Senate committee works to understand balance between drug innovation, affordability

Drug pricing is a complex system in the United States, and costs vary significantly between different payers and consumers for a number of reasons, including rebates and discounts offered by manufacturers, drug patents, agreements with insurers, and changes from volume- to value-based payment systems. In a hearing before the U.S. Senate Committee on Health, Education, Labor & Pensions titled “The Cost of Prescription Drugs: How the Drug Delivery System Affects What Patients Pay,” experts testified about who pays for prescription drugs, and what that money pays for. In his opening statement, Committee Chair Sen. Lamar Alexander (R-Tenn) explained that this is the first of three planned hearings; the second hearing will consider the full drug delivery process and its associated costs, and the third hearing will focus on ensuring patient access to affordable drugs.

Dan Mendelson, President, Avalere Health, said in his testimony that consumer drug prices are “determined jointly by health system design, pharmaceutical company pricing, and decisions by health plans, pharmacy benefit management (PBM) practices, and other transactions involving distributors and pharmacies along the supply chain.” He explained that total costs often include payments for (1) the product; (2) services provided; (3) shipping; (4) rebates; (5) pharmacy reimbursement; and (6) costs associated with PBMs and third-party payers including reimbursement, share of rebates, and contractual obligations. Mendelson noted that most patients pay cost-sharing for prescription drugs based on list price, not net price, because many rebates are not shared directly with consumers. He added that the patient protections included in the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) led to payers increasing deductibles for consumers in order to offer lower monthly premiums. However, he said, the ACA’s cost-sharing reductions have allowed individuals using the health insurance exchange to pay less for drugs; Mendelson reminded committee members that the American Health Care Act (AHCA) (H.R. 1628) in its current form would repeal cost-sharing reductions.

Allan Coukell, Senior Director of Health Programs, Pew Charitable Trusts, testified that net pharmaceutical spending has increased 42 percent since 2006, but two-thirds of that growth has occurred in the past four years. He listed the following limitations on effective drug pricing competition:

  • monopoly pricing for new drugs;
  • lack of competition for some older drugs;
  • misaligned incentives and incomplete information for stakeholders, including payers, providers and patients at many points in the system, and
  • a historical willingness to cover new therapies without ensuring that their clinical benefits justify the price.

Coukell said that the cost of new medicines is rising, and that is largely responsible for increased drug spending—for example, high-cost specialty products, particularly biologics that are not used by many individuals, account for more than 40 percent of drug spending. He suggested that the 12 years of exclusivity granted to biologic manufacturers, particularly when compared with the five years that drug manufacturers get, is excessive.

Paul Howard, Ph. D., Senior Fellow and Director of Health Policy, Manhattan Institute, also spoke about the challenges involved with specialty medicines, such as those that treat hepatitis C, cystic fibrosis, and rheumatoid arthritis. He said noted that the vast majority of prescription drugs are “highly affordable,” and that the “outlook for innovation has never been brighter,” but mentioned the need for increased competition to reduce waste and ineffective care. Howard recommended that Congress “create incentives that reward providers who use medicines (both generic and branded) and technology to deliver care as efficiently as possible, while also empowering patients with the information they need to identify high quality providers.” He suggested changes to the 340B drug discount program, HHS and FDA coordination on safe harbors for innovative contractual arrangements, and broader Medicare, Medicaid, and patient-empowerment reforms.

Gerard Anderson, Ph.D., Professor of Medicine, Johns Hopkins University School of Medicine, also blamed high costs on specialty drugs and chronic conditions, but added that state and federal health care programs cannot afford to continue paying high prices for these expensive drugs for Medicare and Medicaid recipients, and are being forced to make “life or death decisions.” His recommendations are increasing competition and changing policies to increase access to pharmaceuticals, such as including drugs in bundled payments and accountable care organizations (ACOs) while eliminating rebates from PBMs and prescription drug plans. Anderson also recommended cracking down on abuse of orphan drug designations and allowing branded drugs to move to the generic market sooner. He suggested that negotiating drug prices, specifically by a single designated federal agency using existing authority under 28 U.S.C. §1498, and enacting price-gauging legislation.

False promises rebuked by FDA, no tea or vitamin can cure cancer

Bogus cancer “treatments” being marketing and sold without FDA approval were the target of 14 warning letters and four online advisory letters, according to a press release and consumer update from the agency. The 65-plus products listed by the agency include pills, tablets, creams, syrups, sprays, oils, salves, teas, and medical devices, claiming to cure cancer in humans and pets, and have been found illegally for sale online, in retail stores, at flea markets and swap meets, and even at trade shows.

