Latest Drugwonks' Blog

Bloomberg fiction writers Robert Langreth and Ben Elgin are pushing the idea that contributions from a pharmaceutical company to a patient assistance programs (PAPs) run by non profits operate on the edges of anti-kickback law or outright illegal.  Or put another way:  they craft a compelling story that drug companies are using poor patients to launder money and reap profits. 

Relying mostly on unsealed documents from a private case brought by an ex-Celgene employee, the duo cite an expert witness that the donations “were actually illegal kickbacks designed to hide the fact that Celgene was contributing these payments to the foundations to get Medicare patients to use more” of Celgene’s cancer drugs, Thalomid and Revlimid.’

Their reporting is, as the movie disclaimer goes: “Inspired by a true story” which begins here:

First, PAP’s  have been around for decades to help patients with limited financial ability to pay for out of pocket health care costs, including medicines. 

In 2006, the Medicare Part D benefit kicked in.  Beneficiaries no longer qualified for assistance under traditional PAP eligibility criteria whereby companies provided support directly to patients because they could run afoul of federal anti-kickback statutes and other law.  But many patients who did not qualify for low income subsidies still needed financial help.  Hence, the Department of Health and Human Services Office of Inspector General drew up regulations to allow cost-sharing subsidies provided by bona fide, independent charities unaffiliated with pharmaceutical manufacturers… even if the charities receive manufacturer contributions.”  These regulations have been continually updated and PAPs are strictly regulated by HHS.   

Elgin opines that such arrangements are a ‘grey area.’   He might tell that to HHS and the Department of Justice since they are not a party to this private lawsuit.  (More on the intricacies of the suit later. )

Second, drugs not covered on the Medicare Part D plan formulary or drug list are not counted towards the out of pocket costs. The PAP's assistance on behalf of the PAP enrollee does not count towards a Part D beneficiary's true-out-of-pocket cost (TrOOP).  In other words,  PAP assistance would not fill the donut hole and push patients into the catastrophic part of Part D where the program pays 95 percent of all drug costs.  

Third, there are many other patient assistance programs that have also been around for decades to help people with HIV,  Hepatitis C and many rare diseases.  Apparently the dynamic duo also believe these are “schemes” to gain billions. 

Fourth, in addition to ignoring that PAP assistance does NOT boost catastrophic drug spending, Langreth and Elgin rely heavily on the expert testimony provided on behalf of the plaintiff who makes these sweeping claims.   (More on the inventive path the expert took to estimate Celgene raked in $19 billion in excess sales over the last decade in another post.)  

Fifth, they also ignore the vast body of evidence that co-pay assistance often helps patients whose drugs are not covered and who’s copay or cost sharing have increased much faster than drug prices net of rebates.  And often these rebates are generated agreements that specify a “competitor’s drug must have a higher copayment than that of the rebated drug. Other agreements require the sponsor to exclude a competitor’s drugs from its formulary altogether. Rebates were often larger when fewer competitors’ drugs were given preference on the formulary. For example, one sponsor received a 35-percent rebate when the drug was one of two preferred drugs in its class, but a 40-percent rebate when the drug was the only preferred drug in its class on the formulary. “

But I guess helping patients who are powerless to fight such decisions should suffer and die.   Perhaps Langreth and Elgin feel that's a small price to pay to strike a blow for tort lawyer settlements.  

Here’s what Mick Kolassa, one the world’s experts on drug pricing and reimbursement (and a great blues artist) concludes: “Insurers can argue that these offset programs drive patients to use costlier branded drugs (in lieu of cheaper branded options or generics), but studies have shown that more than 40% of the time, in the absence of a copay-offset program, if the patient cannot pay the OOP expenses, they won’t switch to a cheaper drug—they will simply forgo the medication.  The insurance industry will end up losing considerably more money over the long run, in terms of covering related medical expenses that arise when the patients don’t control their conditions through the use of medication.”

To sum up, Langreth and Elgin allege that drug companies and PAPs are colluding to evade anti-kickback laws and overbill Medicare.   So they are alleging that the relationship is nothing less than money laundering and racketeering. 

