Life Science Compliance Update

September 15, 2015

Sen. Bernie Sanders Announces "Prescription Drug Affordability Act of 2015"

Pushes for Lower Drug Prices Through Variety of Measures Including Drug Pricing Transparency; Allowing Part D Negotiations; Imports Of Cheaper Drugs from Canada; Increased Fraud Penalties

Bernie Sanders

Taking a break from campaigning for President, Sen. Bernie Sanders (I-VT) and House Oversight and Government Reform Committee Ranking Member Elijah Cummings (D-MD) introduced legislation to address high prescription drug prices called the “Prescription Drug Affordability Act of 2015.” Announcing the Act, Sandars said: “the American people pay, by far, the highest prices for prescription drugs in the entire world” and the “greed of the pharmaceutical industry…has got to stop.” The main provisions of the Act would allow Medicare to negotiate pharmaceutical prices, allow consumers to import cheaper drugs from Canada, ban pay-for-delay schemes, add additional penalties for companies who settle with the government, and require companies to disclose the costs related to particular products and prices they charge in other countries.

View Sanders’ Press Release here.

Sanders listed a number of grievances he had with the pharmaceutical industry. “It is unacceptable that the top three pharmaceutical companies made a combined $45 billion in profits last year and spent more on sales and marketing than they did on research and development,” he said. He also was critical of the fact that “total spending on medicine in the United States has gone up by more than 90 percent since 2002” and that “the monthly cost of cancer drugs has more than doubled over the last ten years to $9,900. “

The Prescription Drug Affordability Act seeks to address some of these over its six sections.

(1)  Medicare Part D Negotiation: The legislation would instruct the Secretary of HHS to negotiate drug prices under the Medicare Part D prescription drug program. President Obama made a similar proposal earlier this year (see Reuters).  For an interesting counter to allowing government negotiation in this area, read a recent article by Robert Moffit entitled “Why Government Price Controls Would Reduce Access to Drugs,” which notes that under the proposal, “seniors will not have the same access to the same broad range of drug therapies that they do today.”

(2)  Prescription Drug Reimportation from Canada: “This bill would allow individuals, pharmacists, and wholesalers to import prescription drugs from licensed Canadian pharmacies where drug prices are 40 percent lower per person than they are in the U.S,” explains Sanders, who added: “You’re looking at the first Member of Congress who took a busload of seniors to Canada to purchase prescription drugs in 1999.  I will never forget the tears in the eyes of women who were able to buy the breast cancer drug tamoxifen at a tenth of the price that they were paying in the U.S.”

He asks all “who tout the benefits of ‘free trade’ to support this concept,” adding that “[i]f we can import lettuce and tomatoes from Mexico, there is absolutely no reason why we cannot import safe and affordable prescription drugs from Canada.”

(3)  Medicare and Medicaid Rebates: The bill would restore the minimum rebate on drugs covered under Medicare Part D for low income Medicare beneficiaries, which was eliminated with the creation of Part D. The bill states that according to CBO, rebates would save $103 billion over 10 years. The legislation would also require generic drug manufacturers to pay an additional rebate to Medicaid if their drug prices rise faster than inflation, mirroring the current requirements for brand name drug makers. According to CBO, these rebates would save $1 billion over 10 years. The bill would also close the Medicare Part D donut hole for brand and generic drugs by 2017, three years earlier than under current law.

(4)  Prohibit Pay for Delay Deals: The bill would prohibit anti-competitive arrangements between brand and generic drug makers where the brand name drug manufacturers pays the generic manufacturer to delay bringing their generic alternative to market. According to the FTC, these anticompetitive deals cost consumers and taxpayers at least $3.5 billion in higher drug costs every year. 

Also last week, U.S. Senators Amy Klobuchar (D-MN) , and Chuck Grassley (R-Iowa) reintroduced the "Preserve Access to Affordable Generics Act," which likewise seeks to end pay-for-delay arrangements. 

(5)  Penalties for Fraud Convictions: The legislation has some fairly draconian measures for companies who either settle fraud charges or are convicted. It would terminate any remaining market exclusivity period on any product found in violation of criminal or civil law through a federal fraud conviction or settlement. Earlier this year, Senator Elizabeth Warren (D-Mass) proposed adding further monetary penalties against companies that enter into major settlements. Pushback to such legislation often centers on the fact that if companies are penalized when they settle, they may instead continue through expensive, time-consuming litigation in order to fight their case. 