The FDA called these illegal products a “cruel deception,” and urged consumers to stay away from products that have not passed the agency’s review process, designed to ensure the safety and effectiveness of treatments. It listed the following phases or concepts as warning signs that the advertised product was unlikely to be approved by the agency:

  • treats all forms of cancer;
  • miraculously kills cancer cells and tumors;
  • shrinks malignant tumors;
  • selectively kills cancer cells;
  • more effective than chemotherapy;
  • attacks cancer cells, leaving healthy cells intact; or
  • cures cancer.

Additionally, many of the products that were the subject of the warnings were advertised as “natural” or “non-toxic.”

The warning and advisory letters ask the recipient companies to provide written responses to the violations covered in the letters; if the companies fail to respond and make adequate corrections, they could be subject to further actions including criminal prosecution. According to the FDA, the best scenario for consumers who have purchased or used these products is ineffectiveness. It is possible, however, that these products could interfere with proven, beneficial treatments, or even cause direct harm.

Owner of compounding company at the center of the 2012 meningitis outbreak acquitted of murder

A Boston jury convicted Barry Cadden, the owner and head pharmacist of the New England Compounding Center (NECC), of racketeering and mail fraud in connection with the 2012 nationwide fungal meningitis outbreak but acquitted him of 25 second-degree murder charges. His sentencing is scheduled for June 21, 2017; he faces a statutory maximum sentence of up to 20 years’ imprisonment on each of the mail fraud and racketeering counts.

Outbreak. In September 2012, the Centers for Disease Control and Prevention (CDC) began investigating a multistate outbreak of fungal meningitis and other infections among patients who received contaminated preservative-free methylprednisolone acetate (MPA) steroid injections from NECC. The CDC reported that 753 patients in 20 states were diagnosed with a fungal infection after receiving injections of NECC’s MPA. Of those 753 patients, the CDC reported that 64 patients in nine states died.

Indictment. In December 2014, the U.S. Attorney’s Office in Massachusetts announced a 131-count federal criminal indictment in connection with the outbreak. Cadden and NECC’s supervisory pharmacist, Glenn A. Chin, were charged with 25 acts of second-degree murder in Florida, Indiana, Maryland, Michigan, North Carolina, Tennessee and Virginia. Twelve other individuals associated with NECC, including six other pharmacists, the director of operations, the national sales director, an unlicensed pharmacy technician, two of NECC’s owners, and one other individual were charged with additional crimes.

Prosecutors alleged that Cadden directed and authorized the shipping of contaminated MPA nationwide. In addition, he authorized the shipping of drugs before test results confirmed their sterility, failed to notify customers of nonsterile results, and compounded drugs with expired ingredients. NECC also used fictional and celebrity names on fake prescriptions to dispense drugs.

 

HELP Committee hears ardent support for next round of user fee agreements

Four witnesses expressed their support of the continuation of FDA user fee agreements before the Senate Committee on Health, Education, Labor, and Pensions (HELP) on April 4, 2017. These user fee agreements cover prescription drugs, biosimilar drugs, generic drugs, and medical devices (PDUFA, BDUFA, GDUFA, and MDUFA, respectively), requiring manufacturers to pay fees that fund the FDA’s approval processes. According to the witnesses, continuing to impose these fees is vital to ensuring the successful development and approval of future therapies.

Testimony

David Gaugh, a senior vice president of the Association for Accessible Medicines (AAM), emphasized the necessity of the partnership between the pharmaceutical industry and the FDA. Although there has been significant growth in the generic and biosimilar industries, he reminded the committee that the FDA is underfunded and depends on the user fees to speed up the approval process. The AAM also believes that the GDUFA program will incentivize competition by reducing the number of FDA review cycles, removing barriers to drug approval for companies and access to therapies for patients.

Scott Whitaker, president and CEO of the Advanced Medical Technology Association (AvaMed), felt the same way about MDUFA. He believes that the decline in the number of medical technology startups and venture capital investment in recent years is due to the length of time to develop devices, seek approval, and enter them into the stream of commerce. Whitaker noted the MDUFA IV agreement builds upon the provisions in the 21st Century Cures Act (Cures Act) to continually improve the efficiency of the approval process while maintaining strict standards for safety and effectiveness.

Cynthia Bens, vice president at Alliance for Aging Research, and Kay Holcombe, senior vice president at Biotechnology Innovation Organization (BIO), also expressed their support for the programs. Bens lauded Congress for allowing patient organizations to participate in the user fee negotiations, and expressed thanks to the FDA for allowing the Alliance to provide feedback throughout the negotiating process. She highlighted strengthening the FDA’s workforce, increased patient-focused drug and device development methods, and advancing clinical trials as positive outcomes from the user fees. Holcomb also stressed the necessity of integrating patient input into the decision-making process, noting that patients are best able to weigh in on the risks and benefits of treatment. Holcombe believes that the new round of user fee agreements will provide better program sustainability and financial transparency, allowing the FDA to better manage personnel, ramp up approval timelines, and develop innovative clinical trial designs.