Latest Drugwonks' Blog

If it’s not obvious from the title “Orphan Drugs: Way Too Many, Way Too Expensive” the essence of Joseph Burns article in Managed Care Magazine is: isn’t is terrible that drug companies – who neglected rare and tropical disease for decades to make money – are now making money developing drugs for conditions they were criticized for ignoring and for which the Orphan Drug Act was created. 

Burns article is based on the material and media accounts generated by a syndicate attacking rare disease groups and the Orphan Drug Act funded by Laura and John Arnold Foundation to the tune of $22.4 million. It is a network of left-leaning think tanks with a bias against the profitability of medical innovation, news outlets and patient advocacy organization that spread the anti-orphan message far and wide.   

The Arnold funded think tanks provide the Arnold-funded news outlets with factoids and quotes attacking orphan drug development and patient groups. The Arnold funding patient organization then provides the rest of the syndicate with grass roots outlet for even more quotes and opportunities to spread the message.   The advocacy group, Patients for Affordable Medicines, is run by David Mitchell who recently retired as a founder and principal of PR firm GMMB. 

Mitchell knows a little bit about being a front organization or a pass through for political advocacy: GMMB earned $236.3 million from Hillary for America 2016 and moved over $314 million in Obama ad buys during the 2012 election cycle.  It also runs a group called Waterfront Strategies that handles soft money, consulting and ad buys for a number of PACs. 

Burns fails to tell his readers of Mitchell’s past and present work as a conduit. Instead, he depicts Mitchell as a selfless crusader against “drug companies (that) are manipulating the law that created the orphan drug status.  Mitchell claims orphan drug development is mostly  “salami slicing” strategies—companies dividing diseases into smaller and smaller categories based on genetic and biomarker differences so their products can achieve the coveted orphan drug status.”

“This gaming of the system to cut and recut for different orphan diseases means they get to use the same drug for multiple orphan drug designations,” says Mitchell. “That needs to stop.”

Neither Burns or Mitchell offer any proof that such practices are hurting patients.   Instead, their beef with the fact that companies have the audacity to attempt ot make a profit. 
Burns notes: “some commentators have said the trouble starts with the law’s prevalence-based definition of a rare disease as a condition that affects fewer than 200,000 individuals. Because drug companies can now price orphan drugs at between $100,000 to $200,000 per patient per year, they need only 5,000 to 10,000 patients to hit the blockbuster mark of $1 billion in annual sales.”

Well yeah, that’s what the Orphan Drug Act is supposed to do: Encourage the development of new medicines for groups of patients that do not benefit from existing therapies.

But Burns – like most critics past and present – claims “the law’s intended purpose of encouraging the development of drugs for rare diseases has been undermined in various ways.”

Rather than provide evidence of how the act has been undermined, Burns just asserts: companies “are using the 1983 Orphan Drug Act to secure lucrative incentives and gain monopoly control of rare disease markets where drugs often command astronomical price tags”

Burns assertions of gaming and astronomical prices are without substance:

For instance, he fails to note the retail price of the top selling 10 orphan drugs are a bargain relative to lives lost, health care spending saved and productivity gained.  

Take Revlimid (used at various stages of multiple myeloma) as an example.  The true per patient cost – net of rebates, discounts, and other concessions – is about $78K per patient.  The median charge for a hospital stay is $82000.  

Revlimid sales in 2014 were about $4.4 billion.  But extrapolation of gains in life expectancy based on previous studies of the impact of advances in myeloma care on longevity suggests that each year the use of Revlimid and other novel treatments generate $22 billion in added value. 

Further, many other orphan drugs NOT reviewed by Burns treat extremely small populations and require continuing evaluation and expensive production activities. 

Of the orphan drugs approved since 2012, the average patient population has been under 2000. Nearly 80 percent of the new products or approvals were developed by small biotech companies that are losing money.  If Burns and the critics he channels thinks that punishing companies after they turn a profit will not affect orphan drug development, they should prove it, not force dying patients into a twisted social experiment. 

