Bill Targets Pharma Tactics to Delay Generics

The Senate Judiciary Subcommittee held a hearing on S. 3056, the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act. The bill would allow generic-drug companies to bring actions in federal court to get the drug samples they need to develop generic versions of brand drugs. It would authorize judges to award damages. Proponents say that the bill would prevent brand drug manufacturers from abusing risk evaluation and mitigation strategies to block generic competition. It would encourage more development of generic and biosimilar drugs and reduce drug costs. “This legislation will help bring generics to market faster, which is key to reducing drug costs,” said Pharmaceutical Care Management Association (PCMA) president and CEO Mark Merritt.

The bipartisan legislation was introduced by Senators Charles Grassley (R-IA), Patrick Leahy (D-VT), Amy Klobuchar (D-MN), and Mike Lee (R-UT). The legislation is supported by a broad group of stakeholders, including the Generic Pharmaceutical Association, the Academy of Managed Care Pharmacy, Public Citizen, Consumers Union, and the Blue Cross Blue Shield Assn. PCMA also suggests these solutions to bring down drug prices:

  • Accelerate FDA approvals of drugs that face little or no competition.
  • Make copay coupons an illegal kickback for all insurance that receives any federal subsidy.
  • Modernize the Medicaid pharmacy to make it more like the commercial market and Medicare Part D.
  • Create new incentives for physicians to prescribe biosimilars.

Drug Spending Growth Reaches 8.5% in 2015

Total spending on drugs in the United States reached $310 billion in 2015, up 8.5% from the previous year, according to a report by the IMS Institute for Healthcare Informatics. The surge of new drugs remained strong last year, and demand for new brands was high. Savings were relatively low from branded drugs facing generic competition. Price increases on brands had a limited effect due to higher rebates and price concessions from manufacturers. Specialty drug spending reached $121 billion on a net price basis, up more than 15% from 2014. (Net-price spending does not relate to a patient’s out-of-pocket costs or the amount health plans pay for drugs. It estimates the amount received by pharmaceutical manufacturers so it reflects rebates, off-invoice discounts, and other price concessions that manufacturers make to distributors, health plans, and intermediaries.)

Manufacturers are accepting lower price increases on existing products. At the same time, spending on new brands continued at near-historic levels. Increasingly, healthcare is being delivered by different types of healthcare professionals and from different facilities while patients face higher out-of-pocket costs and access barriers. The study predicts mid-single digit growth for drug spending through 2020, driven by innovative treatments and offset by brands facing generic or biosimilar competition.

Heightened competition among manufacturers, along with more aggressive efforts by health plans and pharmacy benefit managers to limit price growth, resulted in significantly lower price increases than in prior years. The report also reveals the following:

  • Spending on specialty drugs has nearly doubled in the past five years, contributing more than two-thirds of drug spending growth from 2010 to 2015. Treatments for hepatitis, autoimmune diseases, and oncology drove increased specialty spending. The year 2015 saw a 21.5% spending increase for specialty drugs.
  • Forty-three new active substances were launched in 2015 with a third receiving orphan drug designations from the FDA. An additional 30 brands were launched last year, bringing new combination therapies, alternative dosing, and treatment administration options to patients. The strong momentum of breakthroughs and R&D productivity is reflected in the 2015 cohort of new drugs.
  • Total prescriptions dispensed in 2015 reached 4.4 billion, up 1% year over year. Demand was higher in some therapy areas, such as antidepressants and anti-diabetes, each of which increased about 10% in 2015.
  • Over the past five years, integrated-delivery networks have expanded their affiliations with healthcare professionals to increase negotiating power with insurers, save money, and drive pay-for-performance initiatives. More than 54% of healthcare professionals are affiliated with integrated-delivery networks. In the past five years, there has been a 115% increase in urgent care centers and pharmacy in-store clinics. The number of prescriptions written by nurse practitioners and physician assistants more than doubled over the past five years.
  • While brand price increases are expected to continue in the 10% to 12% range, they will be significantly offset by rebates, discounts, and other price concessions.
  • The are very bright prospects for innovative drugs becoming available through 2020. The late-phase pipeline holds 2,320 novel products, with an average 43 to 49 to be launched annually over the next five years.

