Archives for August 2011

From the News Desk

With headlines focused on weather, earthquakes and continued unrest overseas, the health care headlines have been quiet. However the Food and Drug Administration called for a sweeping modernization of the science used in developing and evaluating products critical to the nation’s health, economy, and security. Elsewhere:

  • HHS released its “Bundled Payments” initiative intended to improve care for patients in the hospital and after discharge. The initiative will “align payments for services delivered across an episode of care, such as heart bypass or hip replacement, rather than paying for services separately.  Bundled payments will give doctors and hospitals new incentives to coordinate care, improve the quality of care and save money for Medicare.”
  • NPR looks into why drug companies are not mixing well on Facebook.
  • Hip implant complaints continue to soar despite danger warnings.
  • $40 million in grants has been announced to help identify and enroll children eligible for Medicaid and the Children’s Health Insurance Program (CHIP).

Paying for the Safety of Generic Drugs

After years of negotiation and discussion, the federal government and the generic drug industry, first reported by the New York Times, reached an agreement in principle that will lead to routine inspections of foreign generic drug manufacturing plants.  

Expected to be ready for congressional approval before year’s end, generic drug companies — which manufacture almost 75 percent of the prescription medicines sold in the United States — would pay $299 million in annual fees to underwrite inspections of foreign drug manufacturing plants every two years, the same as that required of domestic drug manufacturers.  Part of the new fees are expected to underwrite the hiring of enough reviewers to bring approval times down to 10 months.  The agreement was a result of concerted efforts by generic drug manufacturers to instill confidence in the industry after scandals over the last few years related to tainted pharmaceutical products threatened credibility.  

At its current pace, partly based on resource allocation, the Food and Drug Administration would need more than 13 years to inspect every foreign drug plant exporting to the United States.  Up to 40 percent of the drugs Americans use are imported and the FDA only inspected 11 percent of the more than 3,700 foreign manufacturing sites in 2009, according to a published report from the U.S. Government Accountability Office last year.  Some foreign plants have never been inspected, a factor in the movement of drug manufacturing from the United States to overseas facilities.

China has surpassed the U.S. to become the largest bulk drug manufacturing and exporter in the world, and as a result, China’s raw materials impact on the global pharmaceutical market continues to grow.  In 2008, Chinese manufacturers substituted a fake for the dried pig intestines used to make the blood-thinning drug heparin manufactured by Baxter.  The tainted heparin was linked to 81 deaths in the U.S. and traced to its Chinese supplier, Changzhou Scientific Protein Labs, which apparently purchased crude material from a number of Chinese heparin workshops.  The fact that the Chinese government refused to allow the FDA to investigate raised concerns on whether the Chinese government played a much larger role in the scandal.  The plant was eventually cited by the FDA for several significant deviations from good manufacturing processes, but prior to the heparin scandal, the FDA had never inspected the plants making the crucial ingredients. 

The industry also stands to gain as much as brand name drug manufacturers in the global medicine trade market. Years of consolidation have created giant generic drug manufacturers, such as Israel-based Teva Pharmaceuticals or India-based Ranbaxy Laboratories Limited, that recognize their bottom-line is dependent on consumer and regulator confidence.  Under the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, generic drug companies do not have to repeat expensive clinical trials.  As a result, generic drugs can be marketed at lower prices because the generic manufacturers do not face the same development costs as brand-name companies.  However, the heparin scandal demonstrated that public backlash for a tainted drug product would reach the generic drug industry as well.

Most tellingly, the industry may have acted under the belief that Congress would never appropriate enough money for the FDA to perform the job.  The agency’s oversight of generics is so backlogged that new applications to sell generics take over 30 months to be approved, and there are now over 2,000 applications awaiting approval.  The backlog currently benefits brand-name drug manufacturers, as their drugs come off patents and do not face competition from generics still seeking approval. 

Although the agreement clearly will impact the global generic drug market, it stands to reason that the efforts will not affect over-the-counter medicines or vitamins, whose supply chains are even more susceptible to tampering because inspections rarely, if ever, take place among those manufacturers.  The question is not whether, but when, these other drug products will be added to the FDA’s inspection function.