In addition to being upset about the handful of profitable orphan drugs, Burns claims that slicing and dicing (as he calls it) is an unfair way to make money.  He notes: “Herceptin, originally approved as a breast cancer drug, has gained orphan designation for pancreatic and gastric cancers because those cancers can now also be classified as HER2-positive and HER2-negative.” 

Burns cites an Arnold Foundation funded Kaiser Health News ‘study’ that highlights the number of orphan drug designations generated from existing medicines.  It is not a study, it is simply the same list of orphan drug designations and approvals the FDA generates with KHN’s negative spin added as narrative. 

It is true that there has been an increase in the discovery of markers for previously untreated tumors that are certainly fatal.  And it is true that companies are conducting clinical trials or engaging in data mining to establish benefit in other subpopulations.  KHN implies this is an immoral practice because profit is involved.  

As the FDALawBlog points out, in some cases, a single orphan drug designation can result in multiple periods of orphan drug exclusivity. There appear to be a growing number of cases where FDA has granted multiple periods of orphan drug exclusivity based on the same original orphan drug designation, and where the drug’s indication evolves into something new, shedding and subsuming the previous indication statement.”

The obvious ‘solution’ to this situation is to allow companies faster approval for a broad number of tumors with biomarkers.  FDA’s recent approval of Keytruda for all solid tumors with a specific mutation clears the path for this approach.  Martin Makary (who Burns quotes) suggests this conditional path as an alternative to the multiple exclusivities.  But the anti-orphan Arnold Foundation funded Jerry Avorn and Aaron Kesselheim has attacked the use of biomarkers as a watering down of science pushed by pharma funded patient groups. So my guess is that find a way to characterize THAT as profiteering.  Indeed, Kesselheim is behind the Arnold-funded effort to eliminate biomarker-based disease treatment from Orphan Drug Act designations. 

Burns and the anti-orphan movement suggest instead that orphan drug patent life should be shortened to allow for more generics. But that begs the question: as orphan drugs have gone generic, why haven’t the companies used their first to market exclusivity to engage in similar research?  If it is just slicing and dicing, why wouldn’t a generic company want a line extension?

The answer is supplemental approvals of any type require time and money that innovator companies invest and generics don’t. The FDA does not simply tack on additional patent life.  To obtain a period of orphan drug exclusivity for a drug that is otherwise the “same drug” as a previously approved drug (i.e., a drug containing the same active moiety and that is for the same orphan disease or condition), the sponsor must demonstrate that its product is clinically superior (by showing greater efficacy, greater safety, or by providing a major contribution to patient care) to the previously approved drug.” 

If Burns and the “experts” he quotes wants to repurpose generic Gleevec or Humira for an orphan use and not charge for it, they should set up a company and do so.  

Indeed, Burns and every other critic he cites in his repetition of how the ODA is used to make money ignores a very important point: “Generic competition is generally not thwarted because of the ability of an ANDA applicant to carve-out of its labeling (and thus avoid) a period of unexpired orphan drug exclusivity on the brand-name Reference Listed Drug.” 

The FDA can approve a generic version of the drug product for one or more uses even if, in the future, an innovator company develops another use that garners orphan drug exclusivity. 

Which means the generic version of the drug is on the market and can be used off-label.  

But the anti-orphan critics attack off-label use as a slick, often illegal way, of increasing sales. So that leaves people with rare diseases with a longer wait for medicines that would cost more to make and must rely on generic companies to invest in new indications once innovator drugs go off patent. 

I know people with rare diseases can’t live with that.  I wonder if Joseph Burns and the anti-orphan movement can. 

The economics of opioids

  • 06.08.2017
  • Peter Pitts
The Joint Economic Committee (JEC) will hold a hearing on June 8th to explore the economic aspects of the opioid crisis.

