Tara O'Neill Hayes July 16, 2019
Executive
Summary
·
Multiple Senate and House committees have been working for months
on legislation to bring down drug costs, almost exclusively by either directly
or indirectly increasing competition.
·
The bills take three broad tacks: Some seek to end tactics that
prevent competitors from entering a market, some aim to increase transparency
around pricing practices, and some look to reduce the costs of developing new
drugs.
·
While there is still some disagreement, these bills generally have
bipartisan support.
Introduction
Multiple
Senate and House committees have been working for months on legislation to
bring down health care costs. The array of policies
discussed here all relate to drug pricing and aim to do a variety of things:
spur competition and stop anti-competitive behavior, increase transparency
around drug prices and costs to various stakeholders, penalize drug makers whose
prices are deemed to be too high or increasing too quickly, and reduce the cost
of developing new drugs.
Below are
explanations and analyses of the policies in several recent bills. The policies
discussed here are included in: S. 1895, The Lower Health Care Costs Act, passed by the
Senate Health, Education, Labor, and Pensions (HELP) Committee; H.R. 2296,
the More Efficient Tools to Realize Information for Consumers
(METRIC) Act, passed the House Energy and Commerce (E&C)
Subcommittee on Health; and four bills (S. 1416, S. 440, S. 1227, and S. 1224)
passed by the Senate Judiciary Committee. Most of the bills included in H.R.
2296 have also been considered and passed by the House Ways and Means
Committee.
Attempts
to Spur Competition
Perhaps
the largest focus of these bills is on increasing competition among drugs,
particularly by encouraging the development of generics. Higher competition
typically puts downward pressure on prices while giving consumers greater
choice.
CREATES
Act: One long-awaited provision in the Senate HELP Committee’s bill
(S. 1895) is the CREATES Act, which is intended to bring generic drugs to
market more quickly. An increasing number of drugs are being developed that
require the use of safety protocols, known as Risk Evaluation and Mitigation Strategies (REMS),
due to the potential or known serious health risks associated with exposure to
the drugs. As explained here, REMS protocols may be used by brand-name
drug manufacturers to block or delay the entry of a generic competitor by
impeding the generic manufacturer’s ability to obtain enough samples of the
brand-name drug to prove their product’s bioequivalence to the reference
product. The CREATES Act will allow generic and biosimilar manufacturers to sue
brand-name manufacturers if they fail to provide sufficient samples in a timely
manner.
New FTC
Authorities: A Senate Judiciary Committee bill (S. 1416) would also try to
limit anti-competitive practices. First, the Federal Trade Commission (FTC)
would be authorized to file suit against a manufacturer of an innovator product
if: (1) the manufacturer, just before generic market entry, withdraws an
existing drug’s approval and markets a follow-on product; or (2) the
manufacturer takes an action to “unfairly disadvantage” the original drug
relative to the follow-on drug and impedes competition from a generic or
biosimilar manufacturer. Second, drug manufacturers would only be able to
assert 20 patents, and no more, in a suit against a competitor market entrant
that the manufacturer alleges is infringing on its patent rights.
These
provisions are intended to address behaviors that some have accused brand-name
manufacturers of engaging in to block competition by continuously extending
their patent protections. One example, known as “evergreening,” refers to the
practice of making a small tweak to a drug (and earning a new patent) shortly
before a generic competitor may enter the market and subsequently voiding
approval of the original drug. The manufacturer can then market the “new” drug
and extend their exclusivity via the newly obtained patent. And because the
original drug’s approval was voided, a generic manufacturer can no longer rely
on the original drug’s clinical trial studies showing it’s safe and effective
for expedited approval through the generic pathway; the generic manufacturer
would have to go through the full approval process for a new brand-name drug.
Drug makers are also said to thwart competition by earning as many patents as
possible, making it difficult for another manufacturer to bring a similar drug
to market.
