Life Science Compliance Update

January 29, 2018

MedPAC Proposes Changes to Medicare Part D for Biosimilars

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In mid-January 2018, the Medicare Payment Advisory Commission (MedPAC) met to discuss Medicare payment adequacy and vote on 2019 Medicare payment update recommendations. The recommendations approved during this meeting will appear in the 2018 Report to Congress by the Commission.

One of the recommendations finalized by the Commission involved Medicare Part D, stating that Congress should change Part D’s coverage-gap discount program to require manufacturers of biosimilar products to pay the coverage-gap discount by including biosimilars in the definition of “applicable drugs” and exclude biosimilar manufacturers’ discounts in the coverage gap from enrollees’ true out-of-pocket spending.

Principle Policy Analysts Rachel Schmidt and Shinobu Suzuki reported that of the 58.6 million Medicare beneficiaries in 2017, 42.5 million were enrolled in Part D plans, and the program spent nearly $80 billion last year. They noted the coverage gap for Part D beneficiaries will continue to close over the next few years, but the brand manufacturer discount will remain. The analysts stated that key trends since the start of Part D included enrollment growth of six percent, although that number was higher for non-LIS (Low Income Subsidy) enrollees than LIS, and average monthly premiums were stable at around $31 per month. It was also reported that per capita Medicare reinsurance payments to plans have grown much faster than enrollee premiums at 13 percent since 2010.

Schmidt and Suzuki also stated that altering formulary designs to incorporate trends toward moderate tightening, the use of “price protection” rebates for manufacturers, the use of preferred cost-sharing pharmacies, pharmacy fees, and restrictions against specialty pharmacies were all strategies being used to manage Part D premiums. They said that the growth in brand prices more than offset the impact of generic use by beneficiaries, and nearly all the growth in spending for high-cost enrollees is due to higher prices. Ultimately, they said that the trend of growth of high-cost enrollees and rapid growth in Medicare’s payments for reinsurance will continue due to increasing focus on specialty drugs and biologics in the pipeline. They suggested removing the financial disincentive to use biosimilars to encourage price competition.

MedPAC staff suggested the policy change would remove distortion against biosimilars from plan incentives, and Medicare would pay more of its 74.5 percent subsidy through capitated payments rather than reinsurance. The savings from this policy change would be small initially, but has the potential to generate potentially larger savings over the long-run. The recommended policy is likely to encourage plans to place biosimilars on formularies, and fewer enrollees would reach the out-of-pocket threshold.

Commissioner Jack Hoadley stated that it was important that Congress enact the entire recommendation, as using only pieces of the suggested policy change could do more harm than good. He also suggested going further in future discussions to address pricing strategies of companies where plans are left with little to no leverage as well as rebate games and the overuse of the orphan drug class. Several commissioners agreed that more would need to be done to examine the “food chain” of pharmaceutical development to market, so that the commission could better understand how to tackle ever-rising drug costs.

November 17, 2017

FDA Approves Sixth United States Biosimilar

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Recently, the FDA announced that it approved Boehringer Ingelheim’s Cyltezo (adalimumab-adbm), the second biosimilar to AbbVie’s blockbuster Humira and sixth biosimilar in the United States. “Cyltezo is the first biosimilar from Boehringer Ingelheim to be approved by the FDA and marks an important step towards our goal of providing new and more affordable treatment options to healthcare providers and patients,” said Ivan Blanarik, Senior Vice President and Head of Therapeutic Area Biosimilars at Boehringer Ingelheim. “Chronic inflammatory diseases collectively affect 23.5 million people in the U.S., and Cyltezo has the potential to deliver significant benefits to many of these individuals.”

More Details

Cyltezo is a tumor necrosis factor (TNF) blocker approved for the treatment of adults with moderately to severely active rheumatoid arthritis, active psoriatic arthritis, active ankylosing spondylitis, moderately to severely active Crohn's disease, moderately to severely active ulcerative colitis, and moderate-to-severe plaque psoriasis. In addition, adalimumab-adbm is approved for children aged 4 years or older with moderately to severely active polyarticular juvenile idiopathic arthritis.

A biosimilar is a drug that has been demonstrated to be "highly similar" to the already-approved reference product. "The biosimilar also must be shown to have no clinically meaningful differences in terms of safety and effectiveness from the reference product. Only minor differences in clinically inactive components are allowable in biosimilar products," FDA explains.

