As we have noted several times over the past two years, the ongoing battle to resolve drug shortages has several distinct causes—one of them being drug pricing. Specifically, the Medicare Modernization Act (MMA) and other government pricing policies have had unintended consequences affecting companies’ ability to make profits, particularly for the generic injectable drugs that have been so heavily in shortage. The inability for companies to make profits on drugs has caused them to stop making the product, reducing production, or have left the entity unable to complete the necessary updates to its manufacturing facilities.
Although the Food and Drug Administration (FDA) has taken several steps to address issues causing drug shortages, and Congress passed a new title in the Food and Drug Administration Safety and Innovation Act (FDASIA) to codify measures to reduce such shortages, more is still needed to address the impact the government’s pricing regime is having on drug shortages.
As a result, several members of Congress recently introduced The Patient Access to Drugs in Shortage Act (H.R. 6611), which would amend the Social Security Act, exempting manufacturers from the current pricing method of average sales price plus 6%, which they claim works for branded drugs but not cheap generics. The exemption would apply for generic sterile injectables with three or fewer active manufacturers to the wholesale acquisition cost. The legislation would also offer tax breaks to brand-drug makers that enter the market during shortages.
U.S. Representative Bill Cassidy, M.D. (R-LA), along with Congressman Andy Harris, M.D. (R-MD), Mike Rogers (R-MI), Tom Rooney (R-FL) and Dan Benishek, M.D. (R-MI), introduced the legislation. Dr. Cassidy was an associate professor of medicine for Louisiana State University, and co-founded the Greater Baton Rouge Community Clinic, a clinic providing free dental and health care to the working uninsured.
“Facing miniscule or negative profits in addition to requirements to provide discounts and rebates for drugs for high-need populations, many manufacturers choose to abandon the production of sterile injectables in favor of a more lucrative market. Additionally, because of the high front-end costs for highly complex infrastructure required for injectable drugs combined with low returns, there is little incentive for new manufacturers to enter a market in a time of shortage,” Cassidy wrote in his letter seeking cosponsors.
Dr. Cassidy previously noted in an opinion piece in the Wall Street Journal, co-authored with Dr. Patrick Cobb, that the root cause of drug shortages is economic. The legislation already has support from the Community Oncology Alliance, the National Patient Advocate Foundation (NPAF) and drug wholesaler AmerisourceBergen. The Alliance noted that in a recent survey it conducted among community cancer clinics, “98.9% of respondents reported experiencing a drug shortage problem. There are too many cases where treatment has to be delayed or suspended because of a shortage or, in cases where an alternate is available, more expensive therapy has to be used.”
The proposal relies on returning to wholesale pricing for these kinds of drugs, similar to the reimbursement system that led to a series of lawsuits against drugmakers and wholesalers for gaming the system for profit. “That won't happen this time around, the congressmen claim, because prices will be based on wholesale acquisition cost (WAC), a price set by wholesalers, which the group claims is a real market price, and so resistant to being manipulated.”
The legislation would also exempt the drugs from Medicaid and Medicare discounts and rebates that also lower their prices—340B discounts. The 340B program requires drug manufacturers to provide outpatient drugs at reduced prices to safety net hospitals and other entities that provide a disproportionate share of care to low-income, underinsured, and uninsured individual. If the drugs are in short supply, any branded drugmaker returning to the market “wouldn't have to pony up the Patient Protection and Affordable Care Act annual fee, in hopes of drawing them back into the market.”
Dr. Cassidy also released a Frequently Asked Questions document to explain why the legislation is needed. The document notes that the root cause of the shortages is Medicare reimbursement based on average sales price (ASP) of the manufacturer. The document points out that ASPs of top cancer drugs in short supply have decreased close to 50%, on average, since 2005. Generic manufacturer net sales are below ASP because they are required to provide Medicaid rebates and 340B discounts that exert additional downward pressure on already unstable pricing.
The document asserts that “Exempting Medicaid rebates and 340B discounts is essential to achieving pricing stability,” and notes that “these are low cost generics so the overall impact on Medicaid and 340B is very small,” and the “rebates and discounts are meaningless when a drug is short and cannot be procured.”
“We hear from patients, doctors and hospitals that every day, shortages of cancer chemotherapy medicines and other drugs affect a patient’s treatment. This legislation adjusts how Medicare pays for medicine so as to decrease the risk of a drug shortage, said Congressman Cassidy. “It is good for everyone. Patients are more likely to have their life saving drugs. Medicare saves money by eliminating the need to substitute much more expensive medicines for inexpensive generics. Doctors and hospitals, which currently spend a lot of resources dealing with drug shortages, can focus on better care for patients with less hassle and expense.”
