Prescription Drug Rebates On The Rise

Trump administration to eliminate safe harbors for drug rebates to PBMs |  Fierce HealthcareSource: Axios, by Tina Reed

Prescription drug rebates from drugmakers to commercial health plans are steadily increasing, a study published in JAMA Health Forum shows.

Why it matters: This is all part of a system in which drugmakers negotiate to get their product on the formularies of middlemen known as pharmacy benefit managers and health plans.

  • * “While drug rebates can reduce plans’ net costs, rebates do not reduce patients’ cost sharing,” the authors write.

This can ultimately “incentivize drug manufacturers to inflate list prices and PBMs to distort drug formularies to favor high list price and high-rebate therapies,” the authors write.

What they’re saying: This is also an equity issue, particularly for patients buying individual plans.

  • * “We have the sick people paying more than their fair share for the drug and the rebate goes back to the plan to reduce premiums for the healthy,” said Ge Bai, a professor of accounting at Johns Hopkins Carey Business School who was one of the authors of the study.

What to watch: Trump era rules to block rebates for Medicare stalled under the Biden administration.

  • * But the issue has been gaining attention on Capitol Hill, with a bipartisan group of lawmakers pushing to outlaw rebates as part of legislation that would cap the price of insulin, FierceHealthcare wrote.

Specialty Drug Costs Continue To Vex Employer-Sponsored Health Plans

 

Specialty drug costs continue to vex employer-sponsored health plans |  BenefitsPRO

Source: BenefitsPRO, by Scott Wooldridge

new report from Pharmaceutical Strategies Group finds that specialty drugs continue to be a top focus for plan sponsors, in part because they tend to be very expensive.

The drugs tend to also be highly complex and require special handling or administration, the report noted. At the same time, the drugs can have great value: extending life for some patients and keeping them productive and relatively healthy, even when conditions are not cured outright.

Related: ‘Super spenders’ accrued $2.1 billion in specialty drugs costs 

“Today, advances in drug therapy allow many patients living with conditions treated by specialty drugs to live decades longer than in the past,” the report said. “As a result, today, many specialty drugs are being used as long-term, chronic therapy for a significant portion of patients.”

Very high costs lead to an “appetite for disruption”

The report noted, as many other sources have, the financial burden that specialty drugs present, both to plans and to enrollees. “Patients who use specialty drugs often have additional health care costs such as non-specialty drugs, doctor’s office visits, outpatient hospital visits, and lab testing to monitor their condition, among others,” the study said. “The monthly total cost of care for a member who uses at least one specialty drug averages $4,846 for the plan and $574 for the member. Annualizing these costs equate to average plan costs of $58,157, and average member costs of $6,894, using the monthly average. These costs are in addition to health care premiums and deductible costs.”

To address high costs, plan sponsors are trying a variety of approaches, the report said, including the use of prior authorization, step therapy, and quantity limits as management strategies. More than 50% of employers use at least one strategy to increase the use of biosimilar drugs. And 8% of plans are currently using alternative funding models, while 31% are exploring their use.

An eye on utilization—but complexity remains a problem

Plan sponsors also are putting a premium on appropriate utilization. This is by far the top priority of plan sponsors, the report found: 37% said reducing inappropriate utilization of specialty drugs was a top goal. The next-highest goal was reducing patient out-of-pocket costs (18%), followed by improving specialty drug adherence and persistency (15%).

The report also stressed the importance of reporting on a plan’s drug spend: “Timely, accurate, and actionable reporting is key to measuring how a plan is doing in specialty drug benefit management,” the report said. “When done well, reporting can highlight areas of opportunity to improve clinical and financial outcomes.”

Among the barriers to reporting is the fact that patients with these conditions often see multiple doctors at multiple facilities. In addition, a single patient’s prescriptions often cannot be filled all at one facility, adding to the complexity.

PSG officials said there was a range of reporting for different areas of specialty drug utilization: “More than 80% of plan sponsors have access to reporting on their total health care costs,” said Tracy Spencer, senior vice president and practice leader of employer groups, labor, and health systems at PSG. “However, clinical outcomes of adherence, persistency and clinical efficacy were reported less often (71% and 31%, respectively). The impact of specialty medications on employee productivity had the lowest reporting rate at 23%.”

