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Aaron S. Kesselheim, "Drug Pricing"


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December 12, 2017

The Sixth Annual Health Law Year in P/Review symposium featured leading experts discussing major developments during 2017 and what to watch out for in 2018. The discussion at this day-long event covered hot topics in such areas as health policy under the new administration, regulatory issues in clinical research, law at the end-of-life, patient rights and advocacy, pharmaceutical policy, reproductive health, and public health law.

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Aaron S. Kesselheim, "Drug Pricing"

  1. 1. PORTAL Program On Regulation, Therapeutics, And Law Health Law Year in P/Review: Prescription Drug Prices Aaron S. Kesselheim, M.D., J.D., M.P.H. Associate Professor, Harvard Medical School Director, Program On Regulation, Therapeutics, And Law (PORTAL) December 12, 2017
  2. 2. PORTAL Program On Regulation, Therapeutics, And Law Prescription Drug Spending in the US • Rose 12% in 2015, 6% in 2016 to $450 billion – 22% of health care spending – 19% of Medicare spending – 19% of employer-based insurance benefits – More than half of change in 2016 from increases in prices of existing drugs • Retail spending – Increased 8.9% in 2015 and 1.3% in 2016 to $330 billion • Projections for 2017: – 6-8% increase in total drug expenditures – 11-13% increase in clinics – 3-5% increase in hospital drug spending Sources: IMS, MedPAC, Kaiser, CMS, Schumock et al, AJHSP
  3. 3. PORTAL Program On Regulation, Therapeutics, And Law Agenda • Review selected drug pricing initiatives, policies, proposals from – States – Congress – Executive branch
  4. 4. PORTAL Program On Regulation, Therapeutics, And Law States: New legislation • California SB 17 – Price justification • Notify state and health insurers when plan to raise the price of a medication by 16% or more over 2 years – Outlaw drug coupons when FDA-approved lower cost generic drugs are available Ross and Kesselheim, NEJM, 2013
  5. 5. PORTAL Program On Regulation, Therapeutics, And Law Price gouging • Maryland HB 631 – Medicaid alerts AG if generic drug manufacturers or wholesale distributors raise price of a drug by 50% or more in a year • Also drug-device combinations – Must justify within 45 days • AG can require manufacturer to produce relevant materials to determine whether the increase was excessive – “Unconscionable increase”: AG can stop increase, restore excess payments to patients and payers, impose penalties Greene, NEJM, 2017
  6. 6. PORTAL Program On Regulation, Therapeutics, And Law Diabetes drug transparency • Nevada SB 539 – If increase prices by more than the previous year’s medical inflation, or by double medical inflation over the previous two years, must provide production costs, marketing costs, profits, information about patient assistance programs, the price, and aggregate amount of any rebates – Publish an annual report based on these disclosures with information about price increases, the reasons for those increases, and the price increases’ effects on prescription drug spending
  7. 7. PORTAL Program On Regulation, Therapeutics, And Law NY budget legislation • Identify high-cost drugs, determine value-based price with a review board, negotiate supplemental rebates for Medicaid • Trigger if the rate of drug spending growth exceeds the 10-year average inflation rate plus either 5% in 2017-2018 or 4% in 2018-2019 Hwang Kesselheim Sarpatwari, JAMA, 2017 NY Medicaid spending WAC (May 2017) ICER value- based price range Estimated rebate % Incremental discount required Ledipasvir/so fosbuvir $243M $63,000 (8 wks) $34,000- $42,000 0 10%-23% Dimethyl fumarate $32M $6820 per package $982-$3340 31 0-32%
  8. 8. PORTAL Program On Regulation, Therapeutics, And Law Challenges to state laws • Commerce clause claims – MD: Directly regulates drug prices in other states – NV: Burdens interstate commerce by indirectly influencing prices in other states • Patent-based challenges – Recalling BIO v DC (2007) • Trade secret Lee, Kapczynski, Kesselheim, JAMA, forthcoming 2017
