Life Science Compliance Update

May 14, 2018

President Trump Gives Remarks on Lowering Drug Prices

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“We will see those prices go down, it will be a beautiful thing to watch.” President Donald J. Trump

In less than twenty-five minutes, President Donald J. Trump and Health and Human Services (“HHS”) Secretary Alex Azar provided their remarks on lowering drug prices. President Trump began by stating that his “administration is launching the most sweeping action in history to lower the price of prescription drugs for the American people."

President Trump decried the “middle men” stating they “became very, very rich. Whoever those middle men were, a lot of people never figured it out, they’re rich. They won’t be so rich anymore." He shifted to the “drug lobby” and said they were “making an absolute fortune at the expense of American consumers." President Trump also targeted the pharmacy gag rule, which prohibits pharmacists from informing customers on how to money, stating it “is a total ripoff and we are ending it.” He derided how countries pay far less than the same drug offered here. “It’s unfair, it's ridiculous, and it's not going to happen any longer. It's time to end the global freeloading once and for all," exclaimed Trump. He then asked for HHS Secretary Azar to provide remarks.

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“The President’s blueprint is a sophisticated approach in reforming and improving this unbelieving complex system.” HHS Secretary Azar

Secretary Azar began by explaining how Washington only talks. “The problem of high prescription drug costs is something that’s been talked about in Washington for a long time. But that’s all its been. Talk, talk, talk,” said Secretary Azar. He then highlight two examples of Trump’s plan: requiring drug prices to be disclosed for pharmaceutical advertisements and tougher negotiations for better deals with the industry. It should be noted that in June 2017, the American Medical Association (“AMA”) adopted this policy at its Annual Meeting. Following the remarks, a Press Briefing was held by Press Secretary Sarah Sanders and Secretary Azar. HHS Secretary explained that actions laid out within Trump’s blueprint “are steps that we can take using our regulatory authorities, especially with the power in the Medicare program.”

Trump’s Blueprint: American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs

The 44-page document is filled with a lot of talking points on how to address high drug prices, but ultimately Trump’s plan lacks specifics. HHS identified four challenges in the American drug market: (1) High list prices for drugs; (2) Seniors and government programs overpaying for drugs due to lack of the latest negotiation tools; (3) High and rising out-of-pocket costs for consumers; and (4) Foreign governments free-riding off of American investment in innovation. To address these challenges, HHS identified four key strategies for reform: (1) Improved competition; (2) Better negotiation; (3) Incentives for lower list prices; and (4) Lowering out-of-pocket costs. HHS provided a high-level overview of “immediate actions” it may undertake to address the key strategies, as well as “further opportunities.”

Improved competition

Immediate Actions

  • Steps to prevent manufacturer gaming of regulatory processes such as Risk Evaluation and Management Strategies (REMS)
  • Measures to promote innovation and competition for biologics
  • Developing proposals to stop Medicaid and Affordable Care Act programs from raising prices in the private market

Further Opportunities

  • Considering how to encourage sharing of samples needed for generic drug development
  • Additional efforts to promote the use of biosimilars

Better negotiation

Immediate Actions

  • Experimenting with value-based purchasing in federal programs
  • Allowing more substitution in Medicare Part D to address price increases for single-source generics
  • Reforming Medicare Part D to give plan sponsors significantly more power when negotiating with manufacturers
  • Sending a report to the President on whether lower prices on some Medicare Part B drugs could be negotiated for by Part D plans
  • Leveraging the Competitive Acquisition Program in Part B
  • Working across the Administration to assess the problem of foreign free-riding

Further Opportunities

  • Considering further use of value-based purchasing in federal programs, including indication-based pricing and long-term financing
  • Removing government impediments to value-based purchasing by private payers
  • Requiring site neutrality in payment
  • Evaluating the accuracy and usefulness of current national drug spending data
  • Investigating tools to address foreign government threats of compulsory licensing or IP theft that may be harming innovation and development, driving up U.S. drug prices

Incentives for lower list prices

Immediate Actions

  • FDA evaluation of requiring manufacturers to include list prices in advertising
  • Updating Medicare’s drug-pricing dashboard to make price increases and generic competition more transparent

Further Opportunities

  • Measures to restrict the use of rebates, including revisiting the safe harbor under the Anti- Kickback statute for drug rebates
  • Additional reforms to the rebating system
  • Using incentives to discourage manufacturer price increases for drugs used in Part B and Part D
  • Considering fiduciary status for Pharmacy Benefit Managers (PBMs)
  • Reforms to the Medicaid Drug Rebate Program
  • Reforms to the 340B Drug Discount Program
  • Considering changes to HHS regulations regarding drug copay discount cards

