Latest Drugwonks' Blog

A Pharma Pile-On

  • 11.30.2015
An interesting look at the current contretemps facing the pharmaceutical industry, the FDA, American healthcare, and some of our candidates for the Presidency -- from the pages of Medical Marketing & Media.

The article is titled, "A Pharma Pile-On" and can be found here.

An important and enjoyable read.


The last few weeks have been unsettling. There is a foreboding and unease about radical Islam, the fear, to paraphrase Winston Churchill that “the whole world, including the United States, including all that we have known and cared for, will sink into the abyss of a new Dark Age made more sinister, and perhaps more protracted, by the lights of perverted science.”

Churchill inserted this last sentence of his 23 page typed speech with a red pen.  Many historians have speculated about why he decided to close with such a warning and what he meant by perverted science.

In an article in The New Atlantis, Justin Lyons observes that Sir Winston was referring to the Nazi’s use of technology to wipe out Western civilization.  In one of his many books, Churchill wrote: The material progress that science offers is “really only valuable in so far as it liberates the innate goodness of the human heart. It would not be a blessing but a curse if it rolled forward uncontrolled by the moral principles of simple decent men and women. It can never be our salvation. It may be our doom.” 

The Nazis – as do the radical Islamist states of today – seek to use technology to obliterate, imprison and enslave humanity, to pave over the moral principles of most decent men and women and rebuild society according their worldview.  These two evil forces have in common a belief that have absolute certainty.

As Jacob Bronowski, biologist and philosopher wrote in “The Ascent of Man”:

The Principle of Uncertainty fixed once for all the realisation that all knowledge is limited. It is an irony of history that at the very time when this was being worked out there should rise, under Hitler in Germany and other tyrants elsewhere, a counter-conception: a principle of monstrous certainty. When the future looks back on the 1930s it will think of them as a crucial confrontation of culture as I have been expounding it, the ascent of man, against the throwback to the despots' belief that they have absolute certainty.

We must guard against this mindset ourselves.  Bronowski assert that Heisenberg’s Uncertainty Principle should be called the tolerance principle.  As Simon Critchley notes: “The relationship between humans and nature and humans and other humans can take place only within a certain play of tolerance. Insisting on certainty, by contrast, leads ineluctably to arrogance and dogma based on ignorance. “

This lack of tolerance shows up in the discourse and debates of today.  Setting aside the campus “crybullies” who have captured our attention, the current debate about drug prices – one of many over the past 50 years – is controlled by those who believe they have absolute certainty that by rationing drugs based on their measure of what a life is worth or what institutions they control should pay, we can save money and sustain medical innovation. 

Whereas, human knowledge is personal and responsible, an unending adventure at the edge of uncertainty, there are those who wish to subvert science to their specific social and political agenda.   They justify restricting access to new medicines and reducing drug prices without reducing the risk and cost of developing treatments by claiming – with absolute certainty – that doing so is necessary to keep America from going bankrupt and that doing so would actually increase innovation.

As I have written elsewhere, if the absolutists had won the day in the times past when they proposed the same policies, we would be bereft of the many medicines for HIV, TB, heart disease and various cancers that saved lives and transformed a difficult problem into a world filled with opportunity.  We would die sooner, suffer more, love, learn and live less. 

I am thankful to pharma for it is truly – warts and all – the most fruitful, sustained investment in the most personal and responsible manifestation of human knowledge: increasing the sustainability of humankind.  It is the highest, most human use of free market capitalism and technology the world has ever seen.  Pharma has contributed more good to our planet in a shorter period of time than any other commercial enterprise, precisely because it is always pushing back against certainty, against what is already known.  And yes, at the core of this enterprise is not just a moral code, but a moral code that has shaped decent and just societies throughout history; every life – no matter who or where or how sick – has absolute value. 

To pursue or use science to replace that moral code (with QALYs based on comparative effectiveness)  is to pervert science anew.

