Life Science Compliance Update

December 15, 2017

PhRMA Releases Report on Financial Flow in Pharmaceutical Industry

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In late November, the Pharmaceutical Research and Manufacturers Association (PhRMA) released a new report examining how money flows through the supply chain and how that impacts what patients pay at the pharmacy. According to the report, this system often creates incentives for pharmacy benefit managers (PBMs) to opt for medicines with higher list prices and higher rebates.

The report provides illustrative examples for three patients to not only provide answers, but also to highlight the fact that there is no one price for medicine. This is because prices paid by wholesalers, pharmacies, pharmacy benefit managers (PBMs), and health plan sponsors all vary and are determined by negotiations between stakeholders.

Many manufacturers are offering larger rebates on medicines every year. However, patients - facing larger deductibles and higher coinsurances than ever before - are increasingly facing cost-sharing that is based on the full undiscounted price. As the examples in the report show, patients often do not benefit from discounts and rebates negotiated between manufacturers and payers and may end up paying more than their insurer for their medicine. Such an arrangement leads to the insurer making money off of the patient’s prescriptions.

The report also notes that as the market moves in the direction of a system that better aligns the price of prescription medicines with their value, biopharmaceutical companies are working with private health insurers to implement new payment arrangements for a variety of diseases. In addition, biopharmaceutical companies and health plans are considering new ways to pay for treatment when a patient needs multiple high-priced, innovative medicines and experimenting with money-back guarantees if a medicine does not work as intended. These new types of arrangements offer the potential to increase the choice of therapy, ensure that patients have affordable access to the newest medicines, and enable our health care system to achieve better outcomes at even more affordable prices

By reading and understanding this report, patients and policymakers alike may find answers to their questions and concerns about the affordability of, and access to, medicines. While many things today are politicized and your opinion depends on your political affiliation, one thing most Americans can agree on is that patients should benefit more from negotiated rates in the form of lower out-of-pocket costs at the pharmacy, just like they do for other types of health care services.

November 21, 2017

ICER Expanding Probe

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A nonprofit group, the Institute for Clinical and Economic Review (ICER), recently received a three-year $13.9 million grant from the Laura and John Arnold Foundation to expand its ongoing investigative scope on drug pricing to include all new medicines and price increases on existing treatments.

Up until now, ICER hasn’t had the resources to review all new medicines. The additional funding “puts us on a new trajectory,” according to Steven D. Pearson, president of ICER. “Now we’re going to be able to cover the landscape.”

ICER was essentially founded with a $5.3 million grant from the Arnold Foundation in 2015 and since then has published a series of reviews of new prescription drugs that treat conditions ranging from high cholesterol to congestive heart failure. While companies have typically agreed to participate in the reviews, ICER has found in most cases that the drugs have been priced above what it has deemed a fair value range.

Going forward, Pearson said, ICER will try to begin its reviews about 7½ months before the date the Food and Drug Administration (FDA) is anticipated to rule on a drug candidate. The reviews would be made public around the time a company sets the price of a newly approved medicine and health insurers decide whether to cover it.

While drug companies aren’t bound by the reviews, insurers and consumer groups are increasingly citing ICER’s “value frameworks” in negotiating how much they will pay.

According to Pearson, ICER staff also will begin examining the rationale drug companies use in determining whether to raise the price of drugs already on the market. Drug makers will be invited to take part in the review process.

ICER has previously issued reports outlining what it believes to be an appropriate cost for new medicines to treat high cholesterol, lung cancer, hepatitis C and other conditions, typically suggesting a value to patients that is a fraction of prices set by drug makers.

Rather than working from list prices as it did initially, ICER now attempts to “come up with a more precise estimate incorporating average net prices, taking rebates into account, to determine what it considers fair value-based pricing,” Pearson said.

Pharmacy benefit managers, insurers and government agencies have all used ICER reports in negotiating pricing and preferred formulary placements with manufacturers, ICER President Steven Pearson said in an interview, mentioning Express Scripts, CVS Health, the U.S. Department of Veterans Affairs and others.

Pearson said he had been informed by Express Scripts that it used ICER’s report in aggressively negotiating discounts on prices for new curative hepatitis C drugs with Gilead Sciences. “Veterans Affairs have used our reports to inform their thinking and price negotiations,” Pearson added.

The new funding comes at a time of increased scrutiny among politicians and insurers over the high cost of new prescription medicines in the United States, especially in comparison with other countries, and steep price hikes of some older generic medicines faced with little competition.

November 03, 2017

Sharing Negotiated Discounts Could Save Patients Money

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Providing access to discounted medicine prices at the point of sale (i.e., at the pharmacy directly) could save certain commercially insured patients with high deductibles and coinsurance anywhere between $145 to more than $800 annually, according to a new analysis from Milliman that was commissioned by the Pharmaceutical Research and Manufacturers of America (PhRMA). The data also show sharing negotiated rebates with patients would have a minimal impact on premiums because it would only increase health plan costs on average 1 percent or less.

“Shifting costs to the sickest patients by requiring higher rates of cost-sharing undermines the very purpose of insurance,” said Stephen J. Ubl, president and CEO of PhRMA, who cited recent Kaiser Family Foundation data showing patients’ out-of-pocket spending is growing faster than underlying medical costs. “This analysis demonstrates that sharing negotiated rebates with patients can lower their out-of-pocket costs with a minimal impact on premiums.”

Negotiations between biopharmaceutical companies and health plans often result in significant rebates. According to a recent study from the Berkeley Research Group, more than one third of the list price for brand medicines is rebated back to payers and the supply chain. These rebates totaled more than $100 billion in 2015 and are growing every year.

A little known (and not frequently mentioned) fact is that for patients with high deductibles or coinsurance, their out-of-pocket spending on medicines is based on the full list price, even if their insurer receives a steep discount. In fact, an analysis from Amundsen Consulting found more than half of commercially insured patients’ out-of-pocket spending for brand medicines is based on the full list price.

According to the aforementioned Milliman analysis, these patients would benefit from receiving access to discounted prices at the point of sale. Depending on factors like plan design and medical out-of-pocket spend, some patients may see their annual out-of-pocket spending reduced. Other patients would pay less each month and could have their costs spread throughout the year, so it would take longer to hit their out-of-pocket maximum and resulting in lower monthly costs.

Hypothetical examples to illustrate the data include:

  • Mary has diabetes and is enrolled in a high-deductible health plan with a copay. She spends $1,000 annually out of pocket on her medical and pharmacy expenses. She would save approximately $359 annually if negotiated discounts were shared. 
  • Kevin has diabetes along with several other health conditions and is enrolled in a high-deductible health plan with coinsurance. He spends $5,000 annually out of pocket on his medical and pharmacy expenses. He would save about $800 annually if negotiated discounts were shared.
  • Joe has chronic respiratory disease and is enrolled in a high-deductible health plan with coinsurance. He always reaches his maximum out-of-pocket limit on his medical and pharmacy expenses early in the year. He would save $204 per month until he meets his deductible and then $41 per month until he reaches his out-out-pocket maximum, allowing him to spread his costs throughout the year.

Many often say that industry is not doing enough to help the patients. While we have continued to note the untruthfulness behind that statement, PhRMA has continued to work on behalf of patients all over the country, with their advocacy campaign – Let’s Talk About Cost. Feel free to visit the link to learn more about this campaign and to see how you can get involved – and spread the news about the good work Industry is doing.

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