Life Science Compliance Update

June 19, 2017

What Does the Nevada Law Mean for Pharma?

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We have written several articles on the Nevada bill that requires patient advocacy organizations to report all payments they receive from industry. The bill requires all payments be reported, irrespective of the nature of the payment (i.e., research, education, donations, etc.).  On June 15th the Governor Sandoval signed that bill into law.

This law is the first of its kind, focusing on two specific groups of drugs that are used to treat diabetes: insulin and biguanides. Most other state legislation attempting to quell prescription drug costs focus on drug prices in the general sense.

In general, the law requires that any diabetes drugmakers that have raised the list prices of drugs by a certain amount disclose information about the costs of making and marketing the drugs, along with any rebates they provide. Pharmacy benefit managers (PBMs) will also have to disclose what rebates they negotiate with diabetes drug makers, along with any rebates the PBMs keep.

Another interesting part of the law is it requires pharmaceutical sales representatives register with the state (think, Chicago and Washington, DC), and has them supply certain details about the conversations they have with healthcare providers.

Perhaps the most shocking part of the whole bill is that is requires nonprofits to disclose when they get funding from drug companies, PBMs, and health insurers.

Step-by-Step Digest

Sections 4 and 6

The first bulky section of the legislation is Section 4, which requires the Department of Health and Human Services to create a list of prescription drugs that are used to treat diabetes and that have been subject to a significant price increase. Significant price increase is defined as an increase in the wholesale acquisition cost of the drug of a percentage equal to or greater than the percentage increase in the CPI Medical Care Component during the immediately preceding year or twice the percentage increase in the CPI Medical Care Component within the immediately preceding two calendar years.

Under Section 4, any manufacturers on the list will be required to submit to the Department a report, explaining the reasons behind the cost increase. The report must include a list of each factor that has contributed to the increase; the percentage of the total increase that is attributable to each factor; an explanation of the role of each factor in the increase; and any other information prescribed by regulation by the Department. This report must be submitted on or before July 1 of a year in which a drug is included on the list.

The Department will then analyze the information submitted by manufacturers and compile a report concerning the reasons for, and effect of, the increases. The Department’s report is due on or before September 1.

Section 6 requires the Department to place the aforementioned report on the Department’s website, for public viewing.

Section 18

Section 18 requires a PBM to be licensed by the Commissioner, in addition to being licensed by the Commissioner of Insurance. It also authorizes the Commissioner to adopt regulations governing the management of prescription drug coverage by a PBM.

Section 19

This section provides that a PBM has a fiduciary duty to an insurer with which the PBM has entered into a contract to manage prescription drug coverage. Further, PMBs are required to provide insurers a certain percentage of the rebates issued by a manufacturer to the PBM for the sale to an insured person of a prescription drug used to treat diabetes.

Sections 20 & 21

These sections prohibit PBMs from engaging in certain trade practices (i.e., prohibit a pharmacist or pharmacy from providing information to a covered person concerning the amount of any copayment or coinsurance for a prescription drug or informing a covered person about the clinical efficacy of less expensive alternative drug; prohibit a pharmacy from offering or providing delivery services directly to a covered person as an ancillary service of the pharmacy; or penalize a pharmacist or pharmacy for selling a less expensive alternative drug to a covered person) and requires a PBM to post the rate at which the PBM reimburses each pharmacy for each prescription drug used to treat diabetes that is covered by a prescription drug plan managed by the PBM on its website.

The PBM report that information to the Division of Insurance of the Department of Business and Industry. That information includes the aforementioned reimbursement rate, as well as the total amount of all rebates, under several different categories.

June 02, 2017

Maryland Law to Restrict Generic Drug Price Increases

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Late last week, Maryland Governor Larry Hogan allowed a law targeted at preventing generic drug prices from increasing by too much. The law imposes fines on generic drug makers who raise the wholesale acquisition cost (WAC) of their products by 50% or more in one year, or if the WAC is more than $80, or if three or fewer drug makers are actively manufacturing and marketing the drug. The Maryland legislation is the first of its kind in the United States.

While Governor Hogan did not sign the bill into law, he did not veto it, thereby effectively allowing it to become law. However, Governor Hogan has concerns about “unintended consequences” as a result of the bill. He wrote a letter to the Maryland Speaker of the House, Michael E. Busch, noting that "this legislation raises legal and constitutional concerns. Also, this legislation only addresses the pricing of generic and off-patent pharmaceuticals, and does nothing to address the cost of patented products and medical devices which may be associated with drug delivery.”

In his letter, Governor Hogan further noted,

[T]his legislation only addresses the pricing of generic and off-patent pharmaceuticals, and does nothing to address the cost of patented products and medical devices which may be associated with drug delivery. This oversight, whether inadvertent or deliberate, is troubling since the patented or brand-name pharmaceuticals make up a significant amount of the market and are often times the most expensive and essential pharmaceuticals.

