Life Science Compliance Update

January 26, 2016

CMS Final Rule on Covered Outpatient Drugs

The Centers for Medicare & Medicaid Services (CMS) issued the Covered Outpatient Drugs final rule with comment on January 21, 2016. The rule addresses important areas of Medicaid drug reimbursement, as well as some of the changes that were made to the Medicaid Drug Rebate Program by the Affordable Care Act. This final rule also requests comments on the definition of line extension, and that comment period expires on April 1, 2016.

This rule attempts to assist states and the federal government in managing drug costs and establishing a long-term framework for implementing the Medicaid drug rebate program.

Managing Drug Costs

While the Affordable Care Act increased the Medicaid rebates that are paid to the federal and state governments, this final rule went a step further in an attempt to ensure that the federal and state governments will save money in managing Medicare costs over the long term. One of those steps the final rule took was to create a regulatory definition for Average Manufacturer Price (AMP). The AMP is a key metric in the Medicaid drug rebate program, determining manufacturer rebates and pharmacy reimbursement for certain generic drugs that are subject to the Federal Upper Limit (FUL).

The new definition of AMP for inhalation, infusion, instilled, implanted, or injectable drugs (5i drugs) will permit states to collect additional rebates on more expensive infused and injected drugs. Some of these 5i drugs are a constantly increasing expense to the Medicaid program and are not commonly dispensed through a retail community pharmacy.

The final rule also creates an incentive for pharmacies to utilize generic drugs by updating the FUL formula for the payment of certain generic drugs. The rule also implements the Affordable Care Act provision that extended rebates to covered outpatient drugs provided to beneficiaries that are enrolled in Medicaid managed care organizations.

Lastly, the final rule expanded the definition of "states" to include United States territories so that territories like Puerto Rico and Guam can receive savings in their drug expenditures.

Sustain Medicaid Drug Rebate Program

The final rule attempts to clarify many of the changes that were made to the Medicaid Drug Rebate Program under the Affordable Care Act and provides pharmaceutical manufacturers with clear regulatory guidance to help calculate and report drug product and pricing information.

In addition to clarifying the definition of what is considered a manufacturer's "best price" and aligning that definition with the definition of AMP, the final rule clarifies the definitions of Retail Community Pharmacy and Wholesaler in determining AMP.

Pharmacy Reimbursement System

The final rule also attempts to align pharmacy reimbursement with the acquisition cost of drugs and work to ensure that the states pay an "appropriate" professional dispensing fee.

The final rule also creates an exception to the FUL calculation, allowing for the use of a higher multiplier than 175% for certain multiple source drugs, and establishes actual acquisition cost (AAC) as the basis by which states determine their ingredient cost reimbursement. One of the impetuses behind AAC being the ingredient cost reimbursement basis is so that payments are "based on a more accurate estimate of the prices available in the marketplace."

In addition, a professional dispensing fee will be initiated so that the dispensing fee paid to pharmacies reflects the cost of the pharmacist's professional services and cost to dispense the pharmaceutical product to a Medicaid beneficiary.

Comments Sought After

While most portions of the rule are considered final, as previously mentioned, CMS is still considering comments received on the definition of line extension. For the time being, manufacturers should rely on the statutory definition of line extension found at 1927(c)(2)(C) of the Act, and are permitted to use reasonable assumptions in determining whether their drugs qualify as a line extension drug.

While the definition of line extension is not yet solidified in the final rule, CMS did finalize two aspects of the line extension provision: specifying the rebate calculation requirements and requiring the alternative rebate be calculated if there is a corporate relationship between the manufacturer of the line extension drug and the manufacturer of the initial brand name listed drug.

 

January 13, 2016

A Year in Review: FDA 2015 New Drug Approvals

The approval of first-of-a-kind drugs rose last year to forty-one, resulting in the highest level of newly approved U.S. drugs in nineteen years. The total number of new drugs approved last year was even higher at sixty-nine. The rising figures reflect an industry-wide desire to research and develop drugs for rare and hard-to-treat diseases.

The newly approved drugs serve to advance medical care and the health of patients suffering from many ailments, including various forms of cancer, heart failure, and cystic fibrosis. Additionally, more than 40% of the new therapies were approved for treatment of rare or "orphan" diseases that affect less than 200,000 Americans. Those suffering from orphan diseases often have few or no drug treatment options; these approvals will provide great help to their treatment regimen.