  9. 9. PORTAL Program On Regulation, Therapeutics, And Law 2018 trend?: Medicaid waivers • Public health insurance for patients with low incomes and disabilities – 60 million lives, 10% of total drug spending – Officially optional, but all states provide drug coverage – OBRA of 1990: If offer, must cover virtually all drugs, but receive mandatory statutory rebate of 15.1%; ACA increase to 23.1% • States have few other ways to address rising costs • MA seek waiver under §1115 of Social Security Act – Propose closed formulary, at least 1 drug per therapeutic area – Propose to exclude drugs with limited or inadequate benefit until incremental clinical value is proven
  10. 10. PORTAL Program On Regulation, Therapeutics, And Law Blocked state action • Ohio “Issue 2” – Would mandate that state agencies pay for drugs at the same price as the VA – Similar to California “Proposition 61” (2016) • California analysis – Examine differences in net prices paid by the VA and Medi-Cal for the top 200 brand-name drugs by spending in the Medi-Cal fee-for-service program in 2014 – Medi-Cal net price after statutory rebates exceeded the negotiated VA price for 65 (33%) drugs by 30% on avg – Price parity=cost savings in 2014 of $100-$125M • Voted down, 79%-21% Hwang and Kesselheim, BMJ, 2016
  11. 11. PORTAL Program On Regulation, Therapeutics, And Law Congress • 21st Century Cures Act (Dec 2016) • FDA Reauthorization Act – 2018 goals: new drugs ($879 million), biosimilars ($45 million), generic drugs ($494 million) Kesselheim & Avorn, JAMA 2017 Darrow, Avorn, Kesselheim, NEJM, 2017
  12. 12. PORTAL Program On Regulation, Therapeutics, And Law CREATES Act • Civil penalties for failure to provide sufficient quantities of a covered product • Give FDA flexibility to approve generic drugs with different, comparable Risk Evaluation and Mitigation Strategies Vokinger, Kesselheim, Avorn, Sarpatwari, JAMA IM, Sept 18 2017
  13. 13. PORTAL Program On Regulation, Therapeutics, And Law Affordable and Safe Prescription Drug Importation Act • Canadian pharmacies and wholesale distributors can become “certified foreign” sellers by paying a user fee and: – Being in Canada – Being a distributor of prescription drugs offered for importation – Being established for 5 years or more – Providing medications only if there is a valid prescription – Being in compliance with applicable Canadian laws and regulations – Conducting regular quality assurance – Allowing regular laboratory testing – Notifying all parties of product recalls – Having a process for resolving rule violations – Not selling products that are illegal in Canada – Meeting additional criteria implemented by the Health and Human Services secretary • GAO study of outcomes after 18 mos, expand to include other OECD countries after 2 years Fralick, Avorn, Kesselheim, NEJM, 2017
  14. 14. PORTAL Program On Regulation, Therapeutics, And Law Improving Access to Affordable Rx Drugs Act  Transparency provisions  Negotiating prices for Medicare Part D, accelerate closing the gap  Anti-price gouging  Importing safe drugs  Move dual-eligibles back to Medicaid drug pricing  Cap on prescription drug cost-sharing  Reductions in statutory market exclusivities  Pay for delay illegal
  15. 15. PORTAL Program On Regulation, Therapeutics, And Law Executive branch
  16. 16. PORTAL Program On Regulation, Therapeutics, And Law Draft Executive Order • Cut regulations • Direct FDA to “advance the timely development of medical products, increase drug competition, enable generic entry for complex drugs, and address unintended consequences of existing rules that may reduce competition” • “Facilitate, where appropriate, the ability of Federal health programs to enter into reimbursement arrangements for medical products that are based on the value of such products to patients rather than the volume of such products purchased” • Directs US trade rep to conduct study of price differences between US and other countries – Review trade agreements that may need to revised “to promote greater IP protection and competition in the global market” • Cut 340B reimbursement
  17. 17. PORTAL Program On Regulation, Therapeutics, And Law FDA • Facilitating entry of generic drugs, robust generic competition – Guidances on complex generic drug development – Improve first-cycle approval rate – Expedited development if 3 or fewer manufacturers in the market • However… – Approving drugs for cancer, other diseases based on limited evidence – Not adequately ensuring post-approval trials completed Naci, Smalley, Kesselheim, JAMA, 2017
  18. 18. PORTAL Program On Regulation, Therapeutics, And Law Preview of 2018 • Oil States v. Green Energy Group case before Supreme Court • Biosimilars • More state action • More tweets • The first $1 million therapy?