FDA Mulls Drug Importation With States

Import Offices and Ports of Entry | FDASource: Axios, by Adriel Bettelheim

The FDA has started discussions with states over creating a way to import drugs from Canada — a policy the Biden and Trump administrations both embraced to bring down health costs but which experts regard as having limited impact.

The big picture: With President Biden’s drug pricing agenda stalled, importation could allow states to take advantage of lower drug prices abroad without the need for direct action to limit prices in the U.S.

  • Under one pathway, states, wholesalers and pharmacies submit importation proposals to HHS, which would be subject to safety and cost conditions.

Driving the news: The FDA last week held its first meeting with five states — Florida, Colorado, Vermont, Maine and New Mexico — that have submitted reimportation plans or are thinking about doing so, Politico first reported.

  • Biden’s executive order on promoting competition directed the FDA to work with states and Native American tribes on safely importing prescription drugs from Canada.
  • “The FDA is committed to working with states and Indian tribes that propose to develop … importation programs to reduce the cost of products to the American consumer while still protecting public health and safety,” an agency spokesman told Axios.

Yes, but: The Pharmaceutical Research and Manufacturers of America sued to block a 2020 federal rule that would facilitate importation, citing patient safety and other concerns.

  • Canada also said it has no plans to participate and has told drugmakers not to take steps that could lead to drug shortages there.

Cowen analyst Rick Weissenstein notes the Biden administration has been inconsistent on reimportation, supporting the idea in theory while arguing that it won’t work in legal briefs filed in response to the drug industry trade group’s legal challenge.

Our thought bubble: With Canadians officials adamant they won’t participate in the process, any importation plan is unlikely to actually bring down drug prices. The issue still could be politically appealing as the campaign season heats up.

No End in Sight for Escalating Prescription Drug Spending

Escalator

Prescription drug costs are rising more than 10% a year, which is twice the rate of medical costs increases according to an A.M. Best report. Retail prescription drug spending grew 12.2% in 2014 compared to 2.4% in 2013. Driving the rising costs are increased spending for new medications, such as specialty drugs for Hepatitis C; patents that expired, price increases for brand name drugs, and higher health plan enrollment due to the Affordable Care Act (ACA). Drug spending from private health insurance, Medicare, and Medicaid accelerated in 2014. These costs have affected insurers. Also consumers are paying more out-of-pocket costs.

The increase in drug costs has become divergent to other health care costs. In 2014, U.S. health care spending increased 5.3% to reach $9,523 per person. The cost growth was primarily due to major coverage expansion under the ACA, particularly for Medicaid and private health insurance. The share of the economy devoted to health care spending in 2014 was 18.1%, up from 17.5% in 2013.

The medical loss ratio (MLR) remained relatively flat from 2010 through 2013 in the low 80 percentages before a decline in the past two years to around 75%. But the MLR was more than 10 basis points higher in 2010 to 2015 when prescription drugs were included.

Medicare Rights Center Supports Part B Drug Payment Model

Medicare Rights Center president Joe Baker testified in support of the CMS proposal to test new ways to pay for prescription drugs under Medicare Part B. He addressed a hearing held by the Subcommittee on Health of the U.S. House Committee on Energy and Commerce. The following is a summary of his comments:

Calls to withdraw the Part B Drug Payment Model fail to acknowledge…unrelenting beneficiary access challenges under the payment system. We applaud CMS for proposing to test solutions could alleviate calamitous cost burdens that cause too many older adults and people with disabilities to forgo necessary care. We urge members of Congress to support and strengthen the proposal by recommending improvements that put patients at the center of the payment model…Challenges affording health care affect nearly one in five callers on the Medicare Rights Center’s helpline. Sky-high cost sharing for Part B prescription drugs is a notable concern, most often for cancer and immunosuppressant medications. People with Medicare and taxpayers deserve a Medicare program that pays for high-value, innovative health care. The Part B Drug Payment Model presents an important opportunity to ensure that the Medicare program meets this high bar. 

Most Doctors Report Cancer Drug Shortages

As many as 98.9% of physicians recently reported cancer drug shortages, according to the Community Oncology Alliance (COA). The surveyed physicians said that, because of drug shortages, the cancer progressed faster in more than 60% of patients and more than 70% of patients had more severe side effects.

