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.

FDA’s line of ‘thinking’ via draft guidances draws lawmakers’ attention

Members of the Senate Health, Education, Labor, and Pensions (HELP) Committee, including Senator Lamar Alexander (R-Tenn), asked the FDA to explain why draft guidances were not being revised, finalized, or withdrawn in a timely manner. In a letter expressing concern on the matter, the lawmakers asked the FDA to update information and provide answers to questions regarding (1) the length of time it took for each FDA center to finalize a draft guidance, previously reported as between 425 and 797 days; (2) the number of still-pending draft guidances published prior to December 31, 2013, previously reported as standing at 172; (3) current work plans to address draft guidance review; and (4) FDA staff training on the use of draft guidances in the absence of a final guidance document.

Although the senators applauded the implementation of easy-to-use navigation of guidance documents on the FDA website, the lawmakers stressed that it should be kept as up to date as possible. In the previous 12 months, the FDA took action to withdraw 47 guidance documents that it considered “outdated and unfinished.”

However, the lawmakers noted that industry members, including physicians and corporations, were concerned about the agency’s reliance on draft guidances to carry out regulatory responsibilities. As such, industry felt compelled to follow the draft guidances as if final, even if the most up-to-date information suggested an alternative path. The lawmakers noted that the FDA was periodically sending, as well as publicizing, “It has come to our attention” letters that relied upon new “thinking” only previously discussed in a draft guidance to raise concerns about a current regulated product.

HELP Committee focuses on access to mental health services

On January 20, 2016, the Senate Committee on Health, Education, Labor, and Pensions (HELP) heard testimony from four experts in the field of mental health with very different perspectives. The three who had been directly involved with patients all testified, however, that there is a dearth of resources for treatment and that serious needs go unmet.

Penny Blake, R.N., C.C.R.N., an emergency room nurse and Chair of the Advocacy Advisory council of the Emergency Nurses Association, told the committee that people with mental health or substance use conditions comprise about 10 percent of the patients that present to the emergency department at the West Palm Beach hospital where she works. The loud noises and chaotic atmosphere of a busy emergency department can be harmful to a patient who may be hallucinating. Because the hospital does not have a psychiatric ward, patients who are dangerous to themselves or others must be transferred to other hospitals. There are so few beds available that they must be “boarded” in the emergency department. Usually the wait is 12 to 24 hours, but it is not unusual for a patient to wait for four days to be transferred.

The need to isolate and observe patients who may require involuntary commitment also diverts staff from other patients who need care. The emergency room physicians lack the experience and expertise to begin treatment of the psychiatric emergency with appropriate medication. Blake attributed the difficulties in accessing treatment to the insufficiency of treatment providers available and the lack of insurance coverage for psychiatric care.

Brian Hepburn, MD, Executive Director of the National Association of State Mental Health Directors, expressed gratitude for the mental health block grant programs and funding for demonstration projects. For example, he believes that the First Episode of Psychosis program, which now receives a 10 percent set-aside from mental health block grants, will make a significant difference. He noted that treatment of serious mental illness is much more likely to be successful when begun in the early stages of the illness. He asked that Congress modify the Medicaid exclusion of services of institutions for mental disease (IMD) to allow payment for adult stays in IMDs. Hepburn also recommended increasing support for monitoring and enforcement of the laws requiring mental health and addiction parity.

Both Hepburn and William W. Eaton, PhD, Professor in the Department of Mental Health at Johns Hopkins University Bloomberg School of Public Health, told the committee that patients with mental illness or substance use disorder also are at higher risk for physical illnesses, such as heart attacks, stroke, or diabetes. Eaton also emphasized the lack of research and resources dedicated to mental illness, especially with respect to public health interventions that could prevent or alleviate mental illness.

Pending legislation

Finally, Hakeem Rahim, representing the National Alliance on Mental Illness, put a human face on the problem by describing the experience of living and coping with psychosis. Rahim told the committee that S. 1893, the Mental Health Awareness Act, which was recently passed by the Senate and is now pending in the House, was a good start. However, he urged the committee to support S. 1945, the Mental Health Reform Act, sponsored by committee members Bill Cassidy (R-La) and Christopher Murphy (D-Conn). S. 1945 would create an Assistant Secretary of Mental Health and Substance Use Disorders and expand funding for many training and treatment programs.

Seems like smooth sailing for Califf’s FDA nomination

Dr. Robert Califf, President Obama’s nominee to be the Commissioner of the Food and Drug Administration (FDA), coasted through questions at a confirmation hearing Tuesday in front of the Senate Health, Education, Labor and Pensions (HELP) Committee. Although many thought the process may hit a few bumps due to his ties with the pharmaceutical industry, Republicans and Democrats alike seem to support his candidacy and the nomination seems expected.

Califf’s background

A cardiologist and clinical trial expert from Duke University, Dr. Califf has been a consultant to drug companies and ran a research institute that received a majority of its funding from the industry. Dr. Califf said in his prepared statement that we need “an unbiased FDA that can work with industry to advance critical technologies while still making independent determinations to ensure that scientific potential is translated into safe and effective products. To advance, we must find common ground with industry and academia on the science without compromising this fundamental role of the FDA.”

Califf’s ties to the industry raised concerns among some public health groups and some Democrats say that he is too close to the industry he is being called on to regulate. Many medical experts dispute that, saying that industry is a principal funder of research in the United States and that working with companies does not present an inherent conflict.

Although essentially friendly, the hearing was punctuated with a few skeptical questions from Senators Elizabeth Warren (D-Mass) and Bernie Sanders (I-VT), who is running for the Democratic presidential nomination. In response to questions from Warren, Califf told the committee that the clinical trials he conducted at Duke, if funded by a drug company, had “ironclad” contracts giving the investigators the final rights to publication. Sanders said aid that the FDA needs a candidate who can stand up to an industry that has been “ripping off” the American people by charging “outrageous” prices for medicines.

Vote

The HELP committee will vote on whether to approve Califf’s nomination, which must then be approved by the full Senate. Patient groups and medical associations are hoping that Califf will help to speed new drugs to market and have publicly supported Califf.