Life Science Compliance Update

November 25, 2015

Pharmaceutical Pricing – A Reminder of the Value Equation

We previously wrote about the actions Congress is taking to "combat rising prescription drug prices," and the rhetoric politicians of all stripes are using in an attempt to force public opinion on their side. HHS has announced a pharmaceutical pricing forum set for November 20, Congress has committees on both sides working toward a "solution," and Hillary Clinton has said that if she is elected president, she would "demand a stop to excessive profiteering and marketing" by the drug industry.

Often left out those discussions includes the value of medications, PhRMA has recently released a forty-deck slideshow that addresses the issue of the cost of pharmaceutical drugs in great detail. It is important that we understand in setting the pharmaceutical industry record straight, when speaking with both laypeople and the media. The slides help to explain how the goals of the 21st Century Cures Act, which passed with bipartisan support, cannot be reached without assistance and participation from biopharmaceutical companies and their allies.

The 21st Century Cures Act was lauded by some as being an "encouraging show of bipartisanship ... designed to speed the process from scientific discovery to health treatments and cures for people who need them." The Act "expands funding for the National Institutes of Health and Food and Drug Administration to support promising new research and approval of new therapies." The legislation is also forward-looking in that it recognizes the outstanding potential of new scientific concepts such as personalized medicine and medical applications.

With such a promising piece of legislation passed on a bipartisan basis just over a year ago, one might wonder why politicians are all of a sudden antagonizing the pharmaceutical industry, instead of continuing to work with it. While public opinion does ebb and flow, it is important for the industry to get the facts out there so that everyone can understand that pharmaceutical companies are not their enemies, but instead their allies in health.

It is time we focus on the broad range of benefits the developments in the pharmaceutical industry have brought health care patients. For example, in the last 100 years, medicines have helped raise the average United States life expectancy from 47 years to 78 years; death rates for HIV/AIDS and cancer have fallen 85 percent, and nearly 22 percent since their peaks in 1995 and 1991; and new hepatitis C therapies have cure rates of more than 90 percent. Those numbers are astounding and just a small glimpse into the benefits the pharmaceutical industry provides the health care system as a whole.

There are more than 7,000 medicines that are currently in development around the world. Just to name a few, there are currently over 1800 medicines in development for cancer; over 1250 medicines in development for infectious diseases; and over 1300 medicines in development for neurological disorders.

The presentation highlights how adherence to medicines lowers total health spending for chronically ill patients, stating that the U.S. healthcare system could save $213 billion per year if medicines are used properly to avoid expensive hospitalization and emergency room visits. The biggest savings are realized for congestive heart failure, diabetes, hypertension and dyslipidemia.

It is important in this debate that we go a step further and highlights the fact that that the cost of disease could bankrupt the United States health care system if it weren't for new and developing medicines. There is an estimated $22.4 billion savings to Medicare if adherence to congestive heart failure medications is improved and reaches recommended levels.

There is a compelling argument to be made that the biopharmaceuticals industry is an important force in the U.S. economy, supporting 3.4 million jobs across the country in 2011. Often overlooked this industry sector is the single largest funder of business research and development in the United States and the most R&D intensive industry.

In a similar vein, is the importance clinical trials are to the US economy with $25 billion in economic activity that stems from industry-sponsored clinical trials throughout all fifty states and the District of Columbia.

Even though the cost of medical procedures continue to rise, cost containment is built into the drug pricing life cycle. For example, the cost of percutaneous coronary angioplasty rose from $47,962 in 2005 to $79,391 in 2013, while the cost of Atorvastin 10 mg decreased from $2.13 in 2005 to $0.15 in 2014. Additionally, nearly nine out of 10 U.S. prescriptions are filled with lower-cost generic drugs.

There is often unsung economic realities of the drug development process, a new medicine takes at least 10 years on average, costs roughly $2.6 billion and results in fewer than 12 percent of the drugs that make it into Phase I clinical trials being approved by the FDA. Often the political rhetoric out shadows the other financial benefits when it comes to targeting healthcare costs, pharmaceutical companies are being singled out, despite the statistics cited here.

By no means are all the pharmaceutical companies going about pricing in an ethical manor, especially those pirate companies with no interest in the drug development process, but by and large researched based companies are working to bring about cures that save lives. These slides are recommended as a simple review and reminder about how much good the pharmaceutical industry brings to the world: a strong dose of reality, as compared to the constant barrage of negative publicity.