Expert: Too soon to start writing Obamacare's death certificate

WASHINGTON (Sinclair Broadcast Group) — The Department of Health and Human Services (HHS) insisted Tuesday that the individual health insurance markets under the Affordable Care Act (ACA) have a strong future, despite a warning from one of the nation's biggest insurers that it may drop out of the markets due to unsustainable losses.

UnitedHealth Group (UNH) made the announcement Thursday, saying that the pool of customers that have enrolled through the marketplaces is older and sicker than anticipated. The lack of new healthy customers has led to higher costs than originally projected.

"The Company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017," UNH said in a statement.

While UNH is the country's largest insurer overall, it has had a relatively small role in the individual markets, covering about 500,000 of the 9.9 million total customers there. If UNH actually does leave and insurers that control a bigger piece of the individual market follow its lead, the viability of the system could be in question. There is no indication they intend to do that, though.

"We can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself," UNH Chief Executive Officer Stephen Hemsley reportedly told investors on a November 19 conference call.

HHS remains confident, though, noting statements from several other big insurers that their business on the health exchanges has been in line with their expectations and they are still committed to the program.

"This is further indication that statements from one issuer are not reflective of the Marketplace's overall strength going forward," HHS said in a statement.

The exchange markets, which launched in 2013, were always expected to take up to five years to stabilize, Hospital Corporation of America management told UBS analysts.

Taken with reports of co-ops failing, premiums rising, and enrollment projections being cut, critics of the ACA, also known as Obamacare, have argued these developments are proof the whole program is in a "death spiral."

Some experts say such pessimism is unwarranted at this point.

"It's important to understand that UnitedHealth Group...has never been a big player in what we call the individual or non-group market," said Sabrina Corlette, a research professor at the Georgetown University Health Policy Institute.

Before and after the ACA took effect, the company was hesitant to offer plans on the individual markets. When it did, it was sometimes one of the higher-priced options, Corlette said.

"It's never been my sense that this is a market that they've embraced with any sort of enthusiasm."

The individual marketplaces have presented "a very challenging environment for insurers," though.

According to Corlette, the ACA has required a fundamental shift in the way health insurance companies do business from avoiding risk to managing risk, since they can no longer exclude sick patients with pre-existing conditions. The individual exchanges have not been very profitable for anybody at this point and the big insurers have struggled with them.

For the companies that are patient, though, she said the markets could become an opportunity for growth if they eventually stabilize and the risk pools balance out. How long insurers are willing to wait for that to happen is an open question.

"I don't think any of these companies want to see losses year after year after year," Corlette said.

The UNH news comes after several of the non-profit co-ops established under the ACA to compete with for-profit insurers failed and some customers seeking insurance for 2016 found higher prices and deductibles than they expected. Also, the government has decreased its projection for new enrollees, in part because fewer people than expected have lost employer-provided coverage since the ACA was implemented.

Some of the challenges currently facing the ACA were predictable when it was passed five years ago, Corlette said, adding that patient advocates expressed doubts at the time about the affordability of insurance under the law.

"A number of the insurance companies are complaining that the population they are seeing is sicker than they expected," she said, and they have faced difficulties adapting to the law.

Some of the problems may also be temporary. According to Corlette, mitigating factors could make the individual markets more profitable in the coming years.

As the penalty for failure to sign up for health insurance rises, the cost of not complying with the individual mandate could motivate healthy people to seek out insurance on the exchanges. Also, a provision that allowed people to keep some pre-ACA plans is expiring. Those consumers are often healthy people who did not need comprehensive coverage, so the risk pool could widen if they then transition into the marketplace.

"I would not write anybody's death certificate yet," Corlette said.

Other health care analysts agree that UNH leaving the individual exchanges would be more of a symbolic loss than a fatal blow to the program.

"UnitedHealth isn't yet a big ACA player and came late to the party. But their concerns show why enrollment growth is so important," tweeted Larry Levitt of the Kaiser Family Foundation.

"No--emphatically no--Obamacare is nowhere close to collapsing," wrote Wendell Potter on healthinsurance.org. "In many regards, it is a big success, much to the chagrin of the law's critics."