I am sure that the article has gotten a lot of clicks.   Call me old-fashioned, but I’d trade clicks and self-serving media exposure for being fair and truthful.  
In a set of joint principles, BIO and PhRMA emphasized that companies should be able to communicate "truthful, non-misleading" information outside of an FDA-approved label to insurance providers, PBMs and government healthcare programs as they consider reimbursement decisions.

“To exercise sound medical judgment in treating patients, health care professionals must understand the full range of treatment options, including both established and emerging information about available medications. Biopharmaceutical companies are uniquely positioned to help health care professionals achieve the best outcomes for patients, because companies can provide timely, accurate, and comprehensive information about both approved and unapproved uses of the medications they research, develop, and bring to patients. PhRMA, BIO and their members believe that the availability of a wider range of truthful and non-misleading information can help health care professionals and payers make better informed medical decisions for their patients, which in turn will benefit patients.”

According to the principles, a company should be able to describe to payers its pipeline, the status of FDA applications, the anticipated uses of products, relevant clinical trial data, pharmacoeconomic information and applicable treatment guidelines. Further, a company should be able to discuss analyses of real-world data derived from "sound and well-described" research methods.

Communications should be tailored to the sophistication of the intended audience, and should provide "scientific substantiation" for information not included in FDA-approved labeling, the document said. A company should provide details on the design and implementation of studies that generated data, including patient populations and statistical analysis plan.

BIO and PhRMA also said that when applicable, companies should inform healthcare professionals that other research led to different results.

No word from White Oak … yet. What is needed from the FDA is though bold action and … clarity.

This is urgent for many reasons: different federal agencies (FDA, FTC, DOJ) with different views on pathways and jurisdiction, and the extreme danger of allowing federal judges dictate regulatory policy. If existing policy has evolved to protect the public from snake oil, the recent Amarin decision is precarious precedent for communications about fish oil – and beyond.

CDRH and Real World Evidence

  • 07.27.2016
  • Peter Pitts
In draft guidance released Tuesday, FDA outlined its thinking on the use of real-world evidence in making regulatory decisions about medical devices.

The agency described factors it would consider when evaluating the relevance, reliability and quality of real-world evidence, and suggests when it might use such data to make decisions about devices.

To evaluate the reliability of data, FDA will assess how they were collected, their adequacy for answering relevant questions, and whether they were collected in a manner that minimizes bias. The guidance says a prospective protocol is "essential to ensure reliability" of real-world evidence.
The guidance says FDA might use such evidence to expand a device's approved indications, for postmarket surveillance, and as a control for studies of subsequent devices.

Per BioCentury, “FDA's Center for Devices and Radiological Health also has been in the vanguard of the agency's efforts to solicit patient preference data and use it to support approval decisions.” Last year, CDRH used patient preference data to approve the Maestro Rechargeable System from EnteroMedics Inc.

The AP’s “exclusive“ report on Medicare drug spending excluded many facts that challenge the news outlet’s conclusion that “the rapid rise in spending for pricey drugs threatens to make the popular prescription benefit financially unsustainable.”

By exclusive, AP means selective, since it focused only on 2014-2015 drug spending -- which increased by 15 percent -- and over looked historical and projected changes in drug costs.  

Here's some information AP excluded:

Part D spending grew by 15 percent in 2015 and is expected to grow annually, on average, by 10.9 percent between 2015 and 2020.  And from 2010-2013 gross drug spending (not including rebates and other expenses) grew 10.1 percent.

A 2013 CBO analysis found that Part D drug costs between 2007-2010 “increased by just 1.8 percent per year per beneficiary, growing more slowly than total per capita drug costs.”  From 2010-2013 per capita costs increased by 1.6 percent. 

Specialty drugs accounted for only 6.7 percent of total drug spending per beneficiary in 2007 and 9.1 percent in 2011.   I estimate that

And AP also failed to note just how much “pricey” new drugs were as a percent of total Medicare spending.   In case you’re interested spending on brand drugs for 2015 was $52 billion, around 8 percent of total Medicare spending.  Which is about what it is projected to be for the next 20 years. 

Further, the AP misreports the impact of rebates.  It looks at rebates across the entire program, which includes spending on generic drugs.  AP states: “Rebates for individual drugs…averaged nearly 13 percent across the entire program in 2013, according to government figures, and were estimated at about 17 percent for 2015.”

