Life Science Compliance Update

April 15, 2015

U.S. Spent $374 Billion on Prescription Drugs Last Year, Up 13%; Increase Largely Due To Hep C Cures and Limited Generic Competition

Sales incentives

The U.S. healthcare system spent $373.9 billion on prescription drugs in 2014, up 13.1 percent from the year before, and the highest rate of spending growth since 2001, according to a report by IMS Institute for Healthcare Informatics.

View the full report, including IMS video commentary here.

A number of factors point to the fact that this dramatic increase is not so much a trend, but an anomaly.

"2014 was a remarkable year," Murray Aitken, executive director of the IMS Institute. "We're probably not going to see it again."

Last year saw the FDA approve a near-record 42 novel medicines, including 18 for rare diseases--those that affect fewer than 200,000 Americans. Ten of the new drugs were designated as breakthrough therapies, for conditions including multiple sclerosis, various cancers, and hepatitis C.

“The availability of new hepatitis C treatments and very few products losing patent protection” account for the surge, states Aitken. “Sovaldi was the biggest drug launch in history and accounted for about $8 billion, or 2 of the 13 percent increase.” Furthermore, in 2013, patients were holding off on hep C treatments in anticipation of Gilead Sciences’ cure due out in 2014. This also added to the drastic year over year increase. Over 161,000 patients started treatment for hepatitis C in 2014, “more than four times the previous peak and nearly ten times more than in the previous year as spending on widely adopted new treatments totaled $12.3Bn,” states the IMS report.

As for patent protections, health systems save when from patent protected branded products to generics. “Typically this saves around 15-30 billion a year,” Aitken notes, and “in 2014, that number was only 12 percent.”

Another reason for the spike can be attributed to the Affordable Care Act’s impact on health coverage. Furthermore, on the Medicare side, Aitken states that the “number of Medicare Part D prescriptions reached almost $1 billion in 2014.”

The report also points out some interesting aspects related to Medicaid, which they note was the “leading driver of retail prescription growth in the first year of expanded coverage under the Affordable Care Act."

  • Overall Medicaid prescriptions increased 16.8% in 2014, accounting for 70% of the growth in retail prescription demand
  • Medicaid prescriptions increased 25.4% in states that expanded Medicaid coverage, and 2.8% in states that did not expand Medicaid coverage
  • Nearly a quarter of exchange plan patients and 9% of Medicaid patients may have been previously uninsured

However, while the Affordable Care Act significantly increased the number of insured, the ACA was less of a factor than expected on drug spending, accounting for only about $1 billion of the spending growth, Aitken said. He does not see the Affordable Care Act causing much of an increase in spending down the road either, as 2014 marked the greatest influx of newly insured--the amount may grow in the future, but at a much slower rate. 

October 30, 2014

Physician Payments Sunshine Act: One Month After the Data Release, What Are People Writing About Open Payments?

Newspapers

The Sunshine database was released one month ago, and it has been interesting to see the range of media coverage that has surrounded the release. On October 3, we looked at the first few days of Open Payments articles. These focused primarily on the deficiencies in the roll-out of the Open Payments System. Many early articles also highlighted the importance of context in looking at the database. Other journalists looked for evidence of wrongdoing in the database, but often noted that the system made proper analysis difficult.

One month later, news outlets have had a better chance to analyze some of the numbers. While approximately 40-50% of the records are not connected to a specific doctor or teaching hospital, researchers (including Policy and Medicine) have analyzed certain breakdowns of the data that provide interesting information. In this article, we have provided a number of stories that run the gamut of coverage—some offer an objective breakdown of the payment data, some call out the highest paid doctors and hospitals, others point to the fact that Open Payments may chill important collaborations between industry and physicians.

CMS Releases Search Tool:

When Open Payments launched on September 30th, articles targeted the system’s lack of usability. “Another Government Website Rollout That Is Found Wanting,” wrote the New York Times. On October 17, CMS released a more patient-friendly search tool that allows users to enter the name of their physician and have all of the transactions come up at once. During the first weeks, Open Payments required users to search through a list of thousands of names in alphabetical order and manually add up the payments for a particular doctor.

Resources Analyzing the Open Payments Data:

Brookings Institute breaks down the identifiable payment categories in a number of interesting ways. One graphic that is telling is the physicians who received royalties, which constitute payments for inventions, dominated the highest paid on the list. Also notable, two prominently placing hospitals--the City of Hope National Medical Center (top of the list of general grants) and the Dana Farber Cancer Institute (top of the list of research grants)--are two of the top ranking hospitals for cancer care in the country. 

Note that this payment data does not take into account de-identified payments. Thus, for the research category, the article is missing approximately 90% of the data.  

Medical Money: See What Drug and Device Companies Paid Doctors: Ed Silverman offers a nice interactive pie chart of Open Payments data.

Breakdown of Research Payments by Top Manufacturer and State, Policy and Medicine. We broke down the research payment category, and looked at both identified and de-identified data to get a macro-picture of how and where industry was spending its research dollars.

What sort of information can I get from the new Open Payments data? Quora took many interesting cuts of the data as well. 

