Life Science Compliance Update

April 17, 2017

Maryland Sends Bill to Governor on Drug Prices

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The Maryland House recently passed a bill – House Bill 631 – with the goal of “prohibiting a manufacturer or wholesale distributor from engaging in price gouging in the sale of an essential off-patent or generic drug.”

Under the legislation, the Maryland Medical Assistance Program is instructed to notify Maryland Attorney General if a generic drug’s price spikes by 50% or more in one year, or if its price increases while there are three (or less) companies making the prescription. Once the Attorney General Receives that notice, he or she is able to request a report from manufacturers, detailing production costs, rationale for the price hike, and efforts made to expand access.

If the Attorney General determines that the company violated the pricing law, he or she can request that a local circuit court force it to roll back the price and return money to consumers. That court can also impose a fine of up to $10,000.00 for each violation under the law.

Chester Davis, Jr., President and CEO of the Association for Affordable Medicines, has issued a statement asking for a veto of the bill, stating, “it is threatening the savings patients and taxpayers receive from affordable generic drugs.” He further notes, “in 2015 generic drugs delivered $227 billion in savings to the U.S. healthcare system, and $1.6 trillion in savings over the last decade. For that same calendar year, generic drugs comprised 89% of all prescriptions written in the United States, but accounted for only 27% of total prescription drug costs.”

Davis expresses concern about unintended consequences, “While the desire to take action against bad actors in the industry is understandable, what has been utterly lost in the debate over prescription drug costs in Maryland this session is the law of unintended consequences; namely, that by giving the Attorney General this unbounded and unprecedented level of authority to control pricing in a competitive free market, generic companies will be exposed to a level of risk in Maryland that will require them to evaluate whether they want to continue to market affordable medicines within the state.”

The current Maryland Attorney General, Brian Frosh, applauded the legislation. In a statement released by his office, he stated that the legislation gives Maryland a “necessary tool to combat unjustified and extreme price increases for medicines that have long been on the market and that are essential to our health and well-being.”

Maryland Governor Larry Hogan has not yet signed the bill.

Other State Actions

In New York, Governor Andrew Cuomo has proposed the idea of creating a board to control the costs of drug by allowing that board to determine a “fair price.” This idea has been introduced several times before the Legislature, each time soundly defeated.

Last year, California voters turned down a ballot initiative that would have limited industry’s power to create their own pricing. Now, industry is preparing for a fight in Nevada. A state senator recently introduced a measure to control prices on certain drugs, and the industry is enlisting lobbyists for the fight, according to the publication.

At the national level, President Donald Trump has repeatedly pledged to lower costs through increasing “competition,” while Congress considers proposals for drug importation and Medicare price negotiations. Rep. Elijah Cummings, an influential congressman from Maryland, has been involved in those talks and met with Trump to share his importation proposal earlier this year.

April 14, 2017

Grassley Seeks Answers from EpiPen Competitor

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In early March 2017, Senator Chuck Grassley sent a letter to the manufacturer of Auvi-Q (an epinephrine injector similar to EpiPen), requesting an explanation of its pricing, including which entities within the health care system pay the cited list price of $4,500 for a two-pack when consumers without insurance pay $360 for the product.

Kaléo said that as a part of its Auvi-Q AffordAbility program, patients with commercial insurance will pay nothing out-of-pocket. For patients without insurance and a household income of less than $100,000, Auvi-Q will be made available free of charge, according to the company.

Each prescription includes 2 auto-injectors and a training device. The Auvi-Q features voice instructions to guide users through the delivery process and an automatic retractable needle system, which Kaléo touts as a 1st for epinephrine auto-injectors.

“We met with patients and physicians and listened to the very real challenges in the current healthcare environment with obtaining access to affordable medicines,” president & CEO Spencer Williamson said in prepared remarks.  “As a result, starting Feb. 14, for more than 200 million Americans with commercial insurance, including those with high-deductible plans, the out-of-pocket cost for Auvi-q will be $0.”

“We know how important it is that severely allergic patients have an epinephrine auto-injector that can be with them at all times and used correctly, even without training, during a panic-stricken allergic emergency,” VP of product strategy Dr. Eric Edwards added. “We are excited to make Auvi-q, an epinephrine auto-injector with innovative features, available for millions of patients living with severe, life-threatening allergies.”

