Life Science Compliance Update

May 26, 2017

A Port in Any Storm – Adding New Safe Harbors to the Anti-Kickback Statute


On December 7, 2016, the HHS Office of the Inspector General ("OIG") approved new safe harbors to the federal anti-kickback statute (“AKS”) and amendments to the civil monetary penalty ("CMP") rules, including recognizing new statutory exceptions, seeking to alleviate blanket prohibitions, and regulatory measures to promote access to care. In doing so, the OIG is ushering in a new era for compliance and providing life science companies some refuge from the regulatory storm.

Dating back to 1972, the Anti-Kickback Statute (“AKS”) is a legal requirement whose “main purpose is to protect patients and the federal health care programs from fraud and abuse by curtailing the corrupting influence of money on health care decisions.” At the time the AKS was implemented, various “concerns arose among health care providers that some relatively innocuous, and in some cases even beneficial, commercial arrangements are prohibited by the anti-kickback law.” This was a result of the fact that in an effort to combat all types of fraud and abuse, the AKS’s reach is incredibly broad.

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May 25, 2017

Citizen Petitions to Come Front and Center


In February, the Federal Trade Commission filed a complaint in federal district court charging Shire ViroPharma Inc. with violating the antitrust laws by abusing government processes to delay generic competition to its branded prescription drug, Vancocin HCl Capsules. The complaint alleges that because of ViroPharma’s actions, consumers and other purchasers paid hundreds of millions of dollars more for their medication.

FTC has been looking for similar case

Congress amended federal law in 2007 in the hopes of curbing underhanded petitions. It authorized the FDA to flatly reject petitions that clearly don’t raise legitimate issues, and told the FDA not to delay generics unless public health would be jeopardized.

But it’s not clear that the action worked as intended. In a report to Congress last year, the FDA said it “continues to be concerned that [the amendment] may not be discouraging the submission of petitions that are intended primarily to delay the approval of competing drug products and do not raise valid scientific issues.”

As was reported, Wilson Sonsini Goodrich & Rosati PC partner Seth Silber, a former FTC lawyer, told Law360 that the ViroPharma case represents the culmination of the commission’s years long interest in challenging flimsy petitions.

“I think the FTC, probably from that time [of Congress’ amendment] to present, has been looking for a good case,” Silber said. “They obviously thought they had a good fact pattern.”

What is a citizen petition?

A citizen petition is a request for the FDA to take an action such as evaluating a drug’s safety or effectiveness. When used appropriately, it could raise awareness of legitimate concerns with a drug. But when used inappropriately, it could extend the brand firm’s monopoly by delaying FDA approval of generic drugs. This delay could result in literally millions of dollars a day being transferred from consumers to drug companies

FTC argument

The FTC alleges that to maintain its monopoly, ViroPharma waged a campaign of serial, repetitive, and unsupported filings with the US Food and Drug Administration and courts to delay the FDA’s approval of generic Vancocin Capsules, and exclude competition. According to the FTC, ViroPharma submitted 43 filings with the FDA and filed three lawsuits against the FDA between 2006 and 2012.

The number and frequency of ViroPharma’s petitioning at the FDA are many multiples beyond that by any drug company related to any other drug. ViroPharma knew that it was the FDA’s practice to refrain from approving any generic applications until it resolved any pending relevant citizen petition filings. ViroPharma intended for its serial filings to delay the approval of generics, and thus competition and lower prices.

Shire response

The company notes it acquired ViroPharma in January 2014, and divested Vancocin in August 2014. The Company played no role in ViroPharma’s challenged petitioning, which took place between 2006 and 2012. Shire believes the FTC’s challenge to ViroPharma is wholly without merit, and will vigorously defend these claims. ViroPharma’s actions were in furtherance of its fundamental right to petition the government, which is guaranteed and protected by the First Amendment, and raised legitimate issues with the U.S. Food and Drug Administration (“FDA”) involving complex scientific questions that had significant public health implications.

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.


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