He went on to say

I am not convinced that this legislation is truly a solution to ensuring Marylanders have access to essential prescription drugs, and may even have the unintended consequence of harming citizens by restricting their access to these drugs. The legislation does have a laudable goal, to combat price-gouging of consumers for life-saving drugs, and I am supportive of that goal.

One group that is against the legislation is the Association for Accessible Medicines. They have argued that average generic drug prices have actually declined and that overall, they help save money for the United States healthcare system. A spokesman for the group said the law was unconstitutional and will “have the unintended consequence of driving away generic manufacturers” from the state.

Maryland Attorney General Brian Frosh, is on record as supporting the measure and stating,

When a drug company doubles or triples - or multiplies by 50 - the price of medication, it imperils the health and finances of patients and their families, and it threatens public health. The new law 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.

Lawmakers have introduced bills in about 30 state legislatures this year, seeking to regulate drug prices, require manufacturers to justify price increases and form purchasing groups with other states to negotiate lower prices, according to the National Academy for State Health Policy, a nonprofit policy group that has drafted model drug-pricing bills for states.

The legislation becomes effective October 1, 2017.

Thank you again to our colleague Nicodemo Fiorentino for keeping us up-to-date on the most recent state actions.

May 24, 2017

Drug Prices Are Growing at Slowest Rate in Years

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You’d think, from listening to politicians and news anchors, that the cost of prescription drugs is the highest it has ever been, and continuing to rise out of control. However, in reality, growth in drug prices this year was half of last year and the average out-of-pocket cost to consumers has decreased. This information comes from a new report from The QuintilesIMS Institute.

According to the report, growth in spending on prescription medications in the United States fell in 2016, as competition increased among manufacturers, and payers focused on efforts to limit price increases. According to the report,

Drug spending grew at a 4.8 percent pace in 2016 to $323 billion, less than half the rate of the previous two years, after adjusting for off-invoice discounts and rebates. The surge of innovative medicine introductions paused in 2016, with fewer than half as many new drugs launched than in 2014 and 2015. While the total use of medicines continued to climb—with total prescriptions dispensed reaching 6.1 billion, up 3.3 percent over 2015 levels—the spike in new patients being treated for hepatitis C ebbed, which contributed to the decline in spend. Net price increases—reflecting rebates and other price breaks from manufacturers—averaged 3.5 percent last year, up from 2.5 percent in 2015.

New medicines that have been introduced in the past two years are where most of the total spending growth comes from, representing at least half of total spending growth. These treatments treat common conditions, such as cancer, autoimmune diseases, HIV, multiple sclerosis, and diabetes. The prospects for continued innovation over the next five years are fueled by a robust late-phase pipeline of more than 2,300 novel products that include over 600 treatments for cancer alone.  

Out-of-pocket costs to patients are down $1.18 to prescription, to $8.47, since 2013. But on branded medicines, out-of-pocket costs have increased $111.61, or 48%, to $341.59. On average, medicines are cheaper. But in exceptional cases, patients are paying much more.

However, even with prices on a slower rise, it doesn’t feel that way to consumers, who are more frequently being asked to pay more on branded drugs, while their insurers and employers pocket discounts. New drugs for conditions like cancer and hepatitis C, known as specialty medicines, tend to be very expensive. And some companies have attempted to capitalize on high prices by jacking up prices dramatically, as occurred with Valeant Pharmaceuticals and Martin Shkreli, and have been publicly vilified for it.

Patients tend to not get the discounted rates negotiated by their insurers or by  pharmacy benefit managers, except in the form of lowered insurance premiums. If a patient is asked to pay a share of the drug price, it’s usually off the list price.

List prices on existing drugs increased 9.2% last year, compared to 12% in 2015, QuintilesIMS says. But net prices grew at just 3.5%. Essentially, where market forces are keeping prices down, consumers are being left out of the competition, forced to pay full price when their employers and insurance companies are pocketing a sale.

To recap, the highlights of this report included the following:

  • After accounting for discounts and rebates, spending on medicines grew just 4.8 percent in 2016. 
  • Prices for brand-name medicines increased just 3.5 percent after accounting for negotiated discounts and rebates.
  • Prices for brand-name medicines after accounting for negotiated discounts and rebates is projected to grow between 2 percent and 5 percent through 2021. This lower spending follows the loss of patent protection projected to total $103 billion through 2021, which excludes biologics that will face competition from biosimilars entering the market.
  • More than half (52 percent) of commercial patients’ out-of-pocket spending for brand medicines were filled in the deductible or with coinsurance, meaning patients paid the full list price for their medicines, even if their insurer receives a discount.

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