And AP could have also found that both rebates and administrative costs are increasing faster than part D per capita cost trend.  

Profits plus administrative costs per beneficiary were higher relative to drug costs in 2010 and in 2015 than in 2007.  Which means not all of the slow growth in drug spending was passed back through plan bids

The slow growth in drug spending coincided with a huge increase in the number of Medicare consumers paying thousands out of pocket for drugs deeply discounted under part D.   An Avalere report found:

“The average percentage of covered drugs facing coinsurance has risen sharply from 35 percent in 2014 to 58 percent in 2016 among PDPs. While most PDPs have historically applied coinsurance to high-cost drugs on the specialty tier, plans have extended coinsurance to drugs on lower tiers in recent years, including those covered on preferred and non-preferred brand tiers. “

This is important because increased cost sharing reduces the use of medicines and the use of medicines reduces other spending.  The Congressional Budget Office notes that a 1 percent increase in the number of prescriptions filled by beneficiaries would cause Medicare’s spending on medical services to fall by roughly one-fifth of 1 percent for all patients.  However, the impact on the use of new medicines in reducing other treatment related costs in patients with a diagnosis of a chronic disease without access to a new drug is more significant:

In fact, “improved medication adherence associated with expansion of drug coverage under Part D led to nearly $2.6 billion in reductions in medical expenditures annually among beneficiaries diagnosed with CHF and without prior comprehensive drug coverage, of which over $2.3 billion was savings to Medicare.

Other studies came to the same conclusions: "Implementation of the Medicare prescription drug plan in 2006 was followed by significant decreases in spending on nondrug medical expenditures among beneficiaries who previously had limited drug coverage. After Medicare Part D started, nondrug medical spending in this group was about $1,200 per year less than expected. The savings were driven principally by seniors making less use of hospitals and skilled nursing facilities."

Another study found that part D spending reduced hospitalizations generally by 4.1 percent.  

Among beneficiaries with limited or no prior drug coverage Part D reduced the number of overnight hospital stays by about 12%, and among beneficiaries with generous prior drug coverage Part D reduced the number of hospital nights by about 21%.

By contrast, the increase in cost sharing – even as rebates and PBM profits increase and net drug prices rise below the rate of inflation – makes people sicker and increases health spending. 

Beneficiaries with higher OOP costs for the more expensive oral cancer drugs were more likely to discontinue or delay drug therapy.

More generally, a survey of all articles that” evaluated the relationship between changes in cost sharing and adherence found that 85% showed that an increasing patient share of medication costs was significantly associated with a decrease in adherence. For articles that investigated the relationship between adherence and outcomes, the majority noted that increased adherence was associated with a statistically significant improvement in outcomes.”

Hence, AP’s exclusive access to Medicare part D data was used to confirm a pre-established claim that new drugs will make the benefit unsustainable.  In AP’s world, at least when it comes to drug prices, exclusive means being selective in what information is published to affirm a previously established prejudice.


Per the FDA’s PDUFA VI "commitment letter," the agency will face some real world deadlines to advance the use of real world evidence. But, since we’re dealing with the real world, let’s get real – guidance is unlikely until the end of 2022 at the earliest. (That's the timeline agreed to via the PDUFA VI negotiations.)

Step One towards these new 21st century rules of the regulatory road will be a series of public meetings and regulatory workshops. It will be curious to see who shows up at the table.

PDUFA VI User fees will support agency policy development in the area, and FDA has pledged to meet the following benchmarks:

* End of FY 2018 – Convene one or more public workshops with key stakeholders, including patients, biopharmaceutical companies, and academia, to gather input into issues related to real world evidence (RWE) use in regulatory decision-making.

* End of FY 2019 – Initiate (or fund by contract) appropriate activities (e.g., pilot studies or methodology development projects) aimed at addressing key outstanding concerns and considerations in the use of RWE for regulatory decision-making.

* End of FY 2021 – Publish draft guidance on how RWE can contribute to the assessment of safety and effectiveness in regulatory submissions, for example in the approval of new supplemental indications and for the fulfillment of post-marketing commitments and requirements. FDA will work toward the goal of publishing a revised draft or final guidance within 18 months after the close of the public comment period.

