PEEK supplier settles monopoly charges with FTC

Invibio, the first company to sell the high-performance polymer polyetheretherketone (PEEK) used by medical device makers to construct spinal, orthopedic, and other human implants, has agreed to enter into a proposed consent agreement with the Federal Trade Commission (FTC) settling charges that it violated federal antitrust law by using long-term exclusive contracts to impede competitors and retain a 90 percent monopoly of PEEK sales worldwide.

According to a draft administrative complaint by the FTC, Invibio and Invibio Limited, along with their corporate parent, Victrex plc (Invibio) is the dominant supplier of implant-grade PEEK. Invibio’s only competitors are Solvay Specialty Polymers LLC (Solvay) and Evonik Corporation (Evonik). The complaint further alleged that:

  • Solvay and Evonik each began to sell PEEK after Invibio had established market dominance, offering prices significantly below the prices charged by Invibio.
  • Invibio supplies PEEK to medical device makers primarily pursuant to long-term supply contracts, which it employed both before and after market entry by Solvay and Evonik, and which included exclusivity terms.
  • Invibio employed various strategies to coerce or induce device makers to accede to exclusivity terms, including threatening to discontinue PEEK supply or to withhold access to regulatory support.
  • Invibio’s insistence on exclusivity terms was a deliberate and successful strategy to hinder its competitors and to maintain its monopoly power.
  • In 2014, years after entry by Solvay and Evonik, and despite Solvay’s and Evonik’s lower prices, Invibio still accounted for over 90 percent of PEEK sales worldwide. A substantial majority of these sales were foreclosed from Solvay and Evonik due to the exclusivity terms in Invibio’s long-term supply contracts.

The complaint concluded that due to Invibio’s conduct, Solvay and Evonik have been hampered in their efforts to compete against Invibio, including in developing valuable customer relationships that would bolster the entrants’ reputations, and in realizing sufficient returns to justify further investment in the business. As a result, the FTC alleged that purchasers of PEEK were deprived of a meaningful choice among suppliers and denied the full benefits of competition.

Proposed consent agreement

Under a proposed consent agreement, Invibio will be prevented from entering into exclusive supply contracts and from keeping current customers from using an alternate source of PEEK in new products. The agreement also requires the following:

  • Invibio must allow current customers to modify existing contracts to eliminate the requirement that the customer purchase PEEK for existing products exclusively from Invibio.
  • Invibio is barred from using pricing terms in new contracts that could effectively result in an exclusive arrangement between Invibio and a device maker. These prohibited terms include (1) setting minimum purchase requirements, (2) conditioning discounts or important services on a device maker’s purchase from Invibio of a specified percentage of its PEEK requirements, and (3) providing retroactive volume discounts.
  • Invibio must establish an antitrust compliance program for its employees and officers.

Effect of the consent agreement

The proposed consent agreement is entered into for settlement purposes only and does not constitute an admission by Invibio that it has violated the law as alleged in the administrative complaint, or that the facts as alleged in the complaint, other than jurisdictional facts, are true. The consent agreement is only effective upon execution by the parties and acceptance by the Commission. According to a press release from the FTC’s Bureau of Competition, a Commission vote to issue the administrative complaint and accept the proposed consent agreement for public comment was 3-0.

The proposed agreement package will be published in the Federal Register shortly and subject to public comment for 30 days. The FTC has made available to the public an analysis of the agreement to aid the public in commenting. After the close of the comment period, the Commission may then issue its final decision and order or withdraw its acceptance of the agreement if it deems appropriate.

Smokeless doesn’t mean harmless: educating white rural teenage males

The FDA has announced that messages on the dangers of nicotine addiction, gum disease, tooth loss, and multiple kinds of cancer from smokeless tobacco use will be highlighted through the agency’s placement of advertisements in 35 U.S. markets.

The advertisements (using television, radio, print, public signs, billboards, digital advertising, and social media) are part of the agency’s award-winning The Real Cost campaign (launched in 2014) to educate rural, white male teenagers about the negative health consequences associated with smokeless tobacco use. The central message of the campaign is “smokeless doesn’t mean harmless,” which aims to motivate these teenagers to reconsider what they think they know about smokeless tobacco use.

The campaign messaging focuses on cosmetic and health consequences, loss of control due to addiction, and the danger of chemicals found in smokeless tobacco products, all topics that the FDA’s research has found to resonate with at-risk youth.

This summer the campaign will also collaborate with Minor League Baseball teams across the country to promote tobacco-free lifestyles by displaying campaign advertising and providing opportunities for fans to meet and interact with players who support the campaign’s public health messages.