Dollars for Dudes: Almost No Women Among Medical Industry’s Top-Paid Speakers, Consultants: ProPublica finds that few of the top paid consultants and speakers are women. Women are attending medical school now at the same rate as men, so we hope these payments even out over time. 

Many Articles Were Critical of the "Witch Hunt" Aspect of Open Payments

Open Payments: Detailing the media’s witch hunt:

Perhaps the most entertaining and also insightful take on the Open Payments release came from Kevin MD writer Margalit Gur-Arie. The whole article is worth a read, but here is a choice excerpt:

The big money went to a fraction of a percent at the top, mostly for royalties and licensing of things they designed or invented. I randomly picked a couple of these folks and looked them up on Google. The first one turned out to be a world famous vascular surgeon who invented multiple devices to fix aneurysms, pioneered various types of surgeries, and even got himself a medal from the Society for Vascular Surgery.

The second fellow is an orthopedic surgeon, also world famous who specializes in acute trauma and post-traumatic reconstruction of feet and ankles, and is the inventor of all sorts of plating and nailing systems for his specialty. He has more credentials than you can count and some very prestigious awards to go with that. At this point I stopped searching.

The author is also critical how certain outlets covered the release:

The third New York Times article was cleverly titled “Detailing Financial Links of Doctors and Drug Makers,” a title as innocent as the 1987 Miami Herald story “Miami woman is linked to Hart.” Linkage implies secretive impropriety about to be exposed. You don’t often see headlines saying, “Fireman linked to saving baby from burning building.” The article itself is fraught with equally innocent language such as “doctors reaping over half a million dollars each,” “murky financial ties between physicians and the health care industry,” “lucrative arrangements are just some of the findings,” and a surreal tale of the doomed, in which a righteous Cleveland Clinic physician is contesting his own listing because “he had spoken at the event but deliberately skipped the lunch.”

Without context, Sunshine Act’s health care ‘transparency’ is useless:

Peter J. Pitts, a former FDA associate commissioner, and current president of the Center for Medicine in the Public Interest was strongly opposed to the “gotcha” aspect of the Sunshine Act, intended to embarrass the pharmaceutical industry and healthcare professionals. He notes that research, which made up $1.5 billion in payments, "are merely reimbursing doctors for their professional services."

Biopharmaceutical companies and doctors bring separate skill sets and knowledge bases to the research table. Doctors working in the field have a better sense of what types of treatments patients need. And those in the biopharmaceutical industry are better versed in the drug development process. According to a recent survey, 94 percent of physicians say that the role of pharmaceutical and biotech firms in sponsoring clinical trials for new treatments is useful. 

Thanks to these partnerships, there are currently 3,400 drugs being developed in the United States. These are drugs that will combat diseases like diabetes, heart disease and Parkinson's. 

...[C]ollaborations are especially critical considering that federal research dollars are quickly drying up. In fiscal year 2013, burdened with the sequestration and budget cuts, the National Institutes of Health (NIH) - the country's main source of biomedical research funding - awarded 722 fewer grants than the previous year.

If the data released under the Sunshine Act continues to present the financial relationship between physicians and industry without this crucial background information, these collaborations could be in jeopardy. Doctors may end up resisting them in order to avoid sensationalist claims that their medical judgment is for sale to the highest bidder. Patients will be the real losers.

Sunshine Act Shouldn't Start Chill, argues Steven Kalkanis, M.D. chairman of the Department of Neurosurgery at Henry Ford Health System.

Sunshine Act Update: First Data Set Published: JD Supra breaks down "Why Sunshine Act Reporting Data Matters," including the legal and reputational implications of the Open Payments database, including False Claims Act considerations. 

New data disclosures highlight doctor-payment relationships. The Star Tribune interviews Dr. Richard Lindstrom, inventor of a solution that preserves eye tissue for surgery. He "has given sight to legions of people worldwide and become highly sought after for speeches and consulting deals," the article notes. And "He has been handsomely rewarded for his work."

---

Some Docs Get Big Payments From Drug Firms. The Augusta Chronicle writes: "One Augusta physician got more than $150,000 in payments, food and travel from drug and medical device manufacturers, and a dozen others got at least $12,000, according to records released under the Affordable Care Act. But the top earning physician said that reimbursement for a number of trips on behalf of diabetes drugs is a necessary part of educating colleagues and is 'highly regulated' by federal agencies."

The Federal Report on Financial Relationships Between Pharma Industry and Prescribing Physicians, But Shadows Remain on the Controversial ADHD Drug Market. Michael Corrigan, a noted critique of ADHD drug over-prescribing, went through the database with a fine tooth comb to find companies spending a lot marketing ADHD drugs. Corrigan is thoughtful in his approach to scoping out Open Payments, but believes the disclosures may not be enough.  "I do not believe the pharmaceutical companies selling ADHD drugs are being open when it comes to what has been reported. And if the ADHD subsample of the pharmaceutical population is not being forthcoming, the possibility exists the practices are being repeated throughout the industry." 

Public gets first look at health industry payments to doctors: A Connecticut outlet goes through the highest paid physicians in the state. 

Alabama doctors who receive the most money from drug, device companies explain why.

 

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