Almost half saw more than one patient per day affected by a drug shortage and 58% say the shortage in cancer care drugs is increasing. Over 80% of the patients and over 90% of the practices affected by a cancer drug shortage also experienced a more severe financial burden.

The root cause of the drug shortage is economic, said Ted Okon, executive director of COA. Medicare’s system for reimbursing cancer drugs has created pricing instability. That has resulted in disincentives for manufactures to produce these low-cost but vital generic cancer drugs and invest in manufacturing facilities for these products.

In addition to issues of optimal treatment, drug substitutions made because of a shortage often result in patients facing significantly higher costs. When treating ovarian cancer, a commonly used drug is Leucovorin. The cost to Medicare is $35 per dose; the patient co-payment is $9. But Leucovrin is a generic drug and in short supply, says Dr. Patrick Cobb, an oncologist at the Frontier Cancer Centers and Blood Institute, Billings, Montana, and COA past president. The substitute is a branded drug that is readily available. The cost to Medicare for a dose of the branded drug is $2,000 and the cost to the patient is $520. “This is an unacceptable consequence of the drug shortage crisis,” he said. The complete survey results and comments from respondents are available at http://www.communityoncology.org/site/coa-studies.htm.

Drug Companies Conspire to Keep Generics Off the Market

If it seems harder to get a generic medication it’s not your imagination. With pay-for-delay tactics, brand prescription drug manufacturers pay generic drug manufacturers for not creating generic versions of their medication. This limits the number of prescription options available to patients and contributes to the growth in health care costs, according to the American Medical Assn. (AMA), which has adopted a policy to work toward ending the practice.

Pay-for-delay agreements are estimated to cost American consumers $3.5 billion per year. The Federal Trade Commission (FTC) has recommended that Congress pass legislation to protect consumers from such – agreements. But www.foxbusinessnews.com reports that Congress has failed to stop pay-for-delay and generic drug makers and big-name pharmaceutical companies have been winning court rulings that allowed it.

The Federal Trade Commission recently filed an amicus brief in the U.S. District Court for the District of New Jersey stating that a branded drug company’s agreement not to launch an authorized generic drug “provides a convenient method for branded drug firms to pay generic patent challengers for agreeing to delay entry.”  The FTC also filed a brief in the case of Lamictal Direct Purchaser Antitrust Litigation.  In the case, the private plaintiffs alleged that GlaxoSmithKline paid Teva Pharmaceuticals to delay entry by promising not to compete with authorized generic versions of the drug Lamictal.

Does The Medicare Drug Discount Program Drive up Prices?

The Patient Protection and Affordable Care Act established the Discount Program to help Medicare Part D beneficiaries with their prescription drug costs while in the coverage gap. Until the Discount Program began in 2011, beneficiaries in the coverage gap paid 100% of drug costs. The Discount Program required manufacturers to provide a 50% discount on the price of brand-name drugs for beneficiaries in the gap.

The General Accountability Office (GAO) interviewed pharmacy benefit managers (PBMs) to get their take on the effects of the program. Most sponsors and PBMs told GAO that the Discount Program may be contributing to rising prices of some brand-name drugs by some manufacturers. However, most manufacturers say they don’t think that the Discount Program affected the drug prices that they had negotiated with sponsors and PBMs.

The PBMs said that some manufacturers decreased rebates for their brand-name drugs because of the Discount Program. In comparison, most of the plan sponsors did not observe manufacturers decreasing rebate amounts and most manufacturers said the Discount Program had no effects on their rebate negotiations. Most sponsors and PBMs told GAO that the Discount Program did not affect Part D plan formularies, plan benefit designs, or utilization management practices.

Prices for high-expenditure brand-name drugs increased at a similar rate before and after the Discount Program was implemented in January 2011. Specifically, from January 2007 to December 2010, before the Discount Program began, the median price for the basket of 77 brand-name drugs (weighted by the utilization of each drug) used by beneficiaries in the coverage gap increased 36.2%. During the same period, the median price for the basket of 78 brand-name drugs used by beneficiaries who did not reach the coverage gap increased 35.2%. From December 2010 through December 2011, the first year with the Discount Program, the median price for the two baskets increased equally by about 13%, the greatest increase in median price for both baskets compared to earlier individual years.

For more information, contact http://www.gao.gov/products/GAO-12-914

Last Updated 05/25/2022

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