"United pulling out of Obamacare might signal something even more troubling: that the marketplaces aren't a good business decision for other large carriers," said Sarah Kliff of Vox. "Right now, that doesn't seem to be the case."

"Yes, the Obamacare exchanges are proving to be as dysfunctional as many conservatives had anticipated," wrote Reihan Salam on Slate. "But until Republicans can make a convincing case that they will do a better job of meeting the needs of Americans with pre-existing conditions, Obamacare is here to stay."

Some liberal commentators have a more upbeat assessment of the ACA's progress.

"Obamacare has hit a few rough patches lately," wrote economist Paul Krugman in the New York Times. "But they're much less significant than a lot of the reporting, let alone the right-wing reaction, would have you believe. Health reform is still a huge success story."

Krugman characterized the 11% average increase in premiums for 2016 as a "slight disappointment," noting that increases in the two previous years were smaller than expected.

However, Peter Pitts, president and co-founder of the Center for Medicine in the Public Interest, cautioned that UNH's announcement may be "an early indicator" of things to come.

"It is an indicator that these types of insurance designs are not profitable," he said. He called the need for healthy customers to balance out the risk and reduce the cost of coverage "the cardinal flaw in the whole ACA concept."

Any insurance business is built on a model where premiums of people who buy policies and do not use them help cover the costs of services for people who do use them. If the people who need to use the insurance are all there is, the system falls apart.

"I think there's disappointment on the provider and participant levels," Pitts said of the current state of the individual exchanges.

He could not speculate about whether UNH is serious about dropping out of the marketplaces, but if the company's projection of $500 million in losses in 2016 is accurate, it would make sense for them to stop offering the individual plans.

"Public companies do not pursue programs that cost the company hundreds of millions of dollars in losses," Pitts said. "For that, rocket science is not required."

He said he anticipated many of the challenges the ACA is facing now back before it was passed in 2010. The reliance on healthy young people to buy insurance they do not want is one of the underlying problems he saw, and the effects of that are being seen in rising premiums and companies leaving the exchanges.

"It's fair to say that the foundational design flaws are becoming evident, and the question now is what you do about it," Pitts said. He argued that these problems with the law need to be fixed before the situation becomes a crisis.

Others see a bleaker future for the law.

"For anyone involved with the Affordable Care Act, yesterday was a big day," wrote Robert Laszewski, a health policy and strategy consultant, Friday. "It's the day any vestige of the notion that the Obamacare insurance exchanges have a chance of being successful in their current form lost whatever credibility was remaining."

"These problems aren't incidental to Obamacare," said Sally Pipes of the Pacific Research Institute on Forbes.com. "They're the inevitable result of the law's central premise--that lawmakers and government bureaucrats can make better decisions about small businesses' health care than millions of businesses themselves can."

"This may be the year of the health care law's collapse," wrote Rep. John Barrasso (R-WY) in an op-ed days before the UNH report, citing rising premiums and the failure of the co-ops.

The public seems skeptical of the Obama administration's position that the law is working. According to a recent Kaiser Family Foundation poll, 45% of respondents view the ACA negatively and 38% have a favorable opinion. 30% support a full repeal, 12% want to scale it back, and 26% want to expand it. The opinions largely break down along party lines.

Democratic presidential candidate Martin O'Malley unveiled his plan for health care reform Tuesday with new measures aimed at controlling costs.

Front-runner Hillary Clinton has her own plan that would make some changes to the system.

The other Democratic candidate, Bernie Sanders, has endorsed a national single-payer system, but the exact details of how that would be paid for are unclear.

 Republican candidates have proposed complete overhauls of the system that begin with the repeal of the ACA.

Pitts believes it will be hard for politicians to sell a repeal plan that takes insurance away from those the ACA has helped, but he said it is difficult to determine exactly how many people have benefited from it. At the same time, he worries about the consequences for the public if the law's apparent shortcomings are not addressed in some way.