According to the JEC website, “The opioid problem has various elements on the demand and the supply side that JEC witnesses, Professor Sir Angus Deaton, 2015 Nobel Prize laureate in economics, Ohio Attorney General Mike DeWine, Dr. Lisa Sacco, Congressional Research Service Crime Policy Analyst, and Dr. Richard G. Frank, Professor of Health Economics at Harvard will address in detail.” Mike DeWine? Really?

We’ll see.

I suspect that a key aspect of “opioid economics” that will get very little attention is the unwillingness of PBMs to pay for opioids of the abuse-deterrent variety. That’s simple economics. The reason that there are nearly a quarter of a billion generic, non-abuse opioid tablets prescribed annually (vs. about 5 million abuse-deterrent ones) is because they are inexpensive. But that is a failed metric. It’s benefited the bottom line of PBMs and created a national epidemic.

The same math explains why PBMs often implement barriers to the use of branded, on-label non-opioid medicines, relegating these treatments to second line options. 52% of patients diagnosed with osteoarthritis receive an opioid pain medicine as first line treatment as do 43% of patients diagnosed with fibromyalgia and 42% of patients with diabetic peripheral neuropathy even though there are FDA-approved, non-opioid medicines specifically designed and labeled to treat these conditions.

We’ll see.

Zero-sum thinking is an obsession of mine, but mostly in economics. -- P. J. O'Rourke
To the Editor:

Per, "The Single-Payer Party? Democrats Shift Left on Health Care," (NYT, June 3, 2017) it seems somewhat ham-handed to have only one paragraph, deep inside the page 16 jump of a Page One article, mentioning the enormous cost and tax consequences of the California legislation -- and no mention at all of the proposal's impact on patient choice and resource rationing. That's not fake news -- but it certainly isn't all the news that's fit to print.

Peter J. Pitts
Per FDA Commissioner Scott Gottlieb, “As Commissioner, my highest initial priority is to take immediate steps to reduce the scope of the epidemic of opioid addiction. I believe the Food and Drug Administration continues to have an important role to play in addressing this crisis, particularly when it comes to reducing the number of new cases of addiction.”

One place to look for smart policy solutions is just north of the border, where medical experts and public health officials in Canada are also concerned about the abuse of prescription opioids. A study published by the Canadian Health Policy Institute (CHPI) estimates that if all prescription opioids in Canada were abuse deterrent formulations, societal costs could be substantially reduced.

“Mandating abuse deterrent formulations for prescription opioids could reduce societal costs by $140 million to $4 billion annually.” 

The study estimated that the economic value of the health, social and productivity losses associated with the abuse of prescription opioids in Canada could have averaged as much as $4.3 billion per year during the four-year period from 2012 to 2015. The study also reviewed clinical research showing that existing abuse deterrent formulations ranged from 3.3% to 98.8% effective at reducing abuse rates of the tested products. The median effectiveness reducing abuse rates by between 45.1% and 64%.

The study concluded that if the federal government mandated abuse deterrent formulations for all prescription opioids, it would discourage non-medical use of these drugs, reducing associated societal costs by an estimated range of savings between $140 million and $4 billion annually.

Perhaps a cross-border partnership is in order to address this bi-lateral regulatory issue.

Trumping FDA?

  • 05.25.2017
  • Peter Pitts
As per a no-nonsense report in BioCentury, President Trump’s FY18 FDA budget request envisions cutting medical product safety funding by $17.8 million. The cuts would reduce the agency’s ability to ensure the safety of imported drugs and ingredients, and to conduct safety research the agency characterizes as “critical.”
FDA stated that the budget proposal would also curtail "proactive" activities to respond to global disease outbreaks.

The proposed cutbacks are a consequence of the administration’s proposal to transfer 100% of the responsibility for funding medical product reviews to user fees. Some FDA medical product safety and regulatory science activities cannot be funded with user fees.
There is almost no chance that Congress will agree to the Trump administration’s plan to rip up the user fee reauthorization agreements that FDA and industry have negotiated. It is not clear whether FDA intends to implement the medical product safety oversight cuts outlined in the budget if Congress rejects the administration’s revamped user fees.