(6)  Drug Pricing and Transparency: Finally, the bill includes a drug cost transparency provision, similar to state bills we have written about.  This would require pharmaceutical companies to publicly report information that affects drug pricing, according to the bill, which would include

  • (1) the total expenditures of the manufacturer on (A) research and development;  (B) clinical trials; (C) materials and manufacturing; (D) acquisition costs, including costs for the purchase of patents and licensing; and (E) marketing and advertising for the promotion of the drug to consumers and prescribers;
  • (2) the total profit to the manufacturer attributable to such drug;
  • (3) the total amount of financial assistance the manufacturer has provided through patient prescription assistance programs with respect to such drug, if any;
  • (4) any Federal benefits received by the manufacturer, including tax credits, grants from the National Institutes of Health, and other Federal benefits with respect to such drug; and
  • (5) any additional information the manufacturer chooses to provide related to drug pricing decisions, such as total expenditures on R&D or clinical trials on drugs that failed to receive approval by the FDA.

While most of these provisions are the same as state drug cost legislation transparency, this bill adds section (5), above, that  companies may choose to report total expenditures on R&D or clinical trials for drugs that did not make it to market. However, industry stakeholders have pointed out a number of issues with similar drug price transparency measures, including the fact that the breadth of reporting required could force companies to disclose otherwise protected trade secret or non-commercial information.

What is also unique about this provision from previous state measures is that it includes a section “Reporting on Foreign Sales” that requires reporting of “information about the price of the drug, and profits from and volume of sales of the drug, in each foreign country in which the drug is sold, as applicable.”


Sanders concluded his speech by cautioning his audience that he "know[s] how hard it will be to pass this legislation [and] to defeat the prescription drug industry. In fact, to my knowledge the prescription drug industry has never lost a battle on Capitol Hill." However, he added that "at a time when a huge majority of the American people want us to take action, when 74 percent of Republicans and 93 percent of Democrats, want the federal government to negotiate with the drug companies top lower prices, the time has come to say enough is enough."

Click here for a link to the bill

Click here for Sanders' statements


March 13, 2015

OIG Issues 2015 Health Reform Oversight Plan


HHS-OIG recently released their 2015 Health Reform Oversight Plan. The agency plans to hone in on the Affordable Care Act during 2015, with “primary focus” on the health insurance marketplaces. 

Health Insurance Marketplaces

OIG’s Oversight Plan states that their marketplace work will aim to answer questions in four key areas:

Payments: Are taxpayer funds being expended correctly for their intended purposes?

OIG plans on continuing their oversight into the accuracy and appropriateness of Federal expenditures with reviews of Financial Assistance Payments; Consumer Operated and Oriented Plan (CO-OP) Loan Program; Establishment grants; Navigator grants, and payments to Federal contractors.

Eligibility: Are the right people getting the right benefits?

To ensure accuracy in eligibility determinations, OIG is conducting reviews of marketplace enrollment safeguards, eligibility verifications for premium tax credits, and resolution of inconsistencies in federally facilitated Marketplace (FFM) applicant data. Further, OIG states that they are considering new work on emerging issues, such as Marketplaces’ verification of employer information. “We may also review eligibility for hardship waivers if that emerges as a significant issue as this year’s tax season progresses,” they state. Additional areas for oversight might include reviews of the second open enrollment period.

Management and Administration: Is HHS managing and administering Marketplace programs effectively and efficiently?

To assess the management and administration of Marketplace programs, OIG is currently reviewing HHS’s management and implementation of the FFM from enactment of the ACA through the second open enrollment period and continued oversight of Federal contractors.

Security: Is consumers’ personal information safe?

OIG’s security focused reviews include assessing FFM security controls over consumer information, including personally identifiable information. OIG will also review information security controls at selected State-based Marketplaces. OIG states they are working closely with HHS and law enforcement partners in other agencies to monitor for reports of cybersecurity threats and consumer fraud incidents and take appropriate investigative actions

Health Reform in Other HHS Programs

“Although we are devoting substantial attention to the Marketplaces…OIG is also conducting and developing oversight work addressing reforms in other programs,” their report states. These include Medicaid expansion and services, Medicare payment and delivery reform, Medicare and Medicaid program integrity, and public health programs.

Under the Medicare and Medicaid Program Integrity work, OIG states that they “are examining the implementation and effectiveness of provisions of Title VI of the ACA designed to strengthen transparency and program integrity in Medicare and Medicaid,” including reviews of enhanced provider screening systems, provider payment suspensions, provider terminations, and managed care encounter data.