This trend of increasing numbers of new drugs is beneficial for both industry and patients. Between 2007 and 2011, only one in nineteen drugs that entered early-stage testing made it to market, compared to one in thirteen drugs today. While more drugs may be making it to market, the development time for drugs is increasing, likely due to the complexity of drug trials and demands for more data from health insurers. However, for 2015 new drug approvals, 60% were designated in one or more categories of Fast Track, Breakthrough, Priority Review, or Accelerated Approval. A therapy with one of those designations is helped along the process at a more rapid pace.

Below is a chart of all sixty-nine drugs that were approved in 2015, and their indication. Novel new drugs' brand names are bolded.

Generic Name

Brand Name

Manufacturer

Indication

Approval Date

Ivabradine

Corlanor

Amgen

Heart Failure

April 2015

Sacubitril and Valsartan

Entresto

Novartis

Heart Failure

July 2015

Sebelipase Alfa

Kanuma

Alexion

Lysosomal Acid Lipase (LAL) deficiency

December 2015

Cangrelor

Kengreal

The Medicines Company

Reducing periprocedural thrombotics events

June 2015

Alirocumab

Praluent

Sanofi Aventis

Heterozygous familial hypercholesterolemia or atherosclerotic cardiovascular disease

July 2015

Perindopril Arginine and Amlodipine Besylate

Prestalia

Symplmed Pharmaceuticals

Hypertension

January 2015

Evolocumab

Repatha

Amgen

High Cholesterol

August 2015

Edoxaban

Savaysa

Daiichi Sankyo

Deep Vein Thrombosis, pulmonary embolism and risk of stroke and embolism due to atrial fibrillation

January 2015

Selexipag

Uptravi

Actelion Pharmaceuticals

Pulmonary arterial hypertension

December 2015

Secukinumab

Cosentyx

Novartis

Plaque psoriasis

January 2015

Cobimetinib

Cotellic

Genentech

BRAF V600E or V600K melanoma

November 2015

Calcipotriene and betamethasone dipropionate

Enstilar

LEO Pharmaceuticals

Psoriasis

October 2015

Talimogene laherparepvec

Imlygic

Amgen

Unresectable recurrent melanoma

October 2015

Deoxycholic acid

Kybella

Kythera Biopharma

Submental fat

April 2015

Sonidegib

Odomzo

Novartis

Locally advanced basal cell carcinoma

July 2015

Flibanserin

Addyi

Sprout Pharmaceuticals

Premenopausal women with generalized hypoactive sexual desire disorder

August 2015

Parathyroid Hormone

Natpara

NPS Pharmaceuticals

Control hypocalcemia in patients with hypoparathyroidism

January 2015

Empagliflozin and Metformin Hydrochloride

Synjardy

Boehringer Ingelheim

Type II diabetes

August 2015

Insulin degludec injection

Tresiba

Novo Nordisk

Glycemic control in adults with diabetes mellitus

September 2015

Isavuconazonium Sulfate

Cresemba

Astellas

Invasive aspergillosis and invasive mucormycosis

March 2015

Ciprofloxacin Otic Suspension

Otiprio

Otonomy

Pediatrics with bilateral otitis media with effusion undergoing tympanostomy tube placement