To compensate for proposed budget cuts, the proposal said FDA will "support at lower funding levels regulated product field exams, import entry review, investigations, sample analysis, and inspections for surveillance, compliance, and follow up activities, both domestically and abroad." The proposal added: "Risk assessments will be impacted along with sharing information with regulatory partners."
The proposed $11 million cut to the Center for Drug Evaluation and Research (CDER) medical product safety budget would require the center to “reprioritize and refocus how it promotes and protects public health,” the document said.

The cuts would include "some contracts that promote drug safety and research studies, investments in innovation and research, and training and development opportunities for personnel,” it said. The document said FDA will seek “to minimize the impact of these reductions on FDA‘s core mission activities.”
The medical product safety budget at the Center for Biologics Evaluation and Research (CBER) would be cut by $7.5 million. CBER would "reduce its applied scientific research, which supports the development of innovative products, in order to preserve critical regulatory oversight of its non-user fee programs that address blood components, tissues, and allergenic products." Spending on equipment upgrades and maintenance would be cut, as would "the number of research fellows hired to support the regulatory science program.”

The proposal noted that “research fellows bring innovative ideas, talents, and skills to FDA.”
The budget proposal included reductions in CBER’s “work on the development of laboratory standards, including reference materials, assays, and methodologies that improve product quality and provide standards and guidance to address new technologies and emerging diseases.”
If Trump’s budget is enacted, CBER would "reduce staff through attrition in its non-user fee activities that include the regulation of blood components, tissues, and allergenic products.”

CBER would be forced to “reprioritize how it provides advice to sponsors and reduce resources dedicated to the review of blood components for transfusion and allergenic extracts as well as the ability to provide advice to sponsors of tissues that do not require premarket review.”

As a result, CBER "may no longer be able to exceed its performance target to complete review and action on 90% of complete blood bank and source plasma Biologic License Application supplements within 12 months after submission date.” 
In addition, CBER would “limit proactive work to respond to infectious disease outbreaks globally, including limiting its active participation in international collaboration activities.”

More to come on this.

Off-Label Use: TIme Marches On

  • 05.20.2017
  • Peter Pitts
In a recent Washington Post op-ed, Bill Schultz, the former deputy commissioner for policy of the Food and Drug Administration during the Clinton administration, incredulously offers that FDA policies developed 50 years ago are good enough for life in the 21st century (Trump’s new FDA commissioner has a huge decision to make). He’s wrong.

Time marches on and regulatory practices must evolve to better serve the public health. Nowhere is this more urgent than in making sure physicians and patients have unencumbered access to truthful accurate and non-misleading information about FDA-approved medicines –- both on and off-label. In a draft guidance, FDA notes that ‘‘good medical practice and the best interests of the patient require that physicians use legally available drugs, biologics and devices according to their best knowledge and judgment.’’ And, according to the House Energy & Commerce Committee’s 21st Century Cures Initiative, “… conversations between and among doctors, patients, researchers, and scientists in academia and industry should be facilitated. This includes the free flow of data, research, and results related to what a therapy or combination of therapies does or does not do well and in what types of patients.”

Off-label communications is about getting the right medicine to the right patient in the right dose at the right time.  Off-label communications advances both the practice of medicine and the safe and effective use of medicines.


  • 05.09.2017
  • Peter Pitts
It’s disappointing to say the least when our fine elected representatives place scoring transient political points in front of advancing the public health.

Such is always the case with the perennial non-starter issue of drug importation. What makes it even more dangerous this time is how it could delay swift and clean PDUFA approval.

Front and center is Senator Bernie Sanders. His two PDUFA amendments won’t lower drug prices or increase access for any Americans. But they would negatively impact safety and undercut intellectual property protection.

Let’s cut right to the chase. Generic drugs (85% + of all medicines volume in the US are LESS expensive than in Canada or any European country. Next, for the overwhelming number of Americans with private health insurance, the co-pays for their products are LESS expensive then buying them retail at either a brick-and-mortar of Internet Canadian pharmacy. Biologics? 85% of all biologics are administered in hospitals. Is Senator Sanders suggesting that American hospitals should import drugs that may or may not have been shipped under proper refrigeration conditions? FDA inspections speak otherwise.