Lowering out-of-pocket costs

Immediate Actions

  • Prohibiting Part D contracts from preventing pharmacists’ telling patients when they could pay less out-of-pocket by not using insurance
  • Improving the usefulness of the Part D Explanation of Benefits statement by including information about drug price increases and lower cost alternatives

Further Opportunities

  • More measures to inform Medicare Part B and D beneficiaries about lower-cost alternatives
  • Providing better annual, or more frequent, information on costs to Part D beneficiaries

The full blueprint is available here. The White House also issued a corresponding Fact Sheet.

Reactions

The stock market largely shrugged off Trump’s blueprint by buying more health stocks (Bloomberg article; see NYT article). Industry spokespersons presented a mixed reaction. 

PhRMA: Pharmaceutical Research and Manufacturers of America (“PhRMA”) president and CEO, Stephen J. Ubl, stated “[t]hese far-reaching proposals could fundamentally change how patients access medicines and realign incentives across the entire prescription drug supply chain. While some of these proposals could help make medicines more affordable for patients, others would disrupt coverage and limit patients’ access to innovative treatments.”  Read the full statement here.

ACR: Dr. David Daikh, President of the American College of Rheumatology (“ACR”), stated ACR “agree[d] the President that drug prices in America are too high and action is long overdue. As the Administration explores sweeping changes to Medicare’s drug distribution system, including the role of pharmacy benefit managers, it is imperative that drug pricing reforms increase transparency, choice, and competition – and not penalize our patients by limiting their access to life-changing treatments.”

AMA: David O. Barbe, M.D., President, AMA, said “[t]he AMA is pleased the Trump administration is moving forward with its effort to address seemingly arbitrary pricing for prescription drugs. Physicians see the impact of skyrocketing prices every day as patients are often unable to afford the most medically appropriate medications—even those that have effectively controlled their medical condition for years. No one can understand the logic behind the high and fluctuating prices. We hope the administration can bring some transparency – and relief – to patients.” Read the full statement here.

May 11, 2018

Opioid Class Action Suit Filed in Five States

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On May 2, 2018, three law firms filed class action lawsuits against pharmaceutical manufacturers and distributors on behalf of individuals and businesses who have been handed higher insurance costs as a result of the opioid epidemic. The law firms filed suits on behalf of plaintiffs in five different federal courts: California, Illinois, Massachusetts, New Jersey, and New York. The complaints all charge major opioid manufacturers and distributors with fraudulent and deceptive marketing practices, negligence in distributing opioids into the marketplace, and other violations of state and federal law.

In each of the lawsuits filed, the putative class includes all individuals and corporate entities that purchased health insurance, including individuals who paid for part of an employer-sponsored insurance plan. The complaints allege that each class member paid higher health insurance costs as a predictable consequence of the defendants’ misconduct.

The lawsuits are filed against some of the bigger names in the industry, including Purdue Pharma L.P.; Insys Therapeutics, Inc.; Teva Pharmaceutical Industries, Ltd.; Johnson & Johnson; and Janssen Pharmaceuticals, Inc.

The allegations include the following:

  • Because opioids are highly addictive, prevailing medical norms dictated that they should not be prescribed for chronic pain;
  • The manufacturer defendants disseminate false and misleading statements about opioids;
  • The manufacturer defendants intentionally misled doctors and consumers about the risks and benefits of opioids to generate billions of dollars in improper profits;
    • The manufacturer defendants misrepresented the known risks of long-term opioid use;
    • The manufacturer defendants falsely overstated the positive long-term outcomes of opioids in cases of chronic pain;
    • The manufacturer defendants falsely represented the relative risks associated with non-opioid pain relief and pain treatment strategies;
  • The manufacturer defendants engaged in other unlawful and unfair misconduct;
    • The manufacturer defendants failed to act on their knowledge of the diversion of their opioid drugs;
    • The manufacturer defendants specifically targeted susceptible prescribers and vulnerable patient populations;
    • The manufacturer defendants fraudulently concealed their misconduct;
  • The manufacturer defendants’ misinformation campaign resulted in dramatic increases in opioid use, windfall profits, and a public-health crisis;
  • The distributor defendants engaged in unlawful and unfair misconduct;
    • The distributors defendants had a duty to exercise reasonable care in distributing the opioid drugs;
    • The distributor defendants knowingly or negligently facilitated widespread diversion of opioids;
    • The distributor defendants’ misconduct facilitated the opioid epidemic;
  • The [various state] purchasers of healthcare insurance have sustained substantial harm as a result of all defendants’ misconduct; and
  • All defendants acted wantonly, willfully, outrageously, and with reckless disregard for the consequences of their actions.