Ground Zero for a real-world evidence regulatory pathway will be Sentinel, the existing public/private program aimed that uses a variety of databases to track, collect and analyze adverse event reports about drugs, vaccines and medical devices.

Modeled after successful programs such as the Centers for Disease Control and Prevention’s Vaccine Safety Datalink, Sentinel allows FDA to conduct safety surveillance by actively querying diverse data sources, primarily administrative and insurance claims databases but also data from electronic health record (EHR) systems, to evaluate possible medical product safety issues quickly and securely.

Sentinel, mandated under the Food and Drug Administration Amendments Act (FDAAA), will get a $50m boost over five years under PDUFA VI. Sentinel currently has information on over 100 million patients.

Similarly, efforts are underway to establish a National Device Evaluation System (NDES). As currently envisioned, the NDES would be established through strategic alliances and shared governance. The system would build upon and leverage information from electronic real-world data sources, such as data gathered through routine clinical practice in device registries, claims data, and EHRs, with linkages activated among specific data sources as appropriate to address specific questions.

As FDA Commissioner Rob Califf and Deputy Commissioner Rachel Sherman recently commented:

Creating knowledge requires the application of proven analytical methods and techniques to biomedical data in order to produce reliable conclusions … There must be a common approach to how data is presented, reported and analyzed and strict methods for ensuring patient privacy and data security…  Rules of engagement must be transparent and developed through a process that builds consensus across the relevant ecosystem and its stakeholders … To ensure support across a diverse ecosystem that often includes competing priorities and incentives, the system’s output must be intended for the public good and be readily accessible to all stakeholders. 

When it comes to the regulatory science of real world evidence, we are still in early days, but the times they are a changin.’ (And you better start swimmin' or you'll sink like a stone.)

ICER Hires More Human Shields For Rationing

  • 07.22.2016
  • Robert Goldberg
As I have previously discussed,  ICER's initiative to revisit the representatitiveness and scientific validity of his QALY based assessments of drug prices and access is really a crude political makeover.  The recent appointment of so-called patient and consumer advocates to his board is example of ICER advertising itself as becoming more open and patient centered when the truth is much different:

"The Institute for Clinical and Economic Review (ICER) has announced the appointment of two new members to its Governance Board. Ellen Andrews, PhD and Frances Visco, JD both join the Governance Board with extensive experience in patient and consumer advocacy....
“These two leaders bring to ICER’s Governance Board tremendous skills honed through years of experience fighting for access to high-quality health care and for the evidence that patients need to participate fully in their health care decisions,” noted ICER’s President Steven D. Pearson, MD, MSc. “This is part of our long-standing plan to augment this perspective among the members of our Governance and Advisory Boards as ICER grows. I know that Ellen and Fran are superbly prepared to join with other Board members in assuring that ICER’s strategic direction and all our efforts are informed by the patient voice.”

They are superbly prepared if by preparation one means that they share Pearson's twisted use of QALYs and budget caps to set drug prices and limit access.

Dr. Andrews was already an advisor to ICER and has written in defense of it's current approach.  She has also spouted the party line that insurance companies don't get to vote on ICER decisions (they just fund the organization).   

She has also written favorably about Canadian drug price controls and was part of a working group tasked with finding ways states and provinces could could control drug prices.  

Fran Visco is also a supporter of using longer, larger clinical trials to slow down access to new medicines.  

She is opposed to expanding compassionate use pathways, claiming: The problem is that the expectations for these drugs are unreasonably high. The public has this unrealistic faith in what these new drugs are going to do."

Here's what she said about accelerated approval: "The F.D.A. should learn a lesson and re-evaluate the accelerated approval process itself. The goal is to save lives, not rush to get drugs to the public."   She also believes that "public policy should discourage access to investigational drugs
outside of clinical trials. "  So much for access.

Visco also support the reimportation of drugs into the US from overseas.  She claims that drug importation can be "adequately regulated and can provide immediate cost savings for consumers."  As long as you don't mind counterfeit cancer drugs such as fake Avastin. 