"Nobody should go down with the ship. Least of all, patients."

In a recent Newsweek article I criticized the value framework applied by Daniel Goldstein and colleagues in Necitumumab in Metastatic Squamous Cell Lung CancerEstablishing a Value-Based Cost.

Goldstein had the chance to write a reponse in Newsweek to suggest I was wrong on the facts.

You decide.

Goldstein writes:  In “Should Doctors Worry About the Cost of Extending Life?” Robert Goldberg suggests that our study was endorsed by the American Society of Clinical Oncology (ASCO), which is simply incorrect.

ASCO has recently developed a method to assess the value of cancer drugs, but it uses a completely different methodology. Our study used very sophisticated economic techniques that are used by researchers in many countries worldwide to guide coverage decisions. With value-based pricing, we proposed that the price of a drug should simply be linked to the benefit that a drug provides.

My Response:  Dr. Goldstein plays a prominent role at ASCO conferences where he presented his value framework as an example of how to limit access based on price. That’s not a formal endorsement but Goldstein’s work was highlighted by ASCO media outlets, etc.    The fact that he claims to use “very sophisticated economic techniques that are used by researchers in many countries worldwide to guide coverage decisions” and measure value that ASCO has highlighted as opposed to getting ASCO’s seal of approval  is hair splitting. 

In fact, it is these techniques (which are not very sophisticated) are what I criticized.  My problem is not with the methodology but it’s use, which I believe is unethical.   

Goldstein claims: “Goldberg also does not seem able to perform basic arithmetic. He suggests that we put a price of $20 on each day of life. If this were the case, it would amount to $7,300 per year.”

Me Again:  Here's what Goldstein concluded: "These findings provide a value-based range for the cost of necitumumab from $563 to $1309 per cycle".   Patients in the SQUIRE clinical trial comparing necitumumab with standard treatment for advanced head and neck cancer received six cycles of the new drug.    Multiply 563x6 = $3378.    So I should have divided $3378 by 365 days.  That would be $9 a day.  At the upper limit of price to value established by Goldstein, (1309x6= $7854) comes out to $21 a day.

Finally, Goldstein says I am not “understanding complex policy issues.”  If stating at pricing drugs based on an arbitrary measure of value, a measure that is not scientific, but a rule of thumb is wrong is a reflection of my lack of insight I plead guilty.   Similarly,  if pointing out that the use of necitummab is the first treatment to extend the lives of people in 20 years is valuable for reasons beyond average survival in a clinical trial shows my ignorance, well I wear that dunce cap with pride.


From today’s edition of the New York Post …

The hedge-fund ploy that’s aborting miracle medicines

Hedge-fund investors are coming to raid your medicine cabinet.

Cutting-edge treatments for diseases affecting millions of Americans are threatened by Wall Street’s latest moneymaking scheme. The ploy: Hedge funds bet against a drug company’s stock price, launch attacks against the firm’s patents on its best-selling medicines and then reap windfall profits when investors panic and the stock price plummets.

Unless Congress protects pharmaceutical-research firms from these assaults, funding for drug discovery will dry up and many new treatments won’t ever make it into the hands of patients.

Hedge-fund manager Kyle Bass pioneered the strategy, which relies on a new legal procedure known as “inter partes review,” or IPR. This year, Bass — who previously made $590 million betting that homeowners wouldn’t be able to make their mortgage payments during the financial crisis — filed a review against Acorda Therapeutics’ patent on a drug that helps multiple-sclerosis patients walk. The challenge caused Acorda’s share price to crash by 10 percent.

Wall Street began exploiting the system after Congress created the Patent Trial and Appeal Board, a new arm of the Patent Office tasked with taking a second look at patents that some consider too vague. Since its formation in 2013, the board has proven so hungry to annihilate patents that it’s been called a patent “death squad.” Even the board’s own chief judge has started to admit “the number of patents [going down] is starting to get excessive.”

Bass quickly saw how the board was wiping out patents and jumped at the chance to make money from a self-fulfilling prophecy: challenge the patent and short the company’s stock to profit on the market’s reaction.

