Highlight on Alaska: FTC, DOJ back Alaska Senate’s move to eliminate certificates of need

Citing “considerable competitive concerns” raised by certificate of need (CON) laws, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued a joint statement in support of Alaska Senate Bill 62 (SB 62), which would repeal Alaska’s CON program effective July 1, 2019. CON programs generally require firms to demonstrate an unmet need for services to the state before being permitted to enter the health care market, for example, by building a new hospital. Sen. David Wilson (R-Wasilla), who submitted the bill, applauded the statement, noting, “As government officials, we should not lose sight of a basic truth that competition improves the quality and lowers the costs of services; it’s what drives innovation and ultimately leads to the delivery of better healthcare.”

CON laws were enacted to reduce costs and improve access to care, based on the assumption that the existence of too many health care facilities in the same area could lead to inflated pricing for services. However, the FTC and DOJ opined that the laws create barriers to entry and expansion, allow entities to abuse the process to delay or halt competitors’ entry or expansion, and deny consumers effective remedies from anticompetitive mergers.

Alaska’s program requires parties wishing to spend at least $1.5 million on health care facility construction, alter an existing facility’s bed capacity, or add a category of health services provided to an existing facility to secure a CON after demonstrating that the quality, availability, or accessibility of existing health care resources is less than necessary “to maintain the good health of citizens of [the] state.” Specifically, it requires parties to submit an application with a fee ranging from $2,500 to $75,000.  The Department of Health and Social Services holds a public meeting and solicits comments and then submits a recommendation to the Commissioner of Health and Social Services, who makes the ultimate decision. Members of the public substantially impacted by the CON may initiate administrative proceedings and eventually seek judicial review.

The agencies stated that the existing state law raises both the monetary and time-based costs of entry and expansion, eliminates or reduces competitive pressure that normally incentivizes firms “to innovate, improve existing services, introduce new ones, or moderate prices,” and, in the event of denials, prohibits entry or expansion.  Furthermore, the law allows incumbent firms to drag out the CON application process by filing challenges or comments in order to delay competitors’ entry into the market. It also provides a platform that allows firms to form anticompetitive agreements–for example, two firms could agree to file CON applications for separate services to avoid a lengthy application process and potential challenges from one another. Finally, the existing law could impede antitrust remedies. As an example, the joint statement cited to the case of FTC v. Phoebe Putney.  Although the Supreme Court eventually ruled that an anticompetitive merger was subject to antitrust scrutiny, the entities involved had already merged and the applicable state’s CON laws made divestiture “virtually impossible.”

 

FDA adds voice to EpiPen saga

Recent news about the price spike of EpiPen, manufactured by Mylan NL, has caused heightened concern among lawmakers and the general public. In a letter to Mylan in late August 2016, Sen. Chuck Grassley (R-Iowa) asked a series of questions about the pricing, including what analyses were conducted in determining the price, Mylan’s advertising budget for EpiPen in the first half of 2016 as well as 2015, an explanation of the features the company said have improved the product and its value, whether the company offers patient assistance programs, and whether the company has school assistance programs for providing the drug and if so, how many schools have used the programs. In addition, on September 21, 2016, the House Committee on Oversight and Government Reform will hold a bipartisan hearing with officials from Mylan to ask CEO Heather Bresch about the price spikes.

Mylan, which acquired the product in 2007, recently raised the list price for a pair of EpiPen auto-injectors to $600. The price has been rising from a cost of about $100 in 2008. In addition, the EpiPen product has patents listed through 2025 that could delay generic competition.

In the FDA Voice, the agency’s official blog, Janet Woodcock, Director of the FDA’s Center for Drug Evaluation and Research, noted that the EpiPen product has patents listed through 2025 that could delay generic competition. As a result, questions are raised as to what role the FDA can take in the EpiPen saga. Woodcock went on to stress that while the FDA does not regulate drug prices – it can ensure that safe and effective generic versions of a drug can be approved for the market. The FDA has already approved four epinephrine auto-injectors to treat anaphylaxis in an emergency, with two currently marketed. The EpiPen notoriety is because it does not have any FDA-rated therapeutic equivalents at the time.

The FDA does not regulate drug prices – prices are set by the drug makers or distributors. It’s our job to ensure medications, including emergency medications, are safe and effective. We also recognize when we approve new drugs, including generic versions of a drug, it may improve competition in the marketplace. The good news is that the FDA has already approved four epinephrine auto-injectors to treat anaphylaxis in an emergency, and two are currently marketed. The EpiPen does not have any FDA-rated therapeutic equivalents. But like EpiPen, these alternative products are approved by the FDA as safe and effective for treating anaphylaxis. As always, patients should check with their doctor on whether a particular treatment is appropriate and available.

According to Woodcock, the FDA is doing all it can to encourage manufacturers to develop new auto-injectors for epinephrine that can be administered easily and safely by anyone. She highlighted the “roadmap” issued by the FDA via a draft guidance in June 2013 to help manufacturers get the auto-injectors to market faster. Earlier this year, the FDA provided industry with a draft guidance on how to determine if patients can effectively use the new devices.

Not only did the FDA take actions to encourage auto-injector development, the agency touted that it speeds along the process by prioritizing and expediting reviews of applications for first generics.