“As a doctor who has treated patients for nearly 30 years, I am proud to support this important legislation to prevent drug shortages in this nation. During my first term in Congress, both citizens in Northern Michigan and my former colleagues have expressed their concerns about pending drug shortages and their impact on the ability to treat patients. I want to thank Rep. Bill Cassidy for his leadership on this issue and his efforts to propose a comprehensive solution,” said Rep. Dan Benishek, a general surgeon from Michigan’s Upper Peninsula.
“As a physician, there is nothing more frustrating than not having access to a drug a patient desperately needs,” said Congressman Harris. “This legislation will improve the care patients receive by alleviating some of the drug shortages that have become all too prevalent.”
“As a cancer survivor, I know that timely access to treatment can mean the difference between life and death for patients,” said Congressman Rogers, who represents Michigan’s Eighth Congressional District and is a senior member of the House Energy and Commerce Committee. “Today cancer patients are still suffering unacceptable delays and shortages for critical oncology drugs. This legislation will help to ensure that more of these life-savings drugs are quickly available to patients who need them.”
“I began working on the drug shortage issue nearly two years ago after meeting with doctors and hospital administrators in my district, who warned me that they faced shortages of critical, life-saving medicines,” said Congressman Rooney. “We took an important step to reduce shortages and save lives last year by passing a bipartisan bill I introduced with Rep. Diana DeGette (D-CO) that gives the FDA, doctors and pharmacists more tools to identify, respond to and prepare for drug shortages. Now, we need to take the next step and help prevent shortages from occurring in the first place.”
Objecting to the proposed legislation is the Safety Net Hospitals for Pharmaceutical Access (SNHPA), which represents more than 900 hospitals enrolled in the federal 340B drug discount program. SNHPA asserted that “no evidence has suggested that the 340B drug discount program contributes to drug shortages.” As a result, they note that if “H.R. 6611's 340B language were to become law, it would increase costs to patients, providers, and the government without alleviating drug shortages.”
Other Drug Shortage News
In continuing coverage, American Medical News reported that “Drug shortages are intensifying in some parts of the nation due to the recent closings of two specialty pharmacies in Massachusetts following a fungal meningitis outbreak.” The Boston-based “Massachusetts General Hospital, which is New England's largest hospital, is among the health centers that have been particularly hard-hit.”
According to Massachusetts General’s Inpatient Pain Services Director Padma Gulur, MD, “about 17% of the nearly 400,000 doses of medication it uses each month were provided by Ameridose” and a “smaller amount of medication was produced by NECC.” As a result, the hospital’s pharmacy, which once operated from 7:30 a.m. to 4:30 p.m., now functions around the clock. The pharmacy expanded its space to other sterile areas and is considering temporarily using one of the operating rooms, Dr. Gulur said.
Iyah Romm, policy and health planning director at the Department of Public Health, told the council Wednesday morning that hospitals were reporting shortages of certain medications before the outbreak.
The article notes that FDA Commissioner Margaret A. Hamburg, MD, said, “Drug shortages are still a serious problem, one that may be temporarily impacted by [Ameridose's] voluntary recall of all its unexpired products.” Some hospitals are trying to boost their pharmacy capabilities so they can reconstitute and package drugs themselves rather than rely on specialty pharmacies that could have safety issues similar to those of NECC.
Shortages of lifesaving medication, including benzodiazepine drugs to stop seizures, have led emergency medical workers in the Memphis, Tenn., area to rely on compounding centers to create those products, said emergency physician Joseph E. Holley Jr., MD. “If there are less compounding facilities around, there will be less opportunities to have those drugs made for us,” said Dr. Holley.
To address the unique concerns in Massachusetts regarding drug shortages, the Massachusetts, Public Health Council adopted emergency regulations in November to allow hospitals to share safe, compounded drugs with other hospitals in times of need, said Lauren Smith, MD, MPH, interim commissioner for the Massachusetts Dept. of Public Health. The rules took effect Dec. 1. The council is an appointed board of clinicians, professors and public health advocates.
The rules are primarily aimed at allowing hospitals to share drugs within their health care systems. But the state could consider special requests to distribute them outside those organizations. Romm said the emergency regulations will allow the department to review hospitals’ methods for compounding and transporting the medications they share with other health care centers, to ensure they are “not compromising patient care.”
“Part of the Dept. of Public Health’s mission is to work with hospitals to ensure that they have a plan in place to respond to any unforeseen emergencies,” Dr. Smith said. “These regulations provide another tool at our disposal to respond to any urgent situations that may arise, so we may protect the public health and ensure patient safety.”