Other funds have copied Bass’ strategy. The Mangrove Partners Master Fund acquired a 270,000-share “short” position in VirnetX, which owns patents for a Internet-privacy technology. Within weeks of filing two reviews against VirnetX patents, Mangrove unwound its short position, profiting from an 8 percent drop in the stock price.

Although these reviews can be filed against any patent, they’re particularly threatening to medicine patents and the companies that own them. David Winwood, an executive at Louisiana State University’s Biomedical Research Center, explains that “most often, a startup company’s sole asset is a patent application or issued patent, upon which the company’s fortune lays.”

With the cost of developing a new drug estimated at nearly $2.6 billion, biotech companies need strong patent protection to attract funding and keep competitors out of the marketplace while they recoup their investment. Wall Street’s abuse of these pharmaceutical reviews weakens patents and makes medical research look increasingly like a poor investment.

And with more than 110 petitions filed against pharmaceutical patents in fiscal 2015 — roughly double 2014’s total — the threat to R&D funding is only growing.

Fortunately, Congress can protect drug-development efforts while still enabling judges to weed out bad patents.

Under the Hatch-Waxman Act, more than 80 percent of drug patents are already challenged by companies seeking to enter the market with generics — compared with only 14 percent in the 1990s. Another law, known in Washington as “BPCIA,” also encourages challenges to pharmaceutical patents.

In short, if a drug patent is actually too vague, generic manufacturers can challenge and invalidate it and enter the market. IPR challenges simply aren’t necessary.

That’s why Congress needs to exempt pharmaceutical patents approved by the FDA from these challenges. Such an exemption would ensure that Wall Street profiteers don’t deprive innovators of research funding, while still being able to take down vague tech patents.

Preserving the existing patent-challenge procedures will ensure that companies have the confidence to invest in research and development. The laws give patents adequate protection, enabling firms to recoup the decades and billions of dollars invested in drug research.

Armed with that confidence and shielded from hedge-fund attacks, research firms will continue to create the innovative, life-saving treatments patients need.

Peter J. Pitts, a former FDA associate commissioner, is president of the Center for Medicine in the Public Interest.

PBMs – most particularly Express Scripts -- are using their near monopoly control over prescriptions to shakedown smaller specialty pharmacies and vulnerable patients.  Imagine if Vladmir Putin ran a PBM: that comes close to the business practices of Express Scripts.

PBMs generate according Credit Suisse about $90 billion in revenue – all from drug companies paying them rebates -- because they have been given the near monopoly power to determine who gets what medicines and how much they will pay for them.   PBMs demand rebates in exchange for giving drug companies preferred position on formularies.  (They are also rumored to demand a discount off of the already discounted price Rx companies give before rebates.) 

On top of that, PBMs then – in partnership with many health insurers – take the drugs that they have gotten at a discount and put them in the highest cost sharing tier for the sickest patients, those with cancer, autoimmune disorders, HIV, hepatitis C and chronic pain.  And at that point, drug companies – who have already pledged rebates of up to 40 percent of something near the agreed upon sale price – pick up a lot of the out pocket cost that the PBMs have dumped on patients.  

It gets even better.  To top it off, the PBMs, led by Express Scripts, have been portraying themselves as the thin blue line between profiteering specialty pharmacies and the same consumers they are screwing to fatten their margins.

The Valeant controversy prompted journalists to wonder if other specialty pharmacies were owned and operated by drug firms whose products they distributed.
Indeed, in recent weeks Express Scripts (ESI) has capitalized on the journalistic frenzy feeding over the relationship between Valeant and Philidor to shove aside many specialty pharmacies, replacing these entities with ESI’s own retail pharmacies and self-serving drug formularies without notice.

That was enough cover to permit Express Scripts and other PBMs consolidate its already substantial control over prescription drug sales and increase profit margins by tearing up contracts with any specialty pharmacy that distributed unique drugs to specific groups of patients.