December 2015

Eluxadoline

Viberzi

Actavis

Irritable bowel syndrome with diarrhea

May 2015

Rifaximin

Xifaxan

Salix Pharmaceuticals

Irritable bowel syndrome with diarrhea

May 2015

Ceftazidime-avibactam

Avycaz

Actavis

Complicated intra-abdominal and urinary tract infections

February 2015

Cholic acid

Cholbam

Asklepion Pharmaceuticals

Bile acid synthesis and peroxisomal disorders

March 2015

Trifluridine and Tipiracil

Lonsurf

Taiho Oncology

Metastatic colorectal cancer

September 2015

Irinotecan liposome injection

Onivyde

Merrimack

Metastatic pancreatic cancer following gemcitabine-based therapy

October 2015

Rolapitant

Varubi

Tesaro

Delayed nausea and vomiting associated with chemotherapy

September 2015

Asfotase alfa

Strensiq

Alexion

Hypophosphatasia

October 2015

Uridine Triacetate

Xuriden

Wellstat Therapeutics

Heriditary orotic aciduria

September 2015

Daratumumad

Darzalex

Janssen Biotech

Multiple myeloma

November 2015

Panobinostat

Farydak

Novartis

Multiple myeloma

February 2015

Recombinant Factor VIII

Nuwiq

Octapharma

Prophylaxis and treatment of hemophilia A

September 2015

Idarucizumab

Praxbind

Boehringer Ingelheim

Reversal of anticoagulant effcts of dabigatran

October 2015

Patiromer

Veltassa

Relypsa

Hyperkalemia

October 2015

Daclatasvir

Daklinza

Bristol-Myers Squibb

Chronic HCV genotype 3

July 2015

Ombitasvir, Paritaprevir, and Ritonavir

Technivie

Abbvie

Chronic HCV genotype 4

July 2015

Tacrolimus extended-release

Envarsus XR

Veloxis

Prophylaxis of organ rejection in kidney transplant patients

July 2015

Atazanavir and Cobicistat

Evotaz

Bristol-Myers Squibb

HIV-1 infection

January 2015

Elvitegravir, Cobicistat, Emtricitabine, and Tenofovir Alafenamide

Genvoya

Gilead Sciences

HIV-1 infection

November 2015

Darunavir and Cobicistat

Prezcobix

Janssen

HIV-1 infection

Janaury 2015

Meningococcal Group B Vaccine

Bexsero

Novartis

Invasive meningococcal disease caused by serogroup B

January 2015

Trivalent influenza vaccine

Fluad

Sequirus

Prevention of influenza A and B

November 2015

Meloxicam

Vivlodex

Iroko Pharmaceuticals

Osteoarthritis pain

October 2015

Lesinurad

Zurampic

AstraZeneca

Hyperuricemia associated with gout

December 2015

Aripiprazole lauroxil

Aristada

Alkermes

Schizophrenia

October 2015

Buprenorphine

Belbuca

Endo Pharmaceuticals

Severe pain

October 2015

Carbidopa and Levodopa

Duopa

Abbvie

Motor fluctuations in patients with advanced Parkinson's disease

January 2015

Carbidopa and Levodopa

Rytary

Impax Labs

Parkinson's disease

January 2015

Cariprazine

Vraylar

Allergan

Schizophrenia and bipolar disorder

September 2015

Palbociclib

Ibrance

Pfizer

ER-positive, HER2-negative breast cancer

February 2015

Alectinib

Alecensa

Roche

ALK-positive, metastatic non-small cell lung cancer

December 2015

Elotuzumab

Empliciti

Bristol-Myers Squibb

Multiple myeloma

November 2015

Talimogene laherparepvec

Imlygic

Amgen

Unresectable recurrent melanoma

October 2015

Lenvatinib

Lenvima

Eisai

Thyroid cancer

February 2015

Ixazomib

Ninlaro

Millennium Pharmaceuticals

Multiple myeloma

November 2015

Nivolumab

Opdivo

Bristol-Myers Squibb

Metastatic squamous non-small cell lung cancer

March 2015

Necitumumab

Portrazza

Eli Lilly

Metastatic squamous non-small cell lung cancer

November 2015

Osimertinib

Tagrisso

AstraZeneca

EGFR T790M mutation positive non-small cell lung cancer

November 2015

Dinutuximab

Unituxin

United Therapeutics

Pediatrics with high-risk neuroblastoma

March 2015

Trabectedin

Yondelis

Janssen

Liposarcoma or leiomyosarcoma

October 2015

Lumacaftor and Ivacaftor

Orkambi

Vertex Pharmaceuticals

Cystic fibrosis

July 2015

Sugammadex

Bridion

Merck

Reversal of neuromuscular blockade induced by rocuronium and vecuronium in adults undergoing surgery

December 2015

Uridine Triacetate

Vistogard

BTG

Emergency treatment of patients with a fluorouracil or capecitabine overdose

December 2015

Brexpiprazole

Rexulti

Otsuka

Depression and schizophrenia

July 2015

Mepolizumab

Nucala

GSK

Severe asthma with an eosinophilic phenotype

November 2015

Tiotropium bromide and oldaterol

Stiolto Respimar

Boehringer Ingelheim

Chronic obstructive pulmonary disease

May 2015

Indacaterol and glycopyrrolate

Utibron Neohaler

Novartis

Airflow obstruction in patients with COPD

October 2015

December 22, 2015

Sanofi Genzyme Merger Shows Future Value May Not Be All It’s Made out to Be

Merger and acquisition agreements are known to have many moving parts, and it is not uncommon for merger/acquisition agreements to incorporate milestone payments based on one of the companies achieving certain research and development, or approval, milestones.