So just what is Senator Sanders trying to accomplish? Certainly not a clean PDUFA – which is just what the doctor ordered for the FDA’s Gottlieb Era reforms -- including programs to help lower drig prices by expediting single sourcwe generic reviews.

He certainly doesn’t seem to be interested in safety concerns. Or counterfeits. Or cold-chain control. Or even that every study by the Congressional Budget Office reiterates over and over again that such schemes don’t save the American consumer any money.

But is sure is good for headlines. For shame.
Via Medscape:

Safety Events Common in Newly Approved Drugs

Nearly one third of drugs newly approved by the US Food and Drug Administration (FDA) are affected by safety issues that were not known at the time of approval, a study has shown.

Biologic and psychiatric drugs, as well as those that received accelerated approval or were approved within 60 days of the statutory decision deadline, are the most vulnerable to postmarket safety events, Nicholas S. Downing, MD, from the Department of Medicine at Brigham and Women's Hospital in Boston, Massachusetts, and colleagues report. Their study was published online May 9 in JAMA.

The findings "are not surprising to those of us who have been following this for a while, but they do reflect a growing realization by the mainstream medical community that there are important differences between efficacy in randomized controlled trials and effectiveness once a drug hits the real world," Peter J. Pitts told Medscape Medical News. Pitts is a former FDA associate commissioner and current president of the Center for Medicine in the Public Interest, New York, New York. "It reinforces the basic truth that when you give people medicine, interesting things will happen — good and bad. Postmarket research is the continual search for understanding what these interesting things are in the real world," he added.

To determine the prevalence of postmarket safety events and the characteristics associated with the likelihood of their occurrence in newly approved drugs, the researchers used the Drugs@FDA database to identify all novel therapeutics approved by the FDA between January 1, 2001, and December 31, 2010. They then separated the drugs on the basis on seven prespecified features: class (pharmaceutical, biologic), therapeutic area, priority review, accelerated approval, orphan product, near–regulatory deadline approval, and total review time.

Of 222 novel therapeutics identified, including 183 pharmaceuticals and 39 biologics, 71 (32%) were affected by a total of 123 postmarket safety events over a median 11.7 years of follow-up. The safety issues led to three drug withdrawals. The irritable bowel syndrome drugs valdecoxib and tegaserod were withdrawn in 2005 and 2007, respectively, as a result of adverse cardiovascular events. The psoriasis drug efalizumab was withdrawn in 2009 as a result of an observed increased risk for progressive multifocal leukoencephalopathy.

The approved drugs were also associated individually and class-wide with 61 incremental boxed warnings (43 drugs) and 59 safety communications (44 drugs).

Although safety events leading to market withdrawals were rare, "new boxed warnings, indicating that potentially life-threatening or preventable safety events had been observed in the postmarket period, and safety communications, which describe serious but non-life-threatening postmarket safety events, each occurred for approximately one-fifth of the novel therapeutics," the authors write.

The median time between drug approval and the first postmarket safety event was 4.2 years, and nearly one in three of the drugs had one or more safety events at 10 years, the authors write.

The researchers performed multivariate analyses looking at the relationship between each of the prespecified characteristics and postmarket safety events. They found an increased risk for safety issues among biologics compared with pharmaceuticals (incidence rate ratio [IRR], 1.93; 95% confidence interval [CI], 1.06 - 3.52; P = .03) and among drugs used to treat psychiatric conditions compared with cancer and hematologic therapeutics (IRR, 3.78; 95% CI, 1.77 - 8.06; P < .001). In addition, postmarket safety events were more prevalent among drugs that received accelerated approval (IRR, 2.20; 95% CI, 1.15 - 4.21; P = .02) and those approved near their regulatory deadline (IRR, 1.90; 95% CI, 1.19 - 3.05; P = .008).