The most recent example of this Putin-like business practice:  Express Scripts sudden decision to terminate a relationship with a specialty pharmacy company called Linden.  Because Linden Care manages the pain meds of many patients using drugs made by Horizon Pharma, Express Scripts smeared Linden as another Philidor.

And if anyone had taken the time to look at what Linden did, it would discover (it took me all of 10 seconds) that Linden is not a ‘captive pharmacy.’ Horizon does not own Linden’s business.  Moreover, specialty pharmacies like Linden that are focused on pain management have state-of-the-art security systems, sophisticated software to identify and weed out “doctor-shopping” patients and corrupt prescription factories.  They work closely with the Drug Enforcement Agency and local law enforcement issues to prevent fraud and abuse.  Most importantly, they ensure that patients suffering from chronic and severe pain can access the medicines they need.  Which is why Horizon and many other companies with pain management products use such niche pharmacies.

In contrast ESI just terminated the contract, forcing patients to find – without notice – a new retail pharmacy under ESI’s control. As Adam Fein recently asked:  PBMs routinely monitor their networks, why did it take a highly publicized pharmacy meltdown before PBMs finally cracked down?

Maybe it’s because ESI wanted the business.  Maybe it was because it also has its own specialty pharmacy Accredo that has a larger share of Horizon’s business than does Linden.

CMPI has dealt extensively with the safe distribution and use of pain meds.  Linden is the gold standard for doing so.  Pain management is a highly specialized medical field, with doctors, pharmaceutical companies, and pharmacies working together to provide vital care to patients in severe chronic pain while ensuring adherence to the strictest standards of compliance and regulations in the industry.

Linden is asking a federal court to put the termination on hold so, at the very least, it can negotiate a new contract with ESI and assure that in the interim patients are not endangered.  It is within the jurisdiction of the court to ask: How many patients will be deprived of – or forced to change their medicines -- because of this shift?

Turkish Delight

  • 11.19.2015

If the earth were a single state, Istanbul would be its capital.

                                                                        -- Napoleon Bonaparte

I’ve just returned from the World Cancer Leaders’ Summit in Istanbul. (The event was held in partnership with the International Agency for Research on Cancer, the International Atomic Energy Agency (IAEA), and the World Health Organization.) It was a Turkish delight in more ways than one.

I had the opportunity to talk about the value of quality as it pertains to access. Beyond discussing bioequivalence, biosimilarity, and the many and varied issues pertaining to 21st century pharamcovigilance, my major points were that (1) the most expensive drug is the one that doesn’t work and, (2) broader access to poor quality medicines is not a public health victory.

A key learning for me was that, when it comes to “the market” and “society" -- the market is society. That’s important to remember whether the debate is about access in the Developing World or price/value in the First World. We are all in this together.

During my session’s Q&A a representative from India accused me of slamming generic drugs. I told him that he was hearing what he wanted to hear. I reiterated that generic drugs play a crucial role in access to healthcare around the world – but that quality is a non-negotiable variable for all drugs (both innovator and generic). I reminded him about what I’d said no more that 90 seconds earlier about the USFDA’s new Super Office of Pharmaceutical Quality – that we must approach the issue with “one quality standard” for all medicines.

After all, per the Journal of Infection (2008;56:35-9), “Nothing is more expensive that treatment failure.” In the 21st Century, pharmacovigilance must be about ensuring predictable patient outcomes.

The Indian gentleman’s question highlights an important problem – what happens when your desires do not match the facts? The answer is that we have to listen with an open mind, carefully, and respectfully. We all have to enlarge our circle of policy colleagues. I’m pleased to report that he and I had a long and productive chat afterwards.

The theme of the event was, “Effective international collaboration … across country borders, across disease groups and, through public private partnerships.” It's a small world after all and, at least for a few days, Istanbul was indeed it’s capital.

My article in Newsweek

Oncologists are supposed to treat cancer patients. But some have decided instead to set themselves up as judges of what patients' lives are worth.