According to the FDA, smokeless tobacco, which includes dip, chew, snus and other types of tobacco that dissolve when placed in the mouth, are culturally ingrained in many rural communities and, for many,  has become a rite of passage. Its use is more than twice as likely in rural areas compared to metropolitan and rural youth, particularly white teenage males, are more likely to use smokeless tobacco than other youth. In  fact, the FDA’s Population Assessment of Tobacco and Health (PATH) study found that 32 percent of rural, white teenage males (629,000 nationwide) are either experimenting with, or at-risk for, using smokeless tobacco.

In October 2015, the FDA also launched another campaign, the Fresh Empire campaign, targeting multicultural youth who identify with the hip-hop peer crowd, specifically African American, Hispanic, and Asian American/ Pacific Islander youth.

Shifting biosimilar costs away from Part D beneficiaries

Biosimilars are expected to be priced lower than existing biologics, and therefore reduce costs for consumers and payers. Because of Medicare Part D policies, however, beneficiaries may actually pay more out-of-pocket for the biosimilar than the higher-cost, innovator reference biologic. This may discourage use of biosimilars, reducing overall savings to the Part D program. Avalere Health has studied this issue and released a report suggesting two ways to reduce patient costs for biosimilars: (1) requiring manufacturer discounts for biosimilars, consistent with current law for branded drugs; and (2) creating a biosimilar tier that would reduce beneficiary costs for the biosimilar to the same level as the reference product.

Background

The Biologics Price Competition and Innovation Act (BPCIA), enacted as Title VII of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), created a “biosimilar pathway” for the FDA to approve both biosimilars and interchangeable biologics. Section 7002 of the ACA sets forth the approval pathway for these biosimilar biological products.

Because of the high cost sharing to Medicare Part D beneficiaries in the coverage gap (donut hole), section 3301 of the ACA included a provision to begin closing the gap by gradually reducing beneficiary cost-sharing to 25 percent by 2020. Beneficiaries reach the coverage gap once they incur a certain amount of total drug spending. In 2016, the coverage gap begins after a beneficiary has incurred $3,310 in total drug costs. While in the coverage gap, the beneficiary pays 100 percent of their prescription drug costs until they reach the catastrophic coverage limit of $4,850. Once a beneficiary reaches the catastrophic coverage limit, they pay $2.95 for a generic drug and $7.40 for brand name drug or 5 percent of the cost of the drug, whichever is greater.

Another part of the effort to reduce cost sharing in the coverage gap is the Coverage Gap Discount Program (CGDP), which requires manufacturers to provide a 50 percent discount on brand drugs dispensed during the coverage gap. Both the manufacturer’s 50 percent discount and the beneficiary’s out-of-pocket costs count toward true out-of-pocket costs (TrOOP). Once the beneficiary reaches the TrOOP cost of $4,850 in 2016, he or she enters the catastrophic phase and exits the coverage gap.

The CGDP, however, does not apply to generic drugs or biosimilars in the coverage gap. Therefore, in 2016, Part D beneficiaries are responsible for 58 percent of costs associated with generic and biosimilar medications in the coverage gap and the Part D plan is responsible for all remaining spending in the gap. And because there are no other stakeholders contributing to the TrOOP of the Part D beneficiary, this can lead to patients paying more for a biosimilar product than for the innovator biologic product.

Avalere study

The Avalere study illustrated the cost sharing differences between a reference product and its biosimilar by comparing a Part D beneficiary that takes an innovator biologic medication with another beneficiary taking the biosimilar. The study assumed that the Part D innovator biologic had an annual treatment cost of $30,000 and the biosimilar was discounted by 25 percent. The Avalere study found that a Part D beneficiary will pay approximately $1,536 more per year in out-of-pocket costs for the lower-cost biosimilar product than for the reference product.

Policy options

To avoid this Part D cost-sharing problem for biosimilars, Avalere suggests two policy options, both of which would require legislation:

  • Create a biosimilar coverage gap discount: Changing the statutory language to direct biosimilar manufacturers to pay 50 percent of drug costs in the coverage gap would result in lower out-of-pocket costs for patients, as well as additional savings to the federal government. The additional manufacturer contribution would also count towards beneficiaries’ TrOOP threshold, allowing beneficiaries to reach the catastrophic phase more quickly. With the additional contribution from biosimilar manufacturers, the program costs in the coverage gap would also be reduced.
  • Create a biosimilar tier: Although biosimilars are generally less expensive than innovator biologics, Avalere believes that they will usually be subject to the same cost sharing applied to innovator products on the specialty tier. If Part D plans were required to create a “biosimilar tier,” that would lower patient cost-sharing for a biosimilar because the total out-of-pocket costs would not exceed those for the reference product. This would result in the Part D benefit paying more to cover the lower cost sharing associated with a “biosimilar tier.”