Of interest, safety events were significantly less common among drugs with the shortest regulatory review times. This finding "conversely raises the possibility that some approval packages provide clearer evidence of safety, allowing for more rapid regulatory approval," the authors write. "An analysis of regulatory review documents from the European Medicines Agency indicated that safety risks that would ultimately prompt a postmarket safety event were not always evident in the premarket period, suggesting that additional premarket review might only delay approval without identifying therapeutics that pose a future safety concern."

"I agree with the authors' main point, which is that there are major gaps in our knowledge about the safety of drugs at the time that they are approved," Sean Hennessy, PharmD, PhD, told Medscape Medical News. Dr Hennessy is from the Center for Pharmacoepidemiology Research and Training, Center for Clinical Epidemiology and Biostatistics, Department of Biostatistics and Epidemiology, and Department of Pharmacology, Perelman School of Medicine at the University of Pennsylvania, Philadelphia.

"This isn't necessarily a bad thing, since requiring drug companies to perform the much larger studies that would need to be done to learn about rare adverse effects prior to approval would further increase the cost of drug development, which is already very expensive. Rather, we need to develop more robust systems to assess the safety of drugs after they are approved," Dr Hennessy explained.

Additional research is warranted to gain insight into the approval timeline and drug safety, the authors state. Further, they call for collaboration between stakeholders and the FDA "to develop and maintain an effective system for detecting postmarket safety events."

Stakeholder engagement is essential, Pitts told Medscape Medical News. "Although it's not taught in medical school, it's up to physicians and pharmacists to report adverse events, which is critical from a risk perspective and to mitigate potential problems with the use of approved medicines in everyday practice."

The good news, according to Pitts, is that "the FDA is taking this challenge to heart," by enhancing the capacity of its postmarket safety surveillance programs, and improving interactions with industry to achieve a better understanding of the performance of new drugs once they get into the market.The FDA's Sentinel Initiative, an integrated, national electronic monitoring system for active postmarket risk identification and analysis, is an important step in this direction, as is the sharing of premarket clinical trial data, the authors write. "[T]he integration of multiple data sources that include observations among large and diverse patient populations can facilitate the detection of postmarket safety events."

Previously, as reported by Medscape Medical News, the Government Accountability Office has questioned the sufficiency of the FDA's reporting of postmarket studies of approved drugs.

"I'm not as optimistic as the authors that the current system is working…. Sentinel, which I'm part of, is a great system, but has limited bandwidth. There aren't enough resources to use Sentinel as the only way to study the safety of every approved product, nor does FDA have the human resources to be primarily responsible for studying the safety of all products," Dr Hennessy explained.

"Industry needs to play a role. Unfortunately, FDA is limited by law in their ability to require companies to perform their own safety studies. Changing this would require an act of Congress," he added.

The authors acknowledge that even the most careful regulatory review and surveillance systems may not prevent all postmarket safety events. "[I]t may be impossible to detect other less common events until several years after approval, once the therapeutics are in broad use."

Dr Downing has disclosed no relevant financial relationships. One coauthor reports receiving personal fees from Cepton, OliverWyman, Roland Berger, McCann Health, Omnicom, Grey Healthcare, Saatchi & Saatchi, Sudler, TBWA, Havas, Agipharm, Mayoly Spindler, Teva, Menarini, Pierre Fabre, Merck, and AbbVie. One coauthor reports receiving a grant from the FDA; research agreements with Medtronic and Johnson & Johnson (Janssen) through Yale University; serving as chair of a cardiac scientific advisory board for UnitedHealth, being a founder of Hugo, being a participant and participant representative of the IBM Watson Health Life Sciences Board; and serving as an advisory board member of Element Science. One coauthor reports receiving grants from the FDA, Medtronic, Johnson & Johnson, the Centers for Medicare & Medicaid Services, Blue Cross Blue Shield Association, and the Laura and John Arnold Foundation. Mr Pitts serves as chief regulatory officer for Adherent Health Strategies. Dr Hennessy has disclosed no relevant financial relationships.

