Life Science Compliance Update

May 15, 2017

Drug Pricing Legislation Heats Up

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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”

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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. 

May 02, 2017

New Analysis Shows Out-of-Pocket Spending Based on List Price

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New analysis from Amundsen Consulting, a division of QuintilesIMS, shows that more than half of commercially insured patients’ out-of-pocket spending for brand medicines is based on full list prices. Even though rebates paid by biopharmaceutical companies can substantially reduce the prices insurers and pharmacy benefit managers (PBMs) pay for brand medicines, insurers use list prices—rather than discounted prices—to determine how much to charge patients with deductibles and coinsurance. The newly released data show cost sharing for nearly one in five brand prescriptions filled in the commercial market is based on the list price.

Robust negotiations between biopharmaceutical companies and health plans result in significant rebates and discounts. According to a recent study from the Berkeley Research Group, more than one-third of the list price for brand medicines is rebated back to payers and the supply chain. Private payers are also reportedly receiving rebates of between 30 percent and 55 percent for medicines to treat a number of conditions, including diabetes, asthma, high cholesterol and hepatitis C. 

Unlike care received at an in-network hospital or physician’s office, negotiated discounts for medicines are not shared with patients with high deductibles or coinsurance. Providing access to discounted prices at the point-of-sale could dramatically lower patients’ out-of-pocket costs. For example, a patient in a high-deductible health plan who pays $350 each month for insulin, an amount calculated based on the list price of the medicine, may be paying hundreds—or even thousands—more annually than their insurer.

According to the Amundsen analysis, prescriptions that were subject to a deductible were more than twice as likely to be abandoned at the pharmacy and never picked up by the patient. Patients with higher deductibles or coinsurance are less likely to take medicines as prescribed, putting them at higher risk for expensive emergency room visits, avoidable hospitalizations, and poor health outcomes.

Basing deductibles and coinsurance for medicines on undiscounted list prices effectively shifts more of the cost of care to the patient, unfairly penalizing sicker patients with high spending. This is at odds with the traditional notion of insurance, which is to spread the high costs of a small share of individuals across all members of the health plan. Payers have begun to recognize that using the undiscounted list price of a medicine to set cost-sharing is problematic for patients: recent statements from the two largest PBMs note that high deductibles for medicines put patients in a “very difficult position” and indicate that sharing rebate savings directly with patients should be considered as a “best practice.”

Ensuring patients have access to the medicines they need is the top priority for America’s biopharmaceutical industry. We need to make sure insurance benefits encourage and promote health – not prevent patients from accessing health care treatments. Copay coupon programs offered by biopharmaceutical companies can provide a valuable source of assistance for many commercially insured patients to afford out-of-pocket costs associated with insurance coverage for their medications. 

In many respects, our current marketplace for medicines works for patients, but basing deductibles and coinsurance for medicines on undiscounted list prices unfairly penalizes sick patients with high spending.  

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