Clarifying
Exclusivity Rights for New Chemical Entities: Another proposal intended
to address the issue of evergreening is one included in the Senate HELP
Committee’s S. 1895, which would reverse a recent Food and Drug Administration
(FDA) policy change and again limit five-year exclusivity only to drugs
containing no previously approved chemical entity. Current law provides
manufacturers five years of market exclusivity for new chemical entities. Originally,
FDA interpreted this law to apply only to
products which contained no previously approved active chemical entity. Then,
in 2018, FDA issued new guidance allowing fixed-combination products to receive
the full five years of exclusivity if the product contains a new chemical
entity, even if it also contains a previously approved entity. While some
worry this limitation could discourage innovation and product improvements,
proponents of the provision argue that current policy has led to evergreening.
New
requirements for the Orange Book and Purple Book published by the FDA:
The Orange Book lists all drugs approved by
FDA, including patent and exclusivity information, as well as all drugs that
may serve as a therapeutic alternative for a given drug. The Purple Book is a compendium of all
biological products, including biosimilars, approved by the FDA along with the
date of approval, whether the product received market exclusivity rights, and
if so, the date on which that exclusivity expires. Additionally, all reference
products with a biosimilar will cross-reference each other and indicate whether
the biosimilar has also been deemed interchangeable. S. 1895 would require drug
manufacturers to provide a list of all of their products’ patents for which
they could reasonably assert a claim of patent infringement. All information
must be made publicly available in a single, searchable format online, updated
every 30 days.
S. 1895
would also add a new requirement to the rules governing the Orange Book: If a
patent has been deemed inoperative or invalid or a patent claim has been
cancelled, then that patent information must be removed from the Orange Book.
This requirement is intended to encourage development of products in areas no
longer patented. Such an invalidation will not, however, impact the exclusivity
period of an existing generic for such a drug, so as not to discourage timely
development of generic drugs. While some may view these provisions as
transparency measures, they are primarily intended to spur competition by
making it easier for potential generic and biosimilar makers to better
understand the market, how much competition for a given product exists, and
when a product’s exclusivity period will end.
Citizen
Petitions: Reforms to the FDA’s Citizen Petition process are included in S.
1895 in an attempt to end the abuse of such petitions to delay the approval of
a new drug. Citizen Petitions can be used to request
that FDA take a certain action regarding the products it regulates, such as
disapproving a drug product application, adding a warning label to a drug’s
label, or changing a product from prescription to over-the-counter status. FTC
and FDA officials have noted that numerous petitions have been
filed with no scientific claim and seem to have the sole purpose of delaying
approval of a generic drug. In response, S. 1895 (similar to S. 1224, the Stop
STALLING Act, passed by the Senate Judiciary Committee) does three notable
things: It provides FDA the authority to deny a petition if the agency
determines its primary purpose is to delay approval of an application; it
requires the petition to be submitted within 60 days after the petitioner knew
(or should have known) the information upon which the petition is based; and it
allows the Department of Health and Human Services (HHS) to refer petitioners
to FTC for anti-competitive behaviors.
Biologic
Competition: Biologic products that are currently technically classified as
“drugs” but which will transition to being classified as biologic products in
March 2020, such as insulin, will not be able to receive new, extended market
exclusivities under S. 1895, although any existing, unexpired exclusivities
will be preserved. This categorization change will allow new biosimilar
versions of insulin to finally come to market; the current regulations
governing insulin have thus far prohibited such competition. The bill also
clarifies that manufacturers that submit a biosimilar application under the
current approval pathway at least six months in advance of the transition will
not have to resubmit their application under the new approval pathway if their
application has not been approved by the time the transition takes effect.
Efforts
to Increase Transparency
Several
provisions seek to increase the amount of information available to patients,
doctors, and the government. Disclosing such information is intended to boost
competition and improve efficiency.