“Kaléo has offered various patient support programs in an effort to ensure that some patients pay effectively nothing for the Auvi-Q,” Grassley wrote to Spencer Williamson, president and chief executive officer of Kaléo Pharmaceuticals.  “However, your pricing structure may simply shift the burden and cost to another entity within the health care system. With respect to your choice of price, a number of insurance companies and pharmacy benefit managers do not support the strategy and have stated they will not be adding the Auvi-Q to their list of covered medications.”

Grassley asked a series of questions to understand the pricing decision-making, including:

  • Why the company is charging $4,500 for a two pack, and requesting an explanation of their decision-making process in terms of charging that price and whether patient accessibility and research and development were considerations;
  • How much Kaléo spent on R&D for the drug;
  • Whether any entity in the health care system will have to pay $4,500, and if so, which entity; and
  • How the pricing structure will result in reduced prices to the consumer.

Reminiscent of EpiPen

Grassley began looking at EpiPen’s pricing last year after Iowans raised concern to him about high prices for the product. The EpiPen maker, Mylan, gave an incomplete response to his inquiry. Grassley continues to the press the federal government on the misclassification of EpiPen under the Medicaid Drug Rebate Program, which resulted in overcharges of potentially hundreds of millions of dollars to states and taxpayers. President Trump’s nominee to lead the Centers for Medicare and Medicaid Services pledged to produce records on the misclassification. Grassley requested those records from the Obama Administration, which claimed it took action on the problem, to no avail. 

April 13, 2017

President Trump Meets with Democrats on Drug Prices

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President Donald Trump recently met with several Democratic lawmakers regarding rising drug prices, including Representative Elijah Cummings and Peter Welch. Representative Cummings, Ranking Member of the House Committee on Oversight and Government Reform, has been an outspoken critic of the pharmaceutical industry and drug pricing.

During the meeting, which was also attended by HHS Secretary Tom Price and Dr. Redonda Miller, president of Johns Hopkins Hospital, President Trump allegedly told the lawmakers that he is interested in taking action with respect to U.S. drug prices and believes it may be an area of potential bipartisan agreement as both parties continue to resolve healthcare issues and concerns in America.

Cummings and Welch presented President Trump with a bill to allow Medicare to directly negotiate drug prices with manufacturers. The proposed legislation would allow Secretary Tom Price to negotiate lower prices with drug manufacturers under Medicare Part D, which provides coverage for prescription drugs purchased at pharmacies. An estimated 41 million Americans are covered under Part D, which is provided through private insurers who each have their own list of permitted drugs, and typically use pharmacy benefit managers for drug purchasing.

Representative Cummings left the meeting feeling optimistic, saying, “He made it clear to us that he wanted to do something,” and that Trump was “aware of the problem” and “enthusiastic.”

"He was clearly aware of the problem and he made clear to us he wanted to do something about it," Cummings said, adding "it boiled down to, again, saving people’s lives and saving money, and he was clear when you have situations where these companies are jacking up these prices it puts a lot of families in jeopardy."

While allowing the federal government flexibility in negotiating drug prices is not a new idea, Cummings and Welch both painted a picture on Wednesday of a political climate ripe for change with a president who “gets it.”

President Trump has always been a critic of the pharmaceutical industry, even throughout his campaign. He has threatened to use the government’s buying power to force prices down, but has yet to offer specifics as to how. In early March 2017, President Trump tweeted a promise to lower medicine costs and said he is working on a “new system where there will be competition in the drug industry,” a tweet that sent pharmaceutical stocks tumbling.

Reaction from Former Director of the Congressional Budget Office

Douglas Holtz-Eakin, a former director of the Congressional Budget Office and now president of the American Action Forum, said the idea of lowering prices through Medicare Part D negotiations is "completely unrealistic."

Holtz-Eakin points out that insurers are already used to managing health care for beneficiaries and there are formularies in those plans. Adding into the law that the HHS Secretary should be part of the negotiations merely adds a "bully pulpit," he said.

"The problem with the negotiation in Part D is not a political, partisan problem — it's that it won't work," said Holtz-Eakin, adding that the Medicare Part D program is already holding prescription drug costs down because of the negotiating ability of the drug plans.

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