This type of bean-counting ought to be abhorrent to anyone who calls himself a physician.

A recent article in JAMA Oncology is emblematic of this strain of thinking. The piece employs a "value framework" endorsed by the American Society of Clinical Oncologists to determine what a new drug "should" cost. Once approved by the FDA, the drug in question, necitumumab, will be the first of its kind to treat stage IV squamous non-small-cell lung cancer.

The lead author of the article, Daniel Goldstein, noted that adding necitumumab to the standard combination of drugs for such patients "only" adds about two months to patients' life, on average. As a result, he calculates, necitumumab should cost $600 a month.

Put another way, Goldstein believes that each extra day of life is worth, at most, $20. About the same price as a new toaster.

Goldstein's morbid conclusion demonstrates the callousness of ASCO's value framework, which seeks to derive "appropriate" drug prices from their average effect on longevity. In the process, the framework marginalizes the value of life.

Goldstein notes that "[t]here is a desperate need to find appropriate prices for new treatments while maintaining incentives to drive game-changing innovations." Yet his approach would whittle away payments for the hardest to treat cancers and for patients who have had no real advances in care for decades.

Necitumumab is not just another drug. As Nick Thatcher, the lead investigator for the necitumumab clinical trials, observed: "I think it's important to remember we're dealing with squamous cell lung cancer," which has proved notoriously difficult to treat. "It's the first time," he notes, "that we've seen benefit in this group of patients over the last 20 or 25 years." In that context, demonstrating any effectiveness at all counts as a breakthrough.

History indicates that more profound breakthroughs will follow, as researchers build on each incremental advance. The first anti-AIDS treatments added "only" two months of life in 1987. By 2006, a combination of new drugs—tailored to the particular biology of the patients—added 15 years of life. The value framework doesn't account for increasing medical progress over time.

Moreover, the value framework does not measure the value of living longer from the patient perspective. The five-year survival rate for those diagnosed with this form and stage of lung cancer is 1 percent. Isn't every extra day with loved ones—and beating cancer—worth more than $20?

Goldstein's conclusion—that many oncology drugs in clinical practice in the United States would fare poorly in cost-effectiveness analyses—could be applied to lung cancer treatment prices as a whole.

Since 1973, the average survival generated by any type of chemotherapy is 1.7 months. The average cost of treating lung cancer patients in the last year of life is $94,000. Drugs are about 20 percent of that spending. Why not let people die 1.7 months sooner and save the money?

When insurance companies try to control costs by restricting access to treatments, they are rightly lambasted for it. Doctors who seek to determine which drugs are worth paying for are no better.

We would not countenance paying more to extend the life of a rich man than a poor one, whatever the difference in their economic "value." Nor would we deem the life of a mother of five more worth saving than that of a childless woman, without a family to mourn her passing. But it is no more acceptable to average the social value of their lives in deciding whether it's worth it to treat them.

A cynic, it is said, knows the price of everything and the value of nothing. By this measure, ASCO's framework is cynical in the extreme. The only framework worth defending is one that says life is too precious to put a price on it.

Prescription drug plan is bad medicine for N.J. economy

White House contenders want to address – but don't understand – prescription drugs prices. The Center for American Progress has a plan. A bad one. The CAP plan would effectively turn the U.S. government into the world's biggest intellectual property thief, thus gutting pharmaceutical innovation and crippling New Jersey's economy.

New medications are expensive to develop. On average, it costs $2.6 billion and it takes a decade to bring a new medication successfully to market.

One of the reasons the process is so expensive is that most potentially promising compounds don't pan out. The vast majority of compounds never make it from the lab to the clinical trial stage, and the FDA approves only 12 percent of those that do.

Only a small percentage of approved medications ever recoup their development costs. Pharmaceutical companies have to set prices to cover the costs of both the occasional successes and the many, many, many failures that go along with them.

CAP's 45-page report ignores this reality and offers to lower drug prices by stripping pharmaceutical companies of their intellectual property. The federal government, CAP says, has the authority to license patents to knock-off generic manufacturers any time it deems brand-name drug prices are too high.