OIG also states: “We will consider oversight of CMS’ new Open Payments Database and other Title VI transparency initiatives.”


Target Timeframes for Issuing Reports on Ongoing Marketplace Work

Winter 2015: OIG looks to be focused on payments in the early part of 2015:

  • Accuracy of Aggregate Payments to Qualified Health Plan Issuers for Advanced Premium Tax Credits and Cost Sharing Reductions, and Effectiveness of Related Internal Controls (Payments)
  • Payments to Federally Facilitated Marketplace Contractors (Payments)
  • Information System Security Controls at State-Based Marketplaces – CA (Security)
  • Review of Affordable Care Act Establishment Grants for State Marketplace – MD (Payments)
  • Programmatic Justification for CMS’ Involvement in Premium Tax Credit Obligations Under the ACA (Payments)

Spring 2015:

  • CMS’ Internal Controls Over Advance Premium Tax Credit Obligations and Payments Under the ACA (Payments)
  • Oversight of Federally Facilitated Marketplace Contractors (Management and Administration)
  • Review of Affordable Care Act Establishment Grants for State Marketplaces (Payments)
  • CO-OP Loan Program-Eligibility Status and Use of Startup and Solvency Loans – 6-month period (Payments)
  • Enrollment Safeguards at Additional State Marketplaces (Eligibility)
  • Information System Security Controls at State-Based Marketplaces – CO (Security)
  • CMS Implementation of Security Controls Over Consumer Information Obtained in the Federally Facilitated Marketplace (Security)
  • Review of the Federally Facilitated Marketplace’s Eligibility Verifications for Premium Tax Credits (Eligibility)

Summer 2015:

  • Implementation of the Federally Facilitated Marketplace (Case Study) (Management and Administration)
  • CO-OP Loan Program-Eligibility Status and Use of Startup and Solvency Loans – 12-month period (Payments)

Fall 2015:

  • Review of Grant Awards to Navigators in Federally Facilitated or State Partnership Marketplaces (Payments)
  • Information System Security Controls at State-Based Marketplaces – NY (Security)

 View the entire report here


March 10, 2015

NLARx Dissolves--The National Legislative Association on Prescription Drug Prices Formed in 2000 Called It Quits Last Month


The Board of Directors of the National Legislative Association on Prescription Drug Prices (NLARx) has voted to dissolve. The NLARx was formed in 2000 as a coalition of state legislators that set their sights on the pharmaceutical industry’s pricing of medicine and fought for reforms in marketing, clinical trials, and a host of other issues they believed were responsible for increasing drug prices.

“In large part, the very success of the Association has led to the Board's decision that this is an appropriate time to wind down the organization,“ states NLARx. “While prescription drug costs remain a significant portion of medical costs, and there are still patients who cannot afford their medications, much of what the founders of NLARx set out to do has been accomplished.”

They note that "the issues of prescription drug access and pricing have been subsumed into the overall health care debate, and are being addressed within that context."

"Many of the state legislators who have been active participants in the NLARx network over the past 15 years have also been also deeply involved in seeking to provide universal access to health care in their respective states," the Association states, and “[o]ver the past few years, more and more of their attention has been focused on how to address health care access and cost issues systemically.”

NLARx's press release lists some of the issues that the association advocated for, including Medicare Part D, in order to expand access of reasonable drugs to seniors. Furthermore, "[s]tate legislation in the late 1990's and early 2000's focused on alternative strategies to limit excessive prices through supplemental state Medicaid rebates, Medicaid waivers, group purchasing and negotiation, 340B program expansions and reference pricing."

NLARx also looked back on the past 15 years, during which transparency has spread into all facets of medicine:

Outside of the pharmacists and insurers who had to deal with them, and a few state Attorneys General investigating Medicaid kickbacks, no one in the year 2000 knew what a PBM was; now states around the country have PBM transparency laws. There were no laws at either the state or federal level requiring that spending on pharmaceutical marketing and gifts to prescribers be disclosed or regulated -- policies now incorporated into the Physician Sunshine Payments Act included in the ACA and based on state laws enacted across the nation. Information about most clinical trials was not available unless a pharmaceutical company wanted to share it, and public clinical trial registries didn't exist; after state litigation exposed significant issues, state and federal databases, including, were created.

One of the stated reasons for dissolving has been a lack of financial resources. NLARx has been in the forefront of publicly denouncing pharmaceutical companies, and to their credit were successful in passing many state laws and many of their principles were then adopted in the Affordable Care Act. This may signal that the public war against life industry may be winding down.


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