Some of the causes of action include: Violations of RICO; Conspiracy to Violate RICO; Public Nuisance; Unjust Enrichment; Negligence; Negligent Misrepresentation; and Civil Conspiracy.

Each of the three law firms that filed suit made statements:

"It is not enough that public entities collect damages for the harms suffered by taxpayers," said Ashley Keller of Keller Lenkner LLC. "Pharmaceutical companies must pay for their devastating economic impact on the health insurance market. We're here to make sure that they do."

"Obtaining redress from the opioid wrongdoers is not a 'consumers vs. business' issue, and it transcends traditional political lines," said Will Consovoy of Consovoy McCarthy Park PLLC. "These classes include individual plaintiffs, small businesses, and large corporations. All of them have suffered damages at the hands of the opioid industry."

"Decisions by opioid manufacturers and distributors to put profits over people have damaged millions of consumers and businesses that purchase health insurance coverage," said Jay Edelson of Edelson PC. "Individual policyholders are bearing the high cost of this unprecedented epidemic.  Through these suits, we seek to hold the opioid companies accountable."

May 10, 2018

Growth Rate of Spending on Medicine Slows

Medicine Use

The IQVIA Institute for Human Data Science recently released a report focused on net spending on medicines in the United States in 2017, with an outlook to 2022. The report notes that spending on medicines grew less than one percent in 2017 – just a mere 0.6 percent.

The report further found that the level and growth of spending, the price of new and old drugs, and the allocation of costs among patients, employers, health plans, intermediaries, and state and federal agencies, all “command great attention,” and therefore, the report aims to provide an “objective measure of medicine use” and the cost prescriptions have on our healthcare system.

Overall Figures

Total spending on medicines grew by 0.6% in 2017, after off-invoice discounts and rebates. This includes all types of medicines, including institutional use for inpatients and outpatients. If we were to solely focus on retail and mail-order pharmacy distribution, net spending actually declined by 2.1%.

Further, if we were to adjust for manufacturer discounts and rebates, as well as economic and population growth, medicine spending also declined, on a per capita basis, by 2.2% in 2017. Overall, medicine spending has tended to shift from traditional treatments to specialty medicines.

Interestingly, the report states that pharmacy prices for brand prescriptions increased by 58% over the past five years while the final out-of-pocket costs for all prescriptions declined by 17%. This is a perfect illustration of how complex the dynamics are when it comes to determining how much patients pay for their medicines and the influence the costs have on whether or not they get their prescriptions filled.

As noted above, also included in the report was an outlook for the next five years, to 2022. It is expected that there will be two to five percent net spending growth, with one to four percent growth in retail and mail-order prescription drugs. The growth will be driven primarily by the ever-growing number of new medicines, which tend to be specialty and orphan drugs, and will be offset by the impact of losses of brand exclusivity.

Opioids

Opioids are a hot topic of discussion and the report would have been remiss to not mention them. According to the report, prescription opioid volume peaked in 2011 at 240 billion milligrams of morphine equivalents and have declined 29% to 171 billion in 2017. The report notes that 2017 was the “largest single year change,” when the decline was 23.3 billion morphine milligram equivalents, or 12.0%.

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When we look at per adult statistics, prescription opioid usage was about 22 pills per adult in 1992 and rose to a peak of 72 pills in 2011. Usage has since declined to 52 pills per adult. The report believes that decreases in prescription opioid volume have been driven by changes in clinical usage, which have been influenced by regulatory and reimbursement policies and legislation including the FDA Opioid REMS program.

Innovation

New drug launches more than doubled in 2017 from 2016. Forty-two new active substances (NAS) were launched, with 21 for rare diseases and 14 for cancer. This number is not only more than double 2016 numbers but is also higher than all but two of the last ten years. Significant shifts in the regulatory process are becoming apparent, as 19 drugs received a breakthrough designation and 18 included patient-reported outcomes as part of their approved label from FDA.

According to the report, an estimated 40 to 45 new medicines are expected annually for the next five years, with 15 to 20 of those per year being orphan drugs.

The full report can be found here.

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