I have no problem with Pearson packing his boards and committees with true believers or getting financial support from insurers.  But don't claim ICER is an objective and trusted organization that uses independent assessments to " evaluate the value of costly, new interventions – whether they are worth what they charge."   When you rely upon the QALY and budget caps to set prices across all disease areas, it leads to price controls and rationing.    Andrews and Visco believe in both, as does Pearson.   Again, ICER can meet and talk all it wants.  But it is not patient-centered and it is not trusted or independent.   Andrews and Visco are just another couple of human shields to protect Pearson  while he runs his anti-patient enterprise

This latest move is another example of why we should let ICER melt away and develop a method of measuring value that reflects the needs and preferences of of patients, their families and communities. 


Roy Misses the Value Proposition

  • 07.20.2016
  • Peter Pitts
During a Presidential election cycle, facts are often the first casualty.

Avik Roy argues that the GOP needs a “clear plan to tackle the high and rising price of branded prescription drugs.” He calls it a Republican “blind spot.” And he’s right – but for the wrong reasons (“The GOP Needs to Tackle the High Price of Prescription Drugs").

According to Roy, “Even 66% of Republican voters said high drug prices should be a top policy priority, compared to 60% who said the same of repealing Obamacare.” What he doesn’t share (or more likely doesn’t know) is that for most Americans, “the price of drugs” means the co-pay they hand over at the pharmacy when they pick up their prescriptions. That’s not a drug-pricing problem; it’s an insurance industry problem. It’s so easy to blame Big Pharma. That’s the real blind spot.

Mr. Roy quotes from a recent Kaiser Family Foundation poll which says 72% of their sample find “drug prices” generally unreasonable. But he doesn’t share that the same exact percentage (72%) said they find their drugs affordable. If Mr. Roy is reporting one he should report the other. It’s an issue of probability versus reality.

Mr. Roy discusses consumer purchasing of iPhones and compares it to healthcare. His assumption that consumers can make choices through transparent pricing is false since, in healthcare, there are pesky things called therapeutic outcomes. Even if consumers have pricing information its not good enough to make an appropriate “purchasing decision” since they don't necessarily have or understand the information which drives positive outcomes. This is despite pharmaceuticals being the only segment of healthcare (compared to physician and hospital services ) where pricing and outcomes are the most transparent.

Also, Mr. Roy fails to mention that pharmaceuticals are the only segment of healthcare where the costs plummet after a period of time (brand vs. generics). Today’s expensive medicines are tomorrow's very inexpensive generics. Today’s hospitalizations, alas, are tomorrow's even more expensive hospitalizations. Modern medicines continue to provide value in perpetuity - what value does a site of care, like a hospital or an insurer or PBM provide?

Mr. Roy fails to mention that hospitals actually manipulate and increase drug costs by buying up physician practices and shifting site of care. According to Sloane Kettering data, a medicine administered in a hospital setting is 150% more costly that one administered in physician offices.  Hospitals make more money by shifting site of care while vilifying drug companies! They also artificially pad their bottom lines by taking advantage of the 340B program - but he fails to mention that as well.

Of course, drug pricing is a complicated matter -- which is why the pharmaceutical industry should focus on a few basic points when making its case.
Roy argues there’s no relevant connection between the pharmaceutical industry’s investments in R&D and pricing. That’s intuitively and factually wrong.

Since 2000, drugs firms have spent over half a trillion dollars developing new medicines. And research costs for the last year alone totaled more than $51 billion. That’s up from $15.2 billion in 1995.

These are extraordinary spending levels, even compared to other research-intensive industries. In fact, the pharmaceutical sector spends five times more on R&D than aerospace, and 2 ½ times more than the software and computer industry. This is the kind of investment that pharmaceutical innovation demands, and it’s reflected in the economics of advanced drugs.

Big Pharma also needs to do a better job explaining just how many failures firms endure searching for the next breakthrough medicine. Drug companies must develop hundreds of compounds until they find one suitable for testing on humans. Of those rare compounds that make it to phase-1 human trials, fewer than 12 percent win approval from the FDA.

That’s why bringing just one drug to market costs an average of nearly $2.6 billion and takes more than 10 years, according to researchers at Tufts.
If drug companies were open and honest about their frequent and expensive failures, they could quash the myth that pharmaceutical research is obscenely lucrative.