How the FDA Is Driving Drug Price Hikes

The FDA’s backlog of 4,000 generic drug applications is hindering competitors who could hold prices down, according to a study by the National Center for Policy Analysis (NCPA). Also, older generic drugs are often made on aging production lines, which are sometimes shut down for maintenance. Lines can be stopped after the manufacturer is warned by the FDA that the facility is out of compliance with good manufacturing practices. The resulting shortage often drives prices higher.

Thousands of drugs predate the FDA’s approval process required under the 1938 Food Author and Drug & Cosmetics Act; many were grandfathered, but never officially approved.  NCPA senior fellow Devon Herrick says, “The FDA wants these cheap drugs off the market and replaced with more costly approved versions from any drug makers willing to conduct clinical studies on them.”

State regulations also bite consumers in the wallet. Generic substitution laws in some states make it harder for consumers to save. In the face of rising drug prices, many states have passed laws that worsen the situation, such as banning efficient pharmacy networks, restricting mail-order pharmacies, and restricting maximum allowable cost lists.

The NCPA study highlights several ways to lower America’s drug bills, including the following:

  • Clear the FDA’s backlog of applications to manufacture generic drugs.
  • Resist passing perverse regulations designed to protect local business.
  • Promote competition in the production of generic medications.

“Much of the recent rise in the price of generic drugs can be directly linked to regulatory and legal causes,” says Herrick. This study is Part II of Herrick’s in-depth examination of the rising costs of generic drugs.

Biosimilar Medications Could Save Billions

Over the next decade, the United States could save $44 billion by introducing competing biosimilar versions of complex biologic drugs, according to a report by the RAND Corporation. Biologics, which treat conditions, such as cancer and rheumatoid arthritis, are often effective, but expensive. Patient copays can be several thousand dollars a year. In 2011, eight of the 20 best selling drugs were biologics. Also, annual spending on the drugs has grown three times faster than spending for other prescription medications. Introducing biosimilar drugs into the U.S. marketplace is expected to increase competition and drive down prices, saving money for patients, health care payers, and taxpayers. However, savings are not expected to be as dramatic the as savings we have seen for an earlier generation of less-complex generic drugs.

The Affordable Care Act authorizes the FDA to develop a regulatory framework for approving biosimilar drugs. Draft materials released by the FDA suggest that not all biosimilars will be interchangeable with their original counterparts. In addition, nearly all biosimilars will require at least one head-to-head clinical trial to confirm similarity to the original biologic, which is a more-strenuous process than what is required for standard generics. A number of issues will determine the savings and who will benefit. One issue is how much the use of biologics grows as some patients switch to biosimilar drugs as they become more affordable. Patients will see some cost savings. But physicians and hospitals may also benefit because biologicals are often purchased by health providers and administered in clinics and other treatment settings. For more information, visit www.rand.org.

State Backs Reproductive Rights

California’s executive and legislative branches have thrown their support behind reproductive rights. First, the California Dept. of Managed Health care sent letters to carriers and colleges reminding them that insurance companies in the state can’t refuse to cover abortion. The announcement came after two Catholic institutions, Santa Clara University and Loyola Marymount University, decided to drop coverage for elective abortions for more than 2,000 employees.

Second, the California legislature passed the Contraceptive Coverage Equity Act, which strengthens the coverage for FDA-approved birth control methods under Obamacare. It now heads to the governor, who is expected to sign it. Senate Bill (SB) 1053 would expand access to the full range of FDA approved methods of birth control without restrictions or co-pays.  The measure was introduced by Senator Holly J. Mitchell (D-26) of Los Angeles and co-sponsored by California Family Health Council and the National Health Education Law Program.