The authority for this heist is supposedly a 1980 federal law known as the Bayh-Dole Act, which ushered in a Golden Age of pharmaceutical innovation by shoring up intellectual property rights.

One provision of Bayh-Dole holds that the government retains so-called "march-in" rights to license a patent when its owner fails to take "effective steps to achieve practical application of the subject invention." In other words, if a patent is languishing unused, the feds can license it to encourage development.

CAP evidently believes that a high price tag constitutes a failure to take "effective steps to achieve practical application" – and is therefore grounds for the feds to seize a patent and license it to others.

Who decides what price is too high? Why, an all-powerful new government panel housed in the Department of Health and Human Services, of course. It's supposed to set a range for drug prices, and any drug priced more than 20 percent above this range is subject to patent seizure.

This interpretation of Bayh-Dole is the antithesis of what the authors sought. The law empowered innovators by protecting the work of university researchers, small businesses and nonprofits that incorporated basic concepts that had previously been discovered via federally funded research.

The bulk of biopharmaceutical innovation comes from private industry, which spends more than $51 billion annually to develop new drugs. These investments will simply stop if government has the authority to seize the patents of innovators any time they don't meet a government-set price.

Similar price-capping schemes in Europe, once an industry leader, essentially capped innovation and jobs. In the mid-1980s, Europe spent 24 percent more on research and development than firms did in the United States. As price caps took effect, by 2004 European development dropped 15 percent. Between 2001 and 2009, more than 60 percent of drug patents went to U.S.-based companies. In 2012, the U.S. biotech industry employed 100,000 people – twice as many as in all of Europe. Alas, as John Adams quipped, "Facts are pesky things."

As a major hub for the biopharmaceutical industry, New Jersey will bear the brunt of the CAP plan's job-killing regulations. Over 70,000 Garden Staters work for biopharmaceutical firms. Industry spending supports another 250,000 jobs in other sectors. All told, drug firms add $87 billion to New Jersey's economic output.

Government-sanctioned patent theft will lead to massive investment cuts and job losses in New Jersey. More worryingly, CAP's caps on drug prices would prevent the development of new medicines. Candidates embracing this approach pose a threat to our health.

Peter J. Pitts, a former FDA Associate Commissioner, is the president and co-founder of the Center for Medicine in the Public Interest.

Medicines aren’t priced in a vacuum. Pricing decisions are based on numerous meetings and tough negotiations between manufacturers and payers over a long period of time – often years before the FDA approves a product. In fact, many product programs are stopped or altered well before Phase III trials depending on these conversations.

So, when you hear about a new medicine and payers are complaining about the price, it’s (at best) disingenuous, but they get away with it. Why? Because manufacturers are uncomfortable calling out the insurance companies and PBMs with whom they must do business. The reverse is untrue in the extreme. And “disingenuous” is a polite way to say something else.

A new study from the IMS Institute for Healthcare Informatics puts some hard numbers behind the debate. And it’s about time.

As the report’s executive summary reports:

Price levels for pharmaceuticals in the U.S. market are often reported to the public based on list prices, and therefore do not reflect the series of adjustments that occur throughout the healthcare system and ultimately determine who pays what for medicines.

The purpose of this healthcare brief is to draw specific attention to previously published research from the IMS Institute which highlights not only the visible aspects of price increases, but also the less visible off-invoice discounts, rebates, coupons, and other price concessions to payers that often substantially offset these changes in list price. By bringing context and perspective to the complex interplay of factors that determine the level of price changes for branded medicines we hope to better inform discussions of the issues.

… Our analysis shows that branded pharmaceuticals raised invoice prices on average 13.5% in 2014, but on a net basis, after all of the concessions are adjusted for, the increase was 5.5%. This level of net price increases is notable for being the lowest of the past five years and has occurred even as invoice price increases have accelerated.

It’s time for everyone to debate the facts.

The complete report can be found here. It’s an important read at an important time.

CMPI

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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