PBM
Oversight: Much attention over the past few years has focused on the
pricing and contracting practices of pharmacy benefit managers (PBMs). Little is
known about the value of discounts and rebates obtained by PBMs from drug
manufacturers, which makes it difficult to know the net cost of drugs and which
parties are profiting most from rising drug prices. Section 306 of S. 1895
requires that health insurance plan sponsors (e.g. an employer) receive a
report at least every six months from the health insurance issuer or entity
providing pharmacy benefit management services detailing a broad array of
prescription pricing and utilization data for the enrollees of their plan. PBMs
would also be barred from engaging in spread pricing—a practice in which the
PBM charges the plan sponsor more for a drug than the PBM paid the pharmacy for
dispensing the drug. Similarly, PBMs must, when contracting with a group health
plan, pass all rebates and discounts received from a pharmaceutical
manufacturer, distributor, or other third party through to the health plan;
further, all rebate, discount, and fee data must be made available for audit by
the plan sponsor.
Section 3
of the House Energy and Commerce Committee’s H.R. 2296, the METRIC Act, would
take this principle even further by requiring pricing information be publicly
available. This section mirrors H.R. 2115, the Public Disclosure of Drug
Discounts Act, which requires the HHS Secretary to release to the public
information regarding PBMs serving Medicare Part D and the aggregate drug
manufacturer rebates, discounts, fees, and price concessions they obtain, as
well as generic dispensing rates. This bill further requires that this
information be provided separately for each PBM. The language does stipulate
that the data should be displayed in a manner that prevents the disclosure of
information on rebates, discounts, and price concessions at the individual drug
or plan level. In order to ensure confidentiality of proprietary information,
the information would be required to be aggregated by drug class, but only if
the Secretary determines the number of drugs in a class is sufficient to meet
the confidentiality requirement. Further, data from a particular year must only
be made available after two years have passed.
The
Prescription Pricing for the People Act, S. 1227, passed by the Senate
Judiciary Committee and included as Section 4 of the METRIC Act (with minor
variations following the Judiciary Committee’s amendments), also seeks to
increase insight into PBM contracting practices by requiring FTC to study the
intermediaries in the pharmaceutical supply chain and report on the prevalence
of anti-competitive and non-consumer-friendly behaviors. Specifically, FTC
would report on the practice of spread pricing, practices to steer patients to
particular pharmacies in which the PBM has an ownership interest, the use of
formularies to increase use of higher-cost drugs, and whether FTC faces any
specific legal or regulatory obstacles in trying to enforce antitrust and
consumer protection laws in this field. Last, FTC would make recommendations to
Congress as to how to make the market more competitive and transparent and how
to help ensure consumers benefit from the discounts and rebates provided to the
various industry stakeholders.
Drug
Price Transparency: H.R. 2087, the Drug Price Transparency Act, would require drug
manufacturers without a rebate agreement in effect for the Medicaid Drug Rebate
Program to report average sales price (ASP) information for the purpose of
determining the appropriate Medicare Part B payment rate for such a drug. The
information provided would be subject to audit by the HHS Office of the
Inspector General (OIG) and subject to verifying surveys of wholesalers and
manufacturers conducted by HHS. Further, the OIG will be required to submit a
report to Congress on the accuracy of ASP data and any recommendations on how
to improve it.
Drug
Samples: An amended version of H.R. 2064 has also been included in the
METRIC Act. This legislation would require drug manufacturers to disclose
information on the marketing samples they give to health care providers. Health
care oversight agencies, researchers, and health care payers, including both
public and private insurers, would receive this information. Unlike in the
original bill, however, the information would not be publicly disclosed.
Empowering
Prescribing Providers: Section 7 of the METRIC Act would require providers’ electronic
health record systems to include particular new tools. These tools would allow
providers to access prescription drug information for their patients while
making prescribing decisions, including which drugs are on a patient’s
insurance formulary, the out-of-pocket cost for the drug being considered along
with therapeutic alternatives, and whether prior authorization or other
utilization management requirements are in place for that drug.
Penalizing
High and Rising Prices
One bill
specifically targets price increases for drugs.