Graphic Warning Labels at the Center of Suit Against the FDA

In what some consider a last-minute move, five tobacco companies, (R.J. Reynolds Tobacco Company, Lorillard Tobacco Company, Commonwealth Brands,  Inc., Liggett Group LLC, and Santa Fe Natural Tobacco Company, Inc.) filed a lawsuit against the Food and Drug Administration alleging that the requirements implemented by a June, 2011, Final Rule infringe on the company’s constitutional rights. The Final Rule, promulgated under the 2009 Family Smoking Prevention and Tobacco Control Act, requires that one of the following nine warnings appear on tobacco products and advertisements:

  • WARNING: Cigarettes are addictive
  • WARNING: Tobacco smoke can harm your children
  • WARNING: Cigarettes cause fatal lung disease
  • WARNING: Cigarettes cause cancer
  • WARNING: Cigarettes cause strokes and heart disease
  • WARNING: Smoking during pregnancy can harm your baby
  • WARNING: Smoking can kill you
  • WARNING: Tobacco smoke causes fatal lung disease in nonsmokers
  • WARNING: Quitting smoking now greatly reduces serious risks to your health

These warning statements are accompanied by graphic images and the phone number “I-800-Quit-Now” and must take up half of the packaging on a cigarette pack beginning in September of 2012.

The lawsuit alleges that the new warning labels effectively force tobacco manufacturers to “advocate against the lawful purchase of their products.” The warnings, according to the manufacturers, go beyond being “purely factual and uncontroversial” and are instead intended to make consumers “depressed, discouraged or afraid” to purchase their products. The manufacturers seek both declaratory and injunctive relief against the new warning lables, and request that FDA not enforce new requirements until 15 months after FDA issues regulations “that are permissible under the United States Constitution and federal law.”

The FDA has not issued any statements on the lawsuit, following in its practice not to discussing pending litigation, but the Center for Tobacco Products website contains extensive information on the new labels:

This lawsuit will certainly be worth watching – do you think these labels are government propaganda, or do you think they will be an effective tool in reducing smoking?

PPACA’s “One-Stop Shopping”

The Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) attempts to consolidate the application process for Medicaid, cash subsidies and tax credits for the purchase of insurance and coverage through the health insurance exchanges. The state agencies that run Medicaid and the Children’s Health Insurance Program (CHIP) will be required to coordinate with other agencies and the exchanges  to assure that consumers aren’t  bounced from one agency  to another.

Individuals who apply for any form of assistance, i.e., Medicaid, CHIP, premium assistance for employer-sponsored insurance, or advance payment of the tax credit for individual policies purchased through the health insurance exchange, will have to submit their information only once. If the exchange determines that their income is low enough to qualify for CHIP or Medicaid, the eligibility determination and information will be available to the Medicaid agency through integrated computer systems. Similarly, if the Medicaid agency finds that an applicant is not eligible for Medicaid or CHIP but qualifies for premium assistance with coverage purchased through the exchange, the information will be available to the exchange.

How will this work? HHS and CMS are helping states pay for updates to their computerized eligibility determination systems to assure compatibility and interoperability with the systems used by the exchange.

Why should application for  Medicaid be connected with the purchase of private insurance?

About half of the uninsured nonelderly adults work full time. A Georgia study showed that 57 percent of parents of children enrolled in PeachCare, the state’s CHIP, earned less than $2,500 per month, or $30,000 a year.  No more than half of these adults were eligible for employer-sponsored insurance. PeachCare covers children in households with incomes up to 235 percent of the federal poverty level (FPL). This population is likely to experience gaps in coverage; the Georgia study found that in 2008, nearly half of adults with incomes under 200 percent of FPL experienced at least one gap in coverage during the previous year.  Coverage gaps often result from income instability, as the  loss of a job will affect the availability of employer-sponsored coverage, and new employment may affect eligibility for Medicaid or CHIP.  Thus, these individuals cycle between private and public coverage, enrolling and disenrolling as their circumstances change. Coordination of eligibility determinations for Medicaid, CHIP, premium tax credits and reduced cost sharing should reduce the gaps in their coverage.

The health insurance exchanges also will provide one-stop shopping for individuals seeking information about affordable, qualifying  health plans (QHP). The law requires the HHS Secretary to set standards for the format exchanges will use to provide the information necessary for consumers to compare the advantages and disadvantages of qualified plans.  In a recent  Proposed rule,  HHS outlined requirements for the information to be made available. In addition to costs and coverage limits, the agency would require disclosure of the results of customer satisfaction surveys about each QHP, the medical loss ratio,  quality ratings and transparency of coverage measures. The required disclosures include the insurer’s practices concerning  payment of claims, enrollment, disenrollment, number of claims denied, rating practices, cost sharing and payment requirements for out-of-network services, and the rights of enrollees and participating providers.

What do you think of PPACA’s one-stop shopping?