Consider the controversy surrounding the hepatitis C drug Sovaldi. When the medicine came on the market, it quickly became known in the press as “the $1,000 pill.” This may be a great sound bite, but it’s hardly accurate.

In reality, insurers and benefit managers negotiated discounts that reduced the price of Sovaldi by 20 to 50 percent. But they didn’t pass the full discount on to the consumer. Instead, insurers and pharmacy benefit managers pocketed the money to pad their bottom lines and executives’ wallets. Last year, CVS Caremark Corporation, one of the biggest benefit managers, paid its CEO over $32 million.

For many patients, particularly those without insurance coverage, Sovaldi’s manufacturer supplied a coupon ensuring that co-pays for the drug wouldn’t exceed $5.

But Mr. Roy’s key error is focusing on price as the denominator of the conversation. That’s wrong too, in fact it the fundamental error that allows people like Hillary Clinton and Donald Trump to blame for the biopharmaceutical industry for rising health care costs. The true denominator is value.

Consider one pre-Sovaldi “best practice” treatment for Hepatitis C, the drug Pegasys. This requires one injection a week for 48 weeks — and very few patients see the treatment through to completion, so much of that treatment, both physician time and drug cost, is wasted. Nor is it that much cheaper: At about $7,000/month, the full course of treatment is over $70,000 — barely less than cost of the three months needed for Sovaldi to work a cure.
And the price of not using Sovaldi is very high. One in three patients with the Hepatitis C virus eventually develops liver cirrhosis, and managing these patients is costly. A “routine” liver transplant (where the liver is from a cadaver) costs close to $300,000; a “living donor” transplant is even more expensive.

Thanks to Sovaldi, a pill that cures the disease when taken once a day over 12 weeks will eradicate the need, the risks and the costs of liver transplantation. Such radical innovation deserves to be both lauded and rewarded.

But it’s so much easier to place blame than say thank you. When it comes to pharmaceuticals, we have to learn to understand the value proposition. It’s not just the price of the product –it’s the price relative to the value the product provides to individuals and society.

In short, drugs aren’t the cause of rising health-care costs — they’re the solution. Demonizing new treatments distracts from the real problem in the US biopharmaceutical industry: top-down cost-centric policies that focus on the near-term, short-changing long-term patient outcomes, and so endanger “sustainable innovation” by denying fair reimbursement for high-risk investment in R&D.

But it’s so much easier to just place blame. Easy and wrong.  Avik Roy should know better.

Avik Roy wants congressional Republicans to enact free market policies to reduce drug prices.    So do I. Unfortunately, Roy begins with a misleading case against drug companies and ends up endorsing Bernie Sanders proposals to regulate the industry. 

Let’s start with his statement that spending on medications is closer to 20 percent of health spending instead of 10 percent.  So what?  I wish it were 100 percent, as with polio, measles, hepatitis B, etc. Spending more on drugs means less spending on other costlier services. 
If we were treating heart disease and cancer with the services available even 20 years ago, we’d be spending a lot less on drugs but spending twice the amount we are now with less effective treatments.   

Instead of recognizing that most of the increase in drug spending is due to more use and longer life, he claims it’s all due to drug companies charging whatever they want. He dismisses the claim that price increases in part reflect the rising cost of drug development:

“But it doesn’t follow that high R&D costs should lead to infinite pricing power. For example, Gilead didn’t discover its blockbuster hepatitis drug, Sovaldi. Instead, Gilead purchased the company that did—Pharmasset—for $11 billion, after key clinical trials had been completed, and then proceeded to charge unprecedented sums to insurers and patients in order to recoup their acquisition costs.  An even better example is Avonex, a multiple sclerosis drug from Biogen that was launched in 1996 for less than $10,000 per patient per year. In 2015, Biogen was charging $60,000 for exactly the same drug, even though numerous, more effective medicines had been launched in the intervening two decades.”

“If Apple today charged $10,000 for a 20-year-old computer, or Samsung $6,000 for a 20-year-old TV, citing the “high cost of innovation,” they’d be laughed out of Best Buy. And not because their costs of innovation aren’t high—but because it’s understood that consumers, in a free market, have no need to accept unaffordable prices.”