Justifying
Price Increases: The METRIC Act includes a slightly amended version of H.R. 2296,
the FAIR Drug Pricing Act, which requires drug manufacturers to report publicly
and provide justification for any pending price increases for certain drugs
provided to Medicare and Medicaid beneficiaries 30 days prior to the
increase. This requirement would be triggered for any drug with a list
price of $100 or more if the price is going to increase 10 percent or more in a
single year or 25 percent or more within three years.
Reducing
Development Costs
A couple
of provisions in these bills target the costs of developing and maintaining
drugs. Bringing down these costs reduces the pressure for drug manufacturers to
raise prices or enter the market at such high price points.
U.S.
Pharmacopeial Standards for Biologics: Section 207 of S. 1895 says
that biological products will no longer have to comply with U.S. Pharmacopeial (USP) standards. The USP is
a non-profit scientific organization that develops and publishes standards,
referred to as monographs, regarding the strength, quality, and purity of
medicines. Currently, all drugs recognized in the compendia must comply with
USP monograph standards, when one exists; if they don’t, they will be labeled
as adulterated, misbranded, or both, as appropriate. But these standards were
developed for small molecule drugs which can be exactly replicated; biological
products, in contrast, are complex and variable by nature, and such a standard
can be difficult (if not impossible) to meet and may hamper innovation,
as explained by the FDA. Eliminating this
requirement for biological products will remove a potential market barrier for
such products, while not in any way changing the FDA approval process or
standards regarding safety and efficacy.
Allowing
for Updated Generic Drug Labels: Drug labels include the
indications for which a drug is approved, as well as safety and dosing
information. Drug label information must be approved by the FDA, and brand-name
drug manufacturers are responsible for keeping labels current; generic
manufacturers must use the same label as the brand-name manufacturer. Labeling
updates may include new safety information or warnings (which are required if
new evidence is found), as well as adding new indications for a drug, although
a new indication may only be added if FDA approval for that indication has been
granted. After enough time, however, the brand-name drug may no longer be
manufactured and thus the manufacturer stops updating the drug’s label. The
responsibility then falls to the generic manufacturer, but updating a drug’s
label can be expensive (as just noted, a new indication may only be added after
successfully completing the approval process) and there may not be sufficient
incentive for the generic manufacturer to do so, unless required by the FDA
because it pertains to safety information.
When new
uses for a drug are discovered but not formally approved, doctors may prescribe
the drug for “off-label” use. Insurers, however, are not required to provide
reimbursement for drugs used off-label, which can leave patients on the hook
for the full cost of the drug. Off-label use is quite common in cancer
treatment.[1] The
new authority included in S.1895 would allow the FDA to initiate and require
generic manufacturers to update their labels when new scientific evidence
regarding use of the drug is available; when there is a relevant accepted use
of the drug not reflected in the existing label; or when the label does not
reflect current legal and regulatory requirements. This authority will allow
generic drug labels to be updated to reflect new uses of drugs, which will
increase insurance coverage, without requiring generic manufacturers to endure
the expensive approval process.
Conclusion
Several committees
in Congress have recently crafted legislation intended to bring down the cost
of drugs, almost exclusively by either directly or indirectly increasing
competition. The bills that aim to increase competition directly do so
primarily by increasing scrutiny of certain tactics sometimes used by
first-to-market companies to thwart or delay market entrance by a competing
product. Many others would attempt to increase transparency of the pricing
practices of manufacturers and PBMs, which aim indirectly to help increase
competition. Finally, some of the bills seek to reduce the cost to develop new
drugs, which should also indirectly increase competition and hopefully allow
the drugs to be provided at a lower price than they otherwise would be if the
development costs were higher.
While the
nation’s health policy woes are numerate, prescription drug costs are a top concern for Americans. With
bipartisan support for many of these bills, this seems to be one area where
there is a good chance Congress may very well move forward.
[1] https://www.cancer.org/treatment/treatments-and-side-effects/treatment-types/chemotherapy/off-label-drug-use.html
https://www.americanactionforum.org/insight/how-congress-is-attempting-to-lower-drug-costs/#ixzz5uRz5zqdF
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