November 18, 2015

The Politics of Drug Pricing

The 2016 presidential race is fraught with hot-button issues, with each party and each candidate taking positions on just about every issue imaginable. Thanks to high profile instances such as Valeant, Turing, and Gilead, added to the fray this election cycle is the topic of drug pricing.   At the confirmation hearing for Robert Calif as FDA Commissioner the topic of drug pricing was brought up by both democrats and republican senators.


Valeant Pharmaceuticals purchased the heart drugs Isuprel and Nitropress and immediately boosted the prices by 212 percent and 525 percent, respectively. Valeant allowed patients to lower, or even eliminate, their co-pay if they ordered their drugs through Philidor, a mail-order pharmacy. Turing came under fire when it purchased the prescription drug Daraprim and shortly thereafter raised the price more than 50-fold from $13.50 to $750 per pill. Gilead's story goes all the way back to 2013, when it caught fire that they were charging $84,000 for a 12-week course of Sovaldi, a treatment for hepatitis C. PhRMA has publicly denounced the industry "bad actors" while continuing to fight against proposals that would control drug pricing.

The media propels discussion about many of the political issues, and drug pricing is no different: The New York Times, The Washington Post, and Politico are just a sampling of the media outlets who have recently written headlines about drug pricing and the political ramifications of those who speak out against it.

The October Kaiser Health Tracking Poll found that the affordability of prescription drugs is at the top of the general population's priority list, which has helped force presidential candidates into coming up with their own solution to this issue.

Presidential Candidates

Both leading presidential candidates for the Democratic Party's nomination, Hillary Clinton and Bernie Sanders, have been vocal about their desire to control prescription drug costs and have released their own plans to lower prescription drug prices.

Republican presidential candidates have tended to steer clear of the issue, but Donald Trump and Marco Rubio have expressed concern over high drug prices. Neither, however, has come close to suggesting price controls or laying out specific policies to reduce drug costs.


However, it isn't just presidential candidates who have a focus on the issue; Congress is also starting to bring the issue into focus, with the Senate Aging Committee holding a hearing on the "substantial price increases on recently acquired off-patent drugs," and the House Committee on Oversight and Reform launching an "Affordable Drug Pricing Task Force."

While it is unlikely that any legislation to control or significantly reduce the price of drugs would be passed prior to the November 2016 elections, the hearings and Task Force are likely to be exploited by critics of the pharmaceutical industry in their anti-industry agenda and narrative.

Current Administration

Given the uncertainty of the November 2016 election and the partisan gridlock facing Congress, the Obama Administration is reportedly thinking about addressing the issue head-on by unilaterally making regulatory changes, such as contracting directly with drug makers to pay prices based on performance, employing pharmaceutical cost transparency measures, or targeting single-source drugs for price negotiations.

Further fueling the rumor mill that the Obama Administration is thinking about taking executive action, the Department of Health and Human Services is holding an invitation-only forum on November 20th with health care stakeholders (consumers, providers, employers, manufacturers, health insurance issuers, and state and federal government officials) to discuss different ways to address the rising costs of specialty drugs and to continue ensuring patient access to medications.

Legislative Action

While it is unlikely that any Congressional action will result in a standalone bill before the 2016 elections, Congress has made some movements on drug pricing. The budget deal that was signed into law by President Obama the last week of October made it so generic drug makes will be required under the new Medicaid Drug Rebate Program to pay higher rebates if their prices rise too quickly. Generic drug manufacturers will have to pay additional rebates if the price of a generic for a given quarter outpaces the inflation-adjusted baseline Average Manufacturer Price (AMP).


During the 2015-2016 meeting cycle, there was a noticeable spike in interest in examining drug prices: the Medicare Payment Advisory Commission (MedPAC) addressed drug pricing directly in their first two meetings of this year; however, at the last meeting, the Chairman reiterated MedPAC's commitment to careful deliberation and rigorous analysis, assuaging any concerns that the Commission may endorse haughty or short-term proposals just for the sake of "doing something."


While the industry is not shy, or afraid, of a conversation about drug affordability and access, it wants the focus to be on "spending across the health care system to find solutions that ensure access to high quality, patient-centered care and continue to encourage development of innovative, life-changing medicines."

