Life Science Compliance Update

May 24, 2017

Drug Prices Are Growing at Slowest Rate in Years


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.

May 15, 2017

Drug Pricing Legislation Heats Up


Over the last two years, bipartisan Congressional interest in addressing prescription drug prices has been piqued. The interest is likely a result of a series of high profile and controversial decisions made by pharmaceutical companies such as Valeant, Turing, and Mylan to embrace massive spikes in the pricing of certain of their prescription drugs. Not surprisingly, the issue has also risen to the top of public concerns; 77 percent of Americans now say the cost of prescription drugs is unreasonable, according to a recent poll from the Kaiser Family Foundation. Last year, at a bipartisan Senate Aging Committee hearing, Senator Claire McCaskill summed up the Committee’s belief when she noted that there is a “new breed” of company, run by “people who are not traditional pharmaceutical executives, in which investors play an outsized role, and where the goal is to acquire drugs for rare diseases with no generic competition in order to manipulate the price.” It’s this new breed of company that has given the entire pharmaceutical industry a bad name.

During the campaign, and continuing since his inauguration, President Donald Trump has sent mixed messages on drug pricing. During his candidacy, Mr. Trump released a seven-point health care plan that called for reimportation of prescription drugs to help lower high drug costs in the United States. However, President Trump was more amiable when he met with a group of pharmaceutical company executives at the White House shortly after his inauguration to discuss initiatives aimed at lowering drug prices and common industry concerns. The President also called for reducing regulations to allow for faster approvals of new drugs and to incentivize drug companies to bring jobs back to the United States. The Pharmaceutical Research and Manufacturers of America (PhRMA) described the White House meeting as positive and productive. Attending executives appeared eager to find common ground, and several companies have since responded to Trump’s call to bring manufacturing jobs back to the United States.

With prescription drug pricing and transparency legislation a potential point of disagreement between a traditionally pro-industry Republican-led Congress and the White House, a unique political dynamic exists that could portend some bipartisan movement in Congress on drug pricing issues. While GOP leadership and the stalwarts atop key committees of jurisdiction are largely opposed to most of the reforms highlighted in this report, the moderate and populist wings of Republican party could be supportive of certain measures that are attractive to many Democrats to rein in prescription drug costs. This was evident in early 2017, when ten Republican Senators supported a symbolic amendment vote in favor of the importation of prescription drugs from Canada (though the vote ultimately failed 46-52).

In addition to Congress, state legislatures are also drafting legislation to control drug costs. Just between January and March 2017, legislation was introduced in at least half of the state legislatures to either (1) limit drug prices or (2) impose new pricing transparency requirements on manufacturers. If any of these initiatives pass and prove to be effective, they could provide a template for other states and work to create a network of state-based resistance to high drug pricing. For example, a bill introduced in Maryland would require companies to disclose their R&D, manufacturing, and other costs, and would grant the state attorney general the authority to prosecute companies that price gouge on drugs considered to be "essential generics," i.e., Daraprim and Epipen.

New York's Governor has also introduced legislation supporting value-based determinations (including R&D costing) for high-priced specialty drugs, along with provisions targeting the anti-competitive practices of pharmacy benefit managers.

Several other states have introduced legislation to address price transparency, drug importation, direct-to-consumer advertising, and more.

As President Trump looks to impose his policy agenda through Congress, and states undertake their own initiatives, it will be interesting to see where we go from here. While some of the proposals are more likely to gain traction in Congress than others, they represent some of the most likely policy ideas that lawmakers may consider in the foreseeable future.

May 03, 2017

Mylan Settlement Classified as “Too Low”


Many of our readers may remember back in October 2016, when Mylan agreed to pay $465 million to settle claims related to the way EpiPen was classified under the Medicaid rebate program.

The settlement was based on allegations that the EpiPen was classified as a non-innovator drug with Centers for Medicare and Medicaid Services (CMS) when in reality, according to CMS, EpiPen is a branded drug and Mylan should have been paying Medicaid a much higher rebate under the government’s pricing rules. News that EpiPen has been incorrectly classified since late 1997 as a generic product was released just before this settlement.

CMS also alleged that other than paying Medicaid too-low of a rebate on EpiPen purchased, Mylan also was not paying a second rebate that is required whenever the price of a brand-name drug rises more than inflation. The price of an EpiPen pack rose an average of twenty-three percent per year between 2007 and 2016. Inflation, on the other hand, rose at an average of less than two percent per year over the same period.

This settlement (which has yet to be finalized), has been the most recent of Mylan’s woes. A study recently published in JAMA Internal Medicine concludes that Mylan underpaid in its Medicaid misclassification settlement with the United States government. Researchers at Harvard calculated publicly available data on acquisition costs for Mylan’s EpiPen and incorporating prescription volumes, plus branded and generic rebate rates under the federal healthcare program.

According to the study, at a bare minimum, Mylan avoided paying $426.1 million in rebates due to the misclassification of EpiPen as a non-innovator drug. The calculations that led to the settlement reach back only to 2012, when Mylan picked up EpiPen in 2007.

Writing in JAMA Internal Medicine, researchers Jing Luo, M.D., Aaron Kesselheim, M.D., J.D., and Jerry Avorn, M.D., point out that the settlement “underestimates the actual cost of Mylan’s strategy” to Medicaid, “pointing to the limits of litigation as a way of recovering taxpayer funds.” Instead, they believe, it shouldn’t be up to drug companies to classify their meds as a generic or a branded pharmaceutical.

Litigation expenses, additional rebate agreements and uncertainty surrounding the government’s responsibility could have also played a role in the settlement negotiations, said the authors, who are members of the Division of Pharmacoepidemiology and Pharmacoeconomics at Harvard Medical School.

Mylan did not comment on the study and did not provide an update of the settlement status, which has yet to be finalized, despite being announced more than five months ago. 


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