“One thing you hear from defenders of the status quo is that drug companies need to charge high prices in order to continue to produce innovation. Well that’s not true in the rest of the economy. Google and Facebook charge nothing for the core products—search engines and social networks—and yet they are two of the most innovative companies in the world.”

These are truly ignorant assertions.  First, it’s not just the cost of innovation, it is the cost of innovation given the risk of regulatory uncertainty and clinical results.   I daresay that if it took Apple an average of 10 years to bring a new product to market knowing that only 1 out of 10 they invested in would make it to consumers, it wouldn’t have to worry about being laughed out of Best Buy:  Apple would still be selling Newton's and first generation Macs.    Imaging if fracking companies had to conduct randomized clinical trials each and every time the were going to drill.   

Second, as Derek Lowe points out, comparing the development of apps and social media to drug development ignores the fact that engineering and pharmaceutical R&D require  fundamentally different processes. Upgrading the core technology of a computer is a hell of a lot easier than developing an anti-body and modifying it to adapt to rapidly mutating cancer cells..

As Derek Lowe has pointed out “medical research is different than semiconductor research. It’s harder. Ever seen one of those huge blow-ups of a chip’s architecture? It’s awe-inspiring, the amount of detail that’s crammed into such a small space. And guess what – it’s nothing, it’s the instructions on the back of a shampoo bottle compared to the complexity of a living system.”

Even more troubling is Roy’s claim that “prices for drugs that do not reflect what their value would be in a truly free market.”   That is quite an assertion and suggests that Roy can tell us what that value would be or how that would be communicated through pricing information. 

My guess is, based on his article, he has no clue.   Take his claim that drug companies engage in  “infinite’ pricing.  He points out that the retail price of the multiple sclerosis (MS) drug Avonex increased from 1996 to 2015 by 500 percent.  True, but over the same period of time Avonex revenues and global market share actually fell by 100 percent as newer drugs were introduced.   Meanwhile, the aggregate cost of MS hospitalization increased 372 percent even as the number of hospitalizations remained essentially flat.  Which of these two trends reflect a truly free market?   The one where competition eats away at revenues or the one where you increase revenues by providing a service that is increasingly obsolete? 

Roy calls the price of drugs like Sovadli, that cure hepatitis C Sovaldi’s price unprecedented because Gilead bought the company that developed the drug instead of creating it, itself.   Apparently, free market principles have two separate rules about pricing: one if you acquire a company and another if you spend the same money to make a product.  That is sort of like President Obama telling entrepreneurs “you didn’t build that.”

In any event, Roy fails to consider that the price of drugs does reflect their value relative to current treatments.  With regard to Sovaldi:

“Although the cost of antiviral treatment increased with the availability of new therapies, the cost per survival (SVR) has decreased. As shown in Figure 2, the cost of treating HCV genotype 1 with peginterferon-ribavirin, first-generation protease inhibitors, and sofosbuvir-ledipasvir (at wholesale acquisition cost) increased from $43,000 to $103,000 per patient. However, the corresponding costs per SVR decreased from $213,000 to $108,000. After applying the recent discounts (46%), the cost of treatment decreased to $56,000, which is less expensive than boceprevir- and telaprevir-based therapies, and the cost per SVR decreased to $58,000.” Moreover, in addition to reducing what it costs to save a life, drugs like Sovaldi will eliminate the risk of premature death for people with HCV. 

To create a free market Roy suggests “ending federal and state prohibitions on the ability of private insurers to jointly negotiate drug reimbursement rates. And they can eliminate regulations, like those in Obamacare, that force insurers to pay for expensive branded drugs even when more cost-effective alternatives are available.”

In essence, Roy wants to create a government led cartel to control drug prices.  Indeed, his proposals come straight out of the Bernie Sanders campaign.  Three large pharmacy benefit companies (Express Scripts, CVS Caremark and OptumRx ) control about 80 percent of all prescriptions in both private and public health plans.   Consolidating this control through a government cartel would reduce drug prices, but not for patients.  

That’s because, in the price regulated world of pharmaceuticals, rebates reduce what pharmacy benefit management companies, insurers and hospitals pay for medicines.  Patients wind up overpaying and find their choice of medicines restricted.  

All told, about 30 percent of the cost of medicines – about $135 billion – goes directly into the pockets of other health care business. 