California has had a law on the books since 1999 that requires health insurers to cover contraception along with other prescription drugs. The new measure goes even further to ensure that women can select their birth control method without being required to try other methods first. “We continue to see an alarming national trend of restricting access to women’s health care. In the aftermath of the disappointing Hobby Lobby decision, California, once again, has the opportunity to lead the nation with a legislative model to help women more effectively plan their families and futures with fair and consistent contraceptive coverage,” said Julie Rabinovitz, President and CEO of California Family Health Council.

Traditional Prescription Drug Spending Drops

In 2012, U.S. spending on traditional prescription drugs fell for the first time in more than 20 years, according to data by Express Scripts. Traditional prescription drug spending fell 1.5% in 2012 among the country’s commercially insured population. However, this decline was offset by an 18.4% increase in spending on specialty medications to treat more complex diseases, such as rheumatoid arthritis, cancer, and hepatitis C.

Glen Stettin, MD of Express Scripts said that the drop in traditional drug spending is due to the success of utilization management programs and a growing interest in generic medications, home delivery pharmacies, and more focused retail pharmacy networks. Stettin added, “Effective management solutions and increased drug competition are necessary…to rein in specialty drug costs…and increased drug competition, in the form of biosimilars, is necessary to offer more affordable medication.” Last year’s patent cliff ushered in lower-cost generic alternatives for many blockbuster medications and utilization increased for eight of the top 10 traditional therapy classes, while unit costs decreased in seven.

For the second consecutive year, the country spent more on prescription drugs for diabetes than for any other therapy class. Diabetes drug spending increased 11% in 2012, driven, in part, by unit cost increases for popular insulins. Spending on medications to treat attention disorders increased 14.2% in 2012. Utilization increased 8.8%, due largely to an increased number of adult patients. Unit costs increased 5.4% as a result of a 2012 shortage of active ingredients contained in many of the medications in this class.

While affecting fewer than 2% of the general population, specialty conditions in 2012 accounted for 24.5% of pharmacy benefit drug spending  — the highest percentage on record. Specialty medications often require specialized handling, frequent dosing adjustments, and intensive clinical monitoring and patient assistance. The costliest specialty category was for inflammatory conditions such as rheumatoid arthritis; drug spending increased 23%. This increase was driven by a 9% increase in utilization and a 14% increase in unit costs.

There was a 33.7% increase in hepatitis C spending, which is a bigger increase than any other major traditional or specialty therapy class. The increase is due almost entirely to two new drugs being introduced in May 2011. Express Scripts expects total spending on hepatitis C medications to increase 32.3% in 2013 and another 56.3% in 2014.

For cancer medications, utilization increased 3.4% and costs increased 22.3%. Driving much of the cost increases are new drugs that treat unique genetic profiles — a trend that increased in recent years.

In 2012, the Food and Drug Administration approved 22 new specialty drugs, many of which will cost more than $10,000 per month of treatment.

Doctors who are more likely to prescribe generic medications to Medicare patients are younger, see a large number of Medicare patients, and practice in Midwestern states such as Ohio, Illinois, and Michigan.

As more Americans seek treatment for drug and alcohol abuse, chemical dependence is now among the top 10 traditional therapy classes when it comes to Medicaid drug spending. At 24.3% in 2012, chemical dependence drugs account for the largest percentage increase in Medicaid drug spending.

Utilization of cancer medications increased 11.8% for Medicare patients in 2012, contributing to a 32.8% spending increase for this population. Medicare patients increased utilization of hepatitis C medications by 63.5% in 2012. Infection rates for the virus are more prevalent among patients born 1945 to 1965.

Medicaid spends more on asthma medication than on any other single condition. Total asthma spending increased 6.2%, driven largely by increased utilization.

Prices for the most highly utilized brand-name medications increased 12.5% in 2012, far outpacing the general inflation rate of 1.7%. During the same period, generic medication prices declined 24%. This 36.5 percentage point net inflationary effect is the largest single-year widening of brand and generic prices since Express Scripts began calculating its Prescription Price Index in 2008. The full report is available atwww.DrugTrendReport.com.

Last Updated 11/13/2019

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