September 23, 2015

Hillary Clinton Unveils New Plan for Lowering Drug Cost


Yesterday, Democratic Presidential candidate Hillary Clinton proposed a new plan to address pharmaceutical “price gouging.” Her proposal, unveiled in Iowa and outlined in a factsheet, outlines a list of measures she believes will lower prescription drug costs for Americans.

Clinton’s plan contains a range of potentially far-reaching proposals, including:

  • Ending the business expense deduction for direct-to-consumer drug company advertising.
  • Requiring drug companies “that benefit from taxpayers’ support to invest in research.” Clinton added that drug companies “should not be allowed to reap excessive profits or spend unreasonable amounts on marketing if they want to receive support that is designed to encourage life-saving and health-improving treatments.”
  • Capping monthly and annual out-of-pocket costs for prescription drugs. Specifically, her plan “will require health insurance plans to place a monthly limit of $250 on covered out-of-pocket prescription drug costs for individuals to provide financial relief for patients with chronic or serious health conditions.”
  • Decreasing market exclusivity for biologic drugs from 12 years to 7 years. “Lowering the biologic exclusivity period…will spur greater competition and save up to $5 billion for the federal government over 10 years,” she wrote.
  • Prohibiting “pay for delay arrangements” that keep generic competition off the market.
  • Allowing Americans to import drugs from other counties.
  • Allowing Medicare to negotiate drug and biologic prices and demanding higher rebates for prescription drugs for low-income individuals.

Clinton’s announcement follows a similar policy, announced earlier this month by Senator Bernie Sanders, who is also seeking the Democratic Presidential nomination. Sanders’ proposal is entitled the “Prescription Drug Affordability Act of 2015.” His Press Release announcing the Act is available here.  His main provisions would allow Medicare to negotiate pharmaceutical prices, allow consumers to import cheaper drugs from Canada, ban pay-for-delay schemes, and add additional penalties for companies who settle with the government. Unlike Clinton’s proposal, Sanders does not address direct-to-consumer advertising, nor does he seek to reduce market exclusivity for biologics or provide out-of-pocket expense caps. Further, Sanders would require companies to disclose the costs related to particular products and prices they charge in other countries, a measure that has been introduced, unsuccessfully, in several states.

While drug pricing has been a newsworthy topic over the last year, the past few days have been especially brutal for the pharmaceutical industry's reputation. On September 20, the New York Times wrote an article entitled "Drug Goes From $13.50 a Tablet to $750, Overnight." The drug Daraprim is used to treat toxoplasmosis, an infection caused by a parasite,  and was acquired  by Turing Pharmaceuticals, a start-up run by a former hedge fund manager, noted the article. "Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars," the article stated. A media frenzy ensued (see for example, Fierce Pharma), capped by Hillary Clinton's announcement to move forward on an official drug pricing policy.  

The company's chief executive, Martin Shkreli, defended his company's decision: "the drug was unprofitable at the former price, so any company selling it would be losing money. And at this price it's a reasonable profit. Not excessive at all," he stated in a CBS News interview. "This is a disease where there hasn't been one pharmaceutical company focused on it for 70 years. We're now a company that is dedicated to the treatment and cure of toxoplasmosis. And with these new profits we can spend all of that upside on these patients who sorely need a new drug, in my opinion," he added.

Shkreli has now pedaled back on the price after initially defending the company's decision and weathering an onslaught of criticism (see CNBC). However, the widespread coverage and backlash has already been enough to cause serious discussion about drug cost measures among Democratic presidential candidates in this election cycle. In fact, Bernie Sanders wrote a letter to Shkreli calling him to provide more information on the price hike. (See Sanders' September 21 letter). 

Pharmaceutical industry trade group, PhRMA, responded unfavorably to Clinton’s plan. “The sweeping proposals outlined in Secretary Clinton’s plan to regulate prescription drug prices would restrict patients’ access to medicines, result in fewer new treatments for patients, cost countless jobs across the country and could end our nation’s standing as the world leader in biomedical innovation,” stated PhRMA President and CEO John Castellani.

PhRMA outlined a number of specific provisions in Clinton’s announcement that could be particularly damaging to getting groundbreaking treatments to patients in need.

Drug pricing and related cost-cutting proposals will likely be a major story in the election year, and it will be an important one to follow. While Turing Pharmaceuticals' huge price hike and high profile media fallout appeared to be handed to Presidential hopeful Hillary Clinton on a silver platter, it will be interesting to see whether other pharmaceutical companies garner similar scrutiny.



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