Hence, even as drug prices decreased, the rebate-loaded prices – the one’s consumers are stuck with – surged.    Net drug prices (paid to PBMs and insurers) declined 200 percent between 2011 and 2015.   The rebate-loaded price increase by 33 percent over the same time period 

Data source: Medicines Use and Spending in the U.S. – A Review of 2015 and Outlook to 2020

And as the chart above shows over time rebates as a share of price increases has soared from 6.5% in 2011 to 77% in 2015. 

And very little if any of that rebate went to patients.  Rather, as a recent lawsuit against Express Scripts and Anthem reveals, Anthem used an additional $5 billion in rebates generated by raising retail prices to fund stock buybacks in 2009 and 2010 “during the low watermark” of Anthem’s stock price, which ultimately enriched Anthem’s stockholders and management. Anthem could have passed this money on to plan participants in the form of reduced drug pricing, but chose not to do so. “

In fact, the percent of patients facing cost sharing of up to 40 percent of a retail price has soared even as rebate revenue increased.  And the number of drugs with the highest cost sharing amount also generate the most rebates.   Roy calls PBMs collecting rebates market competition.  I think it’s government sanctioned extortion. 

Further, Roy’s assertion that Obamacare forces insurers to pay for expensive brand drugs is wrong.  Just the opposite has taken place: PBMs and insurers are using cost sharing and rationing to discourage using new medicines.

Insurers – with help from the PBMs that design drug formularies are increasing the use of step therapy, prior authorization, cost sharing to limit access.  As the chart below shows, the private companies Roy trusts to create a free market are increasing what consumers pay for a growing number of important drugs:

In 2016, that trend continues: A just published Avalere report finds that nearly 35% of Obamacare health plans use prior authorization and step-therapy for single-source drugs, a 5% increase in utilization management from 2015. From 2015 to 2016, Obamcare plans increased utilization management of hepatitis and mental health medications by more than 15% and oncology and immune medications by more than 10%.

The high cost of drugs is the result of such practices.  Republicans could provide immediate relief to consumers by capping cost sharing and allowing drug companies to provide rebates directly to people to use them to reduce the upfront cost of new medicines.   Instead, Roy would double down on policies that encourage overcharging and rationing by giving government and the three biggest pharmacy benefit companies even more power over the price of and access to new medicines.   

Does he really think that a government created cartel would make medicines affordable instead of enriching the syndicate members?  How does that create a freer affordable market?  His whole approach -- uninformed and pseudo populist – suggests Roy is motivated by political opportunity to join the anti-pharma bandwagon than in truly free markets. 


Much Congressional ado about ADOs

  • 07.14.2016
  • Peter Pitts
Potent report language on Abuse Deterrent Opioids (ADOs) from the House Labor HHS Appropriations Subcommittee Report for Fiscal 2017.

Specifically, "The Committee directs HHS to submit a report to the Committee on Appropriations regarding beneficiary access to ADOs and actions that Congress and the Administration can take to reduce barriers.

ADOs can't help if patients don't have access to them. It's that simple.

Incentivizing Antibiotics

  • 07.13.2016
  • Peter Pitts
From the pages of the Los Angeles Times ...

Can the government encourage the development of new antibiotics?

It’s been nearly 30 years since scientists have found a new class of antibiotics. But U.S. lawmakers tried to give the drug industry a boost in 2012.
That year, they passed the Food and Drug Administration Safety and Innovation Act. It included provisions — collectively known as Generating Antibiotic Incentives Now, or GAIN — aimed at streamlining the government approval process for new antibiotics. It also boosted financial paybacks to drug companies that develop them.

The law has spurred the introduction of several new medicines. But none so far represents a new class of antibiotic or treats a drug-resistant strain for which effective medicine does not already exist. They are called “me-too” drugs, created by engineering small changes in the chemical structure of existing antibiotics.

To foster the discovery of truly innovative medicines, drug companies may need to be offered more extensive inducements, including tax breaks or market guarantees, said Peter Pitts, president of the Center for Medicine in the Public Interest and former associate commissioner of the FDA.

The federal government may even need to do what it has done for antiradiation drugs and some vaccines, he said: Pay for their development and buy and stock these products itself

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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