Life Science Compliance Update

September 23, 2016

Kaiser Family Foundation Releases Report on Medicare Part D Trends

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Late last week, the Kaiser Family Foundation (KFF) released a new report, “Medicare Part D in 2016 and Trends over Time.” The report examined several different aspects of the Part D program, including enrollment and plan availability, premiums, benefit design and cost-sharing, the low-income subsidy (LIS) program, and plan performance ratings. This article hits some of the highlights from that report.

Part D Enrollment and Plan Availability

Since 2006, the share of Medicare beneficiaries enrolled in a Part D plan has increased from 52 percent to 71 percent of all eligible Medicare beneficiaries. In 2016, nearly 71% of all Medicare beneficiaries nationwide are enrolled in Part D plans, including plans open to everyone and employer-only plans designed solely for retirees of a former employer. The percent of Medicare beneficiaries with Part D coverage in 2016 varies from state to state, from 56% in Alaska to 89% in North Dakota.

Additionally, while 60% of Part D enrollees are in PDPs, the share who are in MA-PD plans has risen from 28% in 2006 to 40% in 2016. That growth is roughly in line with overall growth in Medicare Advantage enrollment. Interestingly, there are five states (Arizona, California, Florida, Hawaii, and Oregon) where MA-PD plan enrollees account for over half of all Part D enrollees.

In 2016, three Part D sponsors accounted for more than half of all Part D enrollees: UnitedHealth, Humana, and CVS Health. This market concentration has increased slightly since 2006, but more so among PDPs. While UnitedHealth and Humana have had large market shares since the program began, CVS Health enrollment grew primarily through acquisition of other plan sponsors.

Part D Premiums

Average monthly PDP premiums rose in 2016 after being essentially flat since 2010, with the average monthly premium for PDP enrollees being $39.21. MA-PD plan premiums for Part D coverage have only risen modestly in the past few years; the average monthly premium is $16.99 for MA-PD plan enrollees. MA-PD enrollees tend to have lower monthly premiums, in part because of the ability of firms to use rebate dollars from Medicare payments for benefits covered under Parts A and B to lower their Part D premiums.

Premiums varied widely from plan to plan, even among those offering an equivalent benefit type, as well as across geographic regions. The average monthly premium for PDPs offering basic benefits in New Mexico runs about $17.05 per month, while the same plan in New Jersey is more than twice that amount - $37.13. In most regions, the range of premiums for PDPs offering the basic benefit is substantial. For example, in Illinois, the highest basic PDP premium is $139.70, almost seven times higher than the lowest basic PDP premium of $20.50.

Part D Benefit Design and Cost Sharing

According to the report, stand-alone PDPs and MA-PD plans differ along several key characteristics related to benefit design. The majority of PDP and MA-PD plan enrollees are in plans with five-tier formularies, tiered pharmacy networks, enhanced benefits, no additional gap coverage, and deductibles lower than the standard $360.

In 2016, 58% of PDP enrollees – but only 14% of MA-PD plan enrollees – are in plans offering the basic benefit, a sizeable decrease from 83% of PDP enrollees in basic-benefit plans in 2006.

Cost sharing for brand-name drugs has been relatively stable in recent years, but is much higher in 2016, as compared to 2006. Median cost sharing for preferred brands increased by about 46% in that time for PDP enrollees and by nearly 70% for MA-PD plan enrollees. For PDP enrollees who face coinsurance for preferred brands, the median coinsurance rate is 20%. Copayments for brand-name drugs in Part D are higher than those typically charged by large employer plans.

Nearly all Part D plans use specialty tiers for high-cost drugs and charge coinsurance of 25% to 33% during the benefit’s initial coverage period. Forty-nine percent of PDP enrollees and forty-three percent of MA-PD plan enrollees are in plans that charge the maximum 33% coinsurance rate for specialty drugs.

The Low-Income Subsidy Program

Nearly 30% of Part D enrollees receive additional financial subsidies for Part D coverage through the Low-Income Subsidy (LIS) program. The LIS pays Part D premiums for eligible beneficiaries, as long as they enroll in PDPs designated as benchmark plans, and also reduces cost sharing.