JAMA. 2017;317:1854-1863.


  • 05.09.2017
  • Robert Goldberg
The policy shop of BCBS has released a report about drug costs that is deliberately deceptive and misleading.   It focuses only on the contribution of innovative drugs to total drug spending, ignoring other facts that underscore the important role new medicines play in reducing the rate of health care spending and hiding the rebates they, along with PBMs pocket. 

The report claims that “since 2010 prescription drug spending has increased 10 percent annually for Blue Cross and Blue Shield (BCBS)members since 2010, an overall rise of 73 percent.This upward trend is due to a small fraction of emerging, patented drugs with rapid uptake and large year-over-year price increases that are more than offsetting the continued growth in utilization of lower-cost generic drugs. These higher costs are being incurred by consumers and payers alike; while consumer out-of-pocket costs have risen just three percent annually for prescription drugs in total, they have risen 18 percent annually for patented drugs.”

You might wonder how it is possible for consumer out of pocket costs to rise 3 percent annually if the increase in patented drug spending has increased 18 percent? Is it because health plans are sucking up the difference in cost for our sake? A closer look at the findings suggests answers. 

1    BCBS compared apples – the average increase in out of pocket costs – which includes the increase in the use of generic drugs – to oranges, namely the pre-rebate increase in spending on drugs for Hepatitis C, autoimmune diseases and cancer for less than 1 percent of chronically ill patients.  Indeed, the BCBS ‘study’ acknowledges that the drug spending data they use is pre-rebate.  But let’s stick with sticker prices for now and ask: how does the increase in the use of a small number of new medicines affect drug spending and total health expenditures.

2    It turns out that employer-sponsored health plans are spending LESS on brand or innovator drugs as a percent of total health care spending.  And total drug spending is about the same as it was in 2007:

Sources: Health Care Cost and Utilization Reports for 2010-2015

3.       Since 2007, brand drugs as a percent of total drug spending has DECLINED

    Sources: Health Care Cost and Utilization Reports for 2010-2015

4. If brand spending is down and total drug spending as a percent of all health expenditures are flat, why is cost sharing for drugs going up by 3 percent a year? 

BCBS notes: “Utilization is down for all brand drugs, but the unit price has increased by an average of 17 percent each year, leading to a total increase in spending of 10 percent.”
In other words, health plans are charging the retail, not the rebated price, in determining copays and coinsurance even as brand drug spending as a percent of total Rx dollars has declined.  Indeed, the spread between the rebated and retail price has been increasing.  

Source: IMS Data

What's more, these rebates are not used to reduce the out of pocket costs of patients And plans use the retail price to fatten their margins with rebates AND the out of pocket spending of consumers.  Reports about rebate revenues are hard to come by.  However, an NAIC report suggests that rebates industry-wide are at least $30 billion which is more than the total underwriting gain of all health insurers.   

The BCBS policy report hides the fact that drug spending as a percent of total health care spending is flat.  It hides the fact that it is using rebates and retail prices to pad the bottom line.  And it is using innovator drug prices as scapegoats.  

A final thought: The Healthcare Cost Institute reports show that the utilization of all inpatient and outpatient services has declined since 2007 even as the use of both new and generic medicines has increased.   And yet health plans have rarely considered or acknowledged that the use of prescription drugs reduces the reliance on more expensive forms of care. 

From the News Desk

  • 05.06.2017
  • Peter Pitts
In the wake of the unraveling scandal surrounding the agency’s television viewing habits, CDRH spokesperson Teng Kay has denied allegations they have been instructed by “unconfirmed alien contact” to reclassify TV remotes as Class II Medical devices. In a related story, Acting FDA Commissioner Rupert Murdoch has issued a list of “breakthrough therapy” entertainment for recommended viewing. The list is said to include: ANDA and the King of Siam, Complete Response Letters from Iwo Jima, and Fahrenheit 453. All programming has been deemed truthful, accurate, and non-misleading by the Shkreli Institute for Ethical Studies.

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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