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Ameet Sarpatwari, "Drug Pricing and Cost"

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January 23, 2017

The Fifth Annual Health Law Year in P/Review symposium featured leading experts discussing major developments during 2016 and what to watch out for in 2017. 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.

The Fifth Annual Health Law Year in P/Review was sponsored by the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics at Harvard Law School, Harvard Health Publications at Harvard Medical School, Health Affairs, the Hastings Center, the Program On Regulation, Therapeutics, And Law (PORTAL) in the Division of Pharmacoepidemiology and Pharmacoeconomics at Brigham and Women’s Hospital, and the Center for Bioethics at Harvard Medical School, with support from the Oswald DeN. Cammann Fund.

Learn more on our website: http://petrieflom.law.harvard.edu/events/details/5th-annual-health-law-year-in-p-review

Published in: Healthcare
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Ameet Sarpatwari, "Drug Pricing and Cost"

  1. 1. Health Law in P/Review Drug Pricing and Cost Ameet Sarpatwari, J.D., Ph.D. Instructor in Medicine, Harvard Medical School Assistant Director, Program On Regulation, Therapeutics, And Law (PORTAL), Division of Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine, Brigham and Women’s Hospital January 23, 2017 asarpatwari@bwh.harvard.edu
  2. 2. Prescription Drug Spending in the US  Net spending rose 20% between 2013-2015 to $457 billion  Outpaced a 6% increase in aggregate healthcare spending  Constitutes 19% of employer-based insurance benefits  International per capita comparisons  US: $858  Average of 19 industrialized countries: $400 -Keehan et al., Health Aff (2015). -Kaiser Family Foundation (2015). -Wall Street Journal (2015). -OECD (2015).
  3. 3. Consequences of High Drug Prices  More patients have coverage due to Medicare drug benefit and the ACA (for now), but cost-containment strategies have shifted drug expenses onto patients’ shoulders  States facing higher drug prices have cut back on other services or have imposed barriers to medication access within Medicaid  25% of patients in 2015 reported that they or another family member did not fill a prescription in the last year due to cost  78% of Americans favor capping what drug companies can charge Kaiser Family Foundation (2016). Kaiser Family Foundation (2016). Barlas. PT (2016).
  4. 4. Explanation for High Drug Prices We are seeing surging drug prices because we allow pharmaceutical companies to charge whatever the market will bear, and at the same time permit strategies that undercut competition or hinder payors’ abilities to provide counterweights.
  5. 5. Federal Policies
  6. 6. Modern Bully Pulpit: Twitter  Lockeed Martin: December 12, 2016  “The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.”  Drugs?  Press Conference: January 11, 2017  “Our drug industry has been disastrous.”
  7. 7. CMS Negotiation of Medicare Part D Prices  Trump  Challenges  Legislation  Medicare Modernization Act: Republican-led Congress  Meaningful savings  Latitude to make formulary choices  CBO: “A negligible effect on federal spending”  Leverage: prior authorization, step therapy
  8. 8. Negotiating Restrictions: Government Payors  FDA: no authority to regulate drug prices  Medicare (40M) cannot negotiate drug prices  2006 Medicare Modernization Act  HHS Secretary cannot  “interfere with the negotiations”  “institute a price structure”  Limits on formulary adjustments  Medicaid (60M) must generally cover all FDA approved drugs  Pays acquisition costs, gets rebate  Individual states may negotiate supplemental rebates  VA negotiates directly with manufacturers  Prices 40% below those paid by Medicare Part D plans  VA price excluded from Medicaid rebate calculation
  9. 9. Other Possible Federal Reform and Realities  Drug (re)-importation  Comparable safety and efficacy standards in Canada, EU, Japan, etc.  Authority exists for HHS Secretary to import from Canada  Problem: fail to address systemic deficiencies  Government patent use and march-in rights  Recent attempt: enzalutamide (Xtandi)  Problem: no indication of willingness to exercise  Targeting extensions of market exclusivity  Patents: reviewing policies for novelty and non-obviousness  CREATES Act: required sample sharing for bioequivalence testing  Pay-for-delay: non-cash based deals
  10. 10. State Policies  States as engine for reform  “If the federal government doesn’t tackle drug pricing fast enough, participants agreed, state governments would.”  Disclosure: Consultancy, National Academy for State Health Policy Politico Working Group (2016).
  11. 11. Transparency  Past focus: research and development costs for high-priced drugs  Vermont: An Act Related to Prescription Drugs  Concerns  Shift away from value-based pricing  Leverage  Possible utility: informing better decision-making  Sources of high drug costs: drug manufacturers vs. PBMs  Savings passed on by 340(b) programs  Utilization of drug coupons  Possible legal challenges  Trade secrets: regulatory takings?  ERISA: PCMA v. Gerhart (8th Cir. 2017)
  12. 12. Public Utility Model  Prescription drugs = critical goods  Drug price review board  Review drugs with high launch prices or price increases  Conduct open hearings  Collect data from drug manufacturers  Commission studies  Approve, reject, tax, or set  E.g., Governor Cuomo proposal: mandatory Medicaid rebates  Legal hurdle: scope of federal preemption  BIO v. District of Columbia (Fed. Cir. 2007)
  13. 13. Consumer Protection: Unfair Trade Practices  Nebulous definition: immoral, unfair, causing substantial harm  Predatory pricing  Forcing patients to forgo treatment altogether or partially  E.g., pyrimethamine (Daraprim)  Case study: sofosbuvir (Sovaldi)  Massachusetts  Chapter 93A Section 2  Attorney General Healey: threat to sue  Skepticism: “I think she looses in Massachusetts and any court in the country.” –Prof. Erik Gordon  Result: negotiated rebate for MassHealth
  14. 14. Thank you! asarpatwari@bwh.harvard.edu
  15. 15. ROI Pricing and Forward Financing  Value-based pricing coupled with long-term payment plan  Mechanism to avoid systemic shocks  Types  Outcomes-based  E.g., sacubitril/valsartan (Entresto) and hospital admissions  Indication-specific  Challenges  Value determination  Risk allocation  Data collection  Medicaid restrictions -ICER (2015).

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