Some LIS beneficiaries pay premiums, even though they are eligible for premium-free Part D coverage. Of the 1.5 million LIS beneficiaries, about 13% pay a premium because they are not enrolled in benchmark plans. Additionally, CMS reassigns some beneficiaries to a zero-premium PDP during open enrollment if their previous PDP loses benchmark status and charges a premium.

September 22, 2016

FDA Offers Update to Orange Book Website

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In August 2016, the Food and Drug Administration (FDA) launched an updated web-based version of its “Orange Book,” the publication on drugs approved on the basis of safety and effectiveness.

This major revision of the Orange Book, known more formally as the Approved Drug Products with Therapeutic Equivalence Evaluations, is a first for the website and features an updated design with user-friendly search options. Users can now search for approved drug products by active ingredient, proprietary name, applicant, application number, dosage form, route of administration or patent number. Groups of accordion panels can also be opened to reveal additional new features and contact information.

What is the Orange Book?

The Orange Book was first created in list form in an attempt to contain drug costs. Almost every state had adopted laws and/or regulations that encouraged the substitution of drug products. The state laws generally required either the substitution be limited to drugs on a specific list or that it be permitted for all drugs except those prohibited by a particular list. Due to the high volume of requests for FDA assistance in the late 1970s, it became apparent that the FDA was not going to be able to serve the needs of individual states and felt as though providing a single list based on common criteria would be preferable to evaluating drug products on the basis of differing definitions and criteria in various state laws.

On May 31, 1978, FDA Commissioner Donald Kennedy sent a letter to officials of each state, stating the FDA’s intent to provide a list of all prescription drug products that are approved by the FDA for safety and effectiveness, along with therapeutic equivalence determinations for multisource prescription products.

In 1979, the List was first distributed in January as a proposal. It included only currently marketed prescription drug products approved by the FDA through new drug applications (NDAs) and abbreviated new drug applications (ANDAs) under the provisions of Section 505 of the Food, Drug and Cosmetics Act.

A complete discussion of the background and basis of FDA’s therapeutic equivalence evaluation policy was published in the Federal Register on January 12, 1979 and the final rule was published on October 31, 1980. The first publication (October 1980) included appropriate corrections and additions to the final version of the List. Each subsequent edition has included new approvals and made appropriate changes in data.

On September 24, 1984, President Ronald Reagan signed into law the Drug Price Competition and Patent Term Restoration Act of 1984, requiring that the FDA make publicly available a list of approved drug products with monthly supplements. The Orange Book satisfies this requirement.

The Orange Book Today

Interested parties can also download the Orange Book application in the Apple App Store or Google Play. The application, Orange Book Express, allows users to search by the same parameters as the website; search all marketing statuses (Rx, OTC, Discontinued) with one simple search; look up patent and exclusivity information; identify Reference Listed Drugs and determine if a drug product has a therapeutic equivalent; and browse patent delistings and newly added patents.  

This updated website is the latest move by the FDA to improve its online presence and follows the release of the 36th edition of the Orange Book in 2015.

The FDA intends to use the Orange Book to further its objectives of obtaining constant input and comments on the publication itself, and Agency procedures. If you have any comments on how the publication may be improved, send them to the Director, Division of Legal and Regulatory Support, Office of Generic Drugs, Center for Drug and Evaluation and Research, 7620 Standish Place, Rockville, MD, 20855-2773.

As If the DOJ Weren’t Enough – Shareholders Are Increasingly Quick to Sue to Recover Lost Value Triggered by Enforcement Actions

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Recent plaintiff wins in lawsuits against life sciences companies seeking to recover lost shareholder value resulting from healthcare fraud investigations and enforcement actions seem to have emboldened more plaintiffs to aggressively pursue this remedy. An effective compliance program is intended to manage the risk of healthcare fraud by putting in place controls designed to help prevent company personnel from paying kickbacks or promoting off label to generate business. Now more than ever, a company that fails to put in place an effective compliance program to manage such risk runs the additional risk of a shareholder lawsuit should the healthcare fraud investigation or enforcement action compromise shareholder value.

If the risk of a healthcare fraud enforcement action were not enough to cause the members of the Board of Directors of a life sciences company to lose sleep, they must now be ever more concerned about their own shareholders filing lawsuits against their companies that piggyback on such enforcement actions. 

Read Full Article in the September 2016 Issue of Life Science Compliance Update

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