The 2011 merger agreement between Sanofi and Genzyme included such a provision. When Sanofi acquired Genzyme in 2011 for $20 billion, Genzyme was in the midst of conducting clinical trials of Lemtrada, a seemingly promising multiple sclerosis drug. Genzyme's shareholders did not think that the $20 billion offer reflected the future upside of Lemtrada. In an effort to keep the purchase price of Genzyme low, but to appease investors, Sanofi agreed to issue one contingent value right for every Genzyme share in the buyout. These rights gave their holders an additional $3.8 billion valuation – if Lemtrada could clear certain hurdles.

Some of the required hurdles included Lemtrada gaining approval by the Food and Drug Administration by March 31, 2014, and reaching specified sales targets within certain time frames. The agreement also required Sanofi to make "diligent efforts" to steer Lemtrada through the FDA approval process and, once approved, to promote Lemtrada with as much vigor as any other drug. In addition, Sanofi agreed to "ignore any cost of potential milestone payments in working to gain regulatory approval and commercialize Lemtrada."

At the time of the merger, Genzyme estimated that each contingent value right was worth $5.58, and recommended that its shareholders approve the merger deal. The shareholders did approve the merger, but some are now concerned about their contingent value rights and the diligence with which Sanofi worked to keep their end of the bargain.

As it turns out, at the time of the merger, Sanofi was working on its own, "competitor," multiple sclerosis drug, Aubagio. In a lawsuit filed on Monday, November 9, 2015, investors allege that Sanofi opted to focus on developing and promoting Aubagio, thereby generating profits that did not have ties to expensive payments to rights holders.

American Stock Transfer & Trust Company, the trustee representing the Genzyme rights holders, alleges that Sanofi failed to fulfill its agreed-to obligations under the deal, and as a result, investors have not received at least $708 million they are owed.

The lawsuit charges that Sanofi did not follow the FDA's recommendation that Genzyme conduct a double-blind clinical trial with Lemtrada. In a double-blind clinical trial, neither the researchers nor the subjects know whether Lemtrada, another drug, or a placebo was being administered. Genzyme instead did the opposite, by conducting the trial with both the subjects and the researchers knew which treatment was being administered. When Genzyme submitted its application for Lemtrada to the FDA in the summer of 2012, it was denied in December 2013 because Genzyme had not submitted sufficient "evidence from adequate and well-controlled studies," demonstrating that the drug's benefits outweighed any possible adverse effects.

The FDA finally approved Lemtrada in November 2014, over seven months past the approval deadline specified in the rights agreement. However, Lemtrada was not approved fully – it was approved only as a third-line therapy to be used after other treatments had been tried and failed. The limited approval was because Sanofi never addressed the FDA's safety concerns, and likely limited Lemtrada's sales potential.

In the complaint, the trustee takes issue with how long it took Lemtrada to gain FDA approval. Among the ten MS drugs with the highest sales in 2013, the FDA approval process took an average of thirteen months, less than half the twenty-nine months it took for Lemtrada to be approved. According to the trustee, Sanofi deliberately ignored the FDA's feedback about Lemtrada's trial design, leading to the initial rejection. Then, Sanofi failed to establish Lemtrada's safety, leading to the ultimate third-line therapy indication.

With the delay in Lemtrada approval, the price of the Genzyme contingent value rights fell significantly. In April 2011, immediately following the acquisition, the rights were trading for as high as $2.63. It didn't take long for them to decline in value, especially as the FDA approval deadline neared. They were trading around $0.50 as that deadline came and went, and currently trade at $0.14. Further complicating the situation, Lemtrada is expected to lose patent protection in September 2017, further limiting its prospects. Once the patent protection runs out, Sanofi will not have to pay any of the promised milestones, according to the trustee.

Aubagio, Sanofi's multiple sclerosis drug, on the other hand, has had a much smoother path to market. The FDA in approved Aubagio in just over a year and Sanofi created a sales force to market Aubagio almost immediately. The complaint also alleged that Sanofi has conducted more consumer marketing events for Aubagio than for Lemtrada.

As a comparison, after one year on the market, Lemtrada generated sales of $36.8 million, compared to Aubagio's sales of $179.5 million.

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