Conclusion

According to Avalere, both policy options would result in savings to patients and overall savings to the Part D system. Under the first policy, requiring manufacturers to pay coverage gap discounts for biosimilars would shift the costs away from the government, patients, and health plans to manufacturers. Under the second policy, creating a separate biosimilar tier would shift costs to health plans and the federal government, as patient cost sharing would be reduced.

Highlight on Ohio: CDC reports on risk factors for unintentional fentanyl overdose deaths

The Ohio Department of Health (ODH) announced that the Centers for Disease Control and Prevention (CDC) issued a report examining the increase in unintentional fentanyl-related drug overdose deaths in Ohio. ODH requested CDC’s assistance in September 2015 after 2014 drug overdose data showed that Ohio’s fentanyl-related overdose deaths increased from 84 in 2013 to 502 in 2014, a 500 percent increase. Preliminary data also indicated that the number of fentanyl-related deaths in Ohio was continuing to increase in 2015.

Fentanyl-related deaths in Ohio also accounted for 20 percent of all drug poisoning deaths in 2014, a substantial increase over the 4 percent in 2013. According to a CDC Health Alert Network advisory, Ohio also ranked number one in the nation in total fentanyl seizures in 2014, with 1245 compared to the second ranked state, Massachusetts, which had a total of 630 seizures.

Ohio’s Public Health Response

The ODH has launched a comprehensive response to the increase in fentanyl-related deaths. A broad overview of these activities can be found on the Ohio Mental Health and Addiction services website.  They include: (1) investment of $1 million over the fiscal years 2016-2017 to expand access to naloxone (a medication used to block the effects of opioids, especially in overdose) through local health departments; (2) growth of the governor’s Start Talking! initiative to continue efforts to prevent drug use before it starts; (3) increased functionality of prescription drug monitoring through improvements in the usability of Ohio’s Automated Rx Reporting System (OARRS); and (4) continued work with communities to enhance local efforts through the Health Resources Toolkit for Addressing Opioid Abuse.

CDC Assistance Sought

As part of its public health response, the ODH also requested CDC’s assistance in an epidemiologic investigation (EpiAid) to examine the ongoing increase in unintentional fentanyl-related overdose deaths in their state. To that end, on October 26, 2015, CDC’s Epidemic Intelligence Service (EIS) Officers deployed to Columbus, Ohio, and in conjunction with ODH officials, conducted a three-week investigation which included visits to four regional hotspots of the epidemic (Hamilton, Cuyahoga, Scioto, and Montgomery Counties).

CDC Findings

The CDC discovered that the sharp increase in fentanyl-related deaths in Ohio appeared to closely coincide with a similar sharp increase in the confiscation of illicitly-produced fentanyl by law enforcement in Ohio, based on data obtained from the U.S. Drug Enforcement Administration (DEA). On March 18, 2015, the DEA issued a nationwide alert on fentanyl as threat to health and public safety.

The CDC found that the majority of the Ohio population experiencing fentanyl-related unintentional overdose deaths were male (69 percent), white (89 percent), never married (55 percent), and had some college or less education (94 percent). The average age of fentanyl decedents was 37.9 years old, with ages ranging from 17 to 71 years old. Although large metropolitan counties (population more than 1 million) had a higher number and percentage of all fentanyl-related deaths (47 percent), moderate metropolitan counties (population 250k to 1 million) had the highest rate of fentanyl-related deaths (6.63 per 100,000).

The report showed that the risk factors for fentanyl-related overdose deaths in Ohio included: male gender, white race, some college or less education, history of substance abuse problem, and current mental health problem (e.g., depression, anxiety, or bipolar disorder). Additional risk factors included a recent release from an institution within the last month (e.g. jail, hospital, and treatment facility), and a history of using high-dose opioid prescriptions.

The report also showed a correlation between heroin and fentanyl deaths in Ohio. For example, approximately 62 percent of all fentanyl and heroin decedents had a record of at least one opioid prescription from a healthcare provider during the seven years preceding their death. In addition, one in 10 heroin decedents, and one in 5 fentanyl decedents, had an opioid medication prescribed to them at the time of their death.

Further analysis of OARRS data revealed that substantial percentages of fentanyl and heroin decedents (40 percent and 33 percent, respectively) had been prescribed an opioid at high doses (at least 90 morphine milligram equivalents) at some point in the seven years preceding death. The CDC suggested further analysis to determine the duration and timing of these high dose opioid prescriptions.

CDC Recommendations

CDC’s recommendations to OPH focused on enhancing public health surveillance for fentanyl morbidity and mortality, targeting of public health response to high-burden counties and high-risk groups, enhancing and facilitating response to fentanyl-related overdoses by emergency personnel and laypersons, and improving access to naloxone and addiction services.