Future Biosimilar Predictions

As reported by Regulatory Focus, Bernstein biotech analyst Ronny Gal told investors in a note that adoption of biosimilars in the EU “continues to surprise to the upside” as member states have increased their adoption.

“Prices are lower (say ~50% discount of pre-biosimilar entry) and the commercial model is supported by very light marketing requirements. Further, the number of late-stage competitors in key markets (Enbrel, Epogen, and Remicade) is only 3-4, suggesting continuation of profitability. The big upcoming test is the adoption of the oncology products (Rituxan launched and Herceptin expected). Neulasta will presumably launch in 2018 and will do very well in the EU markets,” Gal wrote, according to Regulatory Focus.

For the US marketplace, Gal points to “two key speed bumps”: Approvals of Epogen and Neulasta have been delayed for a year and the Remicade biosimilars approved in April 2016 and last April have “failed to gain traction, exposing some weaknesses in the US market when it comes to encouraging biosimilars and casting doubt on the market,” though he expects this to change in the next 12 months. In terms of other predictions, Gal said Epogen and Neulasta biosimilars will launch in the US though he expects “relatively weak adoption” before the end of 2018.

May 09, 2017

Biotechnology Investors Beware?

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One thing the pharmaceutical stock industry has seen over many decades is price sensitivity to small statements and comments made by those in the public eye. Recently, Jim Greenwood, President and CEO of the Biotechnology Innovation Organization (BIO), authored an article on Medium about why those working and investing in the biotechnology industry should not be concerned, industry is on a successful path forward.

Greenwood noted that while investors do not do well with uncertainty, there is now more stability and less of a likelihood that biotech markets will radically move with a just one press conference or interview.

Greenwood also refreshed our memories about the BIO “Value Campaign,” which has two goals: (1) to cultivate political allies and (2) to change the conversation on price to a conversation on value. BIO wants “people to understand that biotech companies do more than manufacture pills and biologics. They offer the most precious thing of all: more time to spend with our loved ones.”

The fact that Donald Trump wants to bring down drug prices has been made evident. However, Greenwood notes that the biopharmaceutical industry shares that goal, but believes that rather than add restrictions and regulation, a greater emphasis needs to be placed on the free market. He has seen the success of diverse CEOs who spend their time gathering information, from a variety of sources, and the correct calls they wind up making.

Greenwood notes,

For instance, some counseled the President to put at the helm of the Food & Drug Administration a leader who might take a radically different approach to drug approvals. Others advised him that it’s critical for patients and innovators for the FDA to remain the global, gold standard. The President has since nominated Scott Gottlieb, who believes we can have meaningful regulatory reform without compromising on safety or efficacy. President Trump has chosen known entities and strong free-market reformers to lead FDA and the Department of Health and Human Services. This is actionable intelligence for investors, far more so than any single Tweet or quote. There’s a saying in Washington that “personnel is policy.” Savvy investors who’ve studied the positions and credentials of President Trump’s key personnel choices are rightly confident about placing bold bets on biotechnology stocks.

Just the Facts, Ma’am

Greenwood goes on to discuss the PR gambit insurance companies and the media have partaken in, wherein they unleashed a torrent of media attacks against drug makers, enlisting universities and think tanks to help them. Patients, unfortunately, have fallen for this nonsense. They pin the fact that the insurance company is refusing to cover their medicine, thereby increasing co-pays, on the drug company instead of the insurer.

However, the national share of health care spending on medicines remains the same today as it was fifty years ago – roughly ten to fourteen percent. Greenwood notes that insurers spend a lot of time pointing the finger at industry for rising premiums, but that is not true. About 75% of insurance premium growth is driven by increasing payments to hospitals and doctors – only 17.7% of premium increases in the ACA market come from prescription drug costs.

This degree of cost-shifting is not happening in other sectors of health care. Patients have to pay just four percent of their hospital bill, on average, but insurers make them pay a cost-sharing percentage five times greater for their medicines.

Greenwood then attempts to set the record straight, noting:

First, drug companies don’t set patients’ out-of-pocket costs. Insurers do. Second, rising drug prices are not the real driver of health care costs. Medicine keeps people out of hospitals and doctor’s offices, which are the primary cost drivers.

Greenwood concludes by mentioning the roll out of www.drugcostfacts.org, a portal filled with facts (each with multiple sources), with information changing regularly, depending on what is being debated in Congress.

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