Shockingly high price increases for already very expensive prescription drugs have generated plenty of headlines and outrage. Early last year, the problem finally prompted the federal government to react with a blueprint for relief. But the ideas coming from Washington are broad, and lack significant detail.
The Trump administration wants to rein in pharmacy benefit managers like Express Scripts and CVS Health, which get kickbacks from manufacturers and impose gag clauses
on pharmacists. The blueprint also calls for letting Medicare negotiate drug prices and loosening the government program’s formulary requirements, giving free generics to low-income Medicare recipients, diverting any kickbacks to patients, and speeding approval of generic drugs.
What do patients, health care providers, and insurers think about the ideas in Washington’s blueprint, entitled American Patients First, and how they should be fleshed out?
Tony Petitta, vice president of pharmacy care management at Health Alliance Plan in Detroit, thinks Washington should start treating drug companies like the monopolies they are.
“Why can’t the U.S. do what other countries have done, and regulate prices?” Petitta asks. “I don’t see anything else that’s going to totally solve the problem at this point.”
President Donald Trump has met with drug company executives publicly at least two times on the issue. In advance of one meeting, according to published reports, Trump told reporters prices were going to come way down. In July, Pfizer and Novartis agreed to postpone or reverse price hikes until 2019 — or, in Pfizer’s case, until Washington implements the blueprint’s proposals.
Most experts and patients agree that something has to be done. The prices of the top 20 drugs paid for by Medicare rose from 987 percent to 208,248 percent between 2011 and 2015, according to a report from the Office of Inspector General for the U.S. Department of Health and Human Services. While spending on prescription medications actually went down in 2012, thanks to generics, the fact is that drug costs are rising faster than any increases in wages and the cost of living.
It’s hardly surprising, then, that nearly three-quarters of the public view prescription drug costs as unreasonable, and one in four patients say they haven’t filled a prescription because of its cost, according to U.S. Sen. Patrick Leahy’s website.
In the meantime, states are taking matters into their own hands, helping their citizens and serving as laboratories for ideas. In the 2018 legislative session, 20 states passed 37 bills to curb rising medication costs, according to the National Academy for State Health Policy (Michigan wasn’t one of them). The new legislation in other states addressed the business practices of pharmacy benefit managers, transparency, price setting/anti-price gouging, and importing wholesale drugs from Canada.
I think the biggest challenge is the litigation from the pharmaceutical manufacturers.
— Christina Barrington
Buying drugs from our northern neighbor, as Vermont plans to do, doesn’t appeal to at least one health system pharmacy executive.
“Importing foreign drugs isn’t in the best interest of the integrity of our drug supply chain,” says Kathy Pawlicki, vice president and chief pharmacist for Beaumont Health in Southfield. “It doesn’t target the pricing of the manufacturers. That’s a big misstep, I think, and misguided.”
To put pressure on Washington and manufacturers to act, the public may look to another source of relief from rising prices — patient advocacy groups — that exert influence in Washington with letter-writing and social media campaigns, patient visits to lawmakers, and testimony on Capitol Hill.
Drugmakers quickly adopted the strategy to support their own causes by hiring patient advocacy groups to influence lawmakers as a supplement to efforts by paid lobbyists. Even as 14 drug companies spent $63 million on Washington lobbying in 2015, they also contributed $116 million to patient advocacy groups, according to the latest available data from a Kaiser Family Foundation database, Pre$cription for Power.
The donations — including money given to Susan G. Komen, which advocates for breast cancer treatments, and the American Diabetes Association — raise the question of what drugmakers expect in return.
About half of the 1,200 advocacy groups in the Pre$cription for Power database took drug money.
One of them, Patients for Affordable Drugs, accepts no money from pharmaceutical companies, and agrees with many facets of Washington’s proposals, including greater transparency and speeding up generics, along with value-based pricing, which isn’t in the blueprint. The group has helped pass state legislation, testified in Congress, lobbied HHS and the FDA, supported legislation, and amassed more than 14,000 patient stories to influence lawmakers.
“We’re not Pollyannas,” says David Mitchell, a cancer patient who is the group’s founder and president. “We know we’re taking on an entity that has unlimited resources because they have monopolies.”
Despite the power of the drug industry, the government has shown signs it can do something about speeding up clearance for generics.Last August, the FDA cleared the first generic in a new program that expedites development and review of lower-cost replacements for brand-name drugs with one or no generic equivalent. That first clearance was for liquid potassium, prescribed to people with low levels of the electrolyte caused by taking diuretics. The agency also cleared the first generic of the EpiPen injector for allergic reactions in the same month.
“Anytime we can get drugs to be available generically it lowers the co-pay burden for the patient,” says Hae Mi Choe, associate dean of the University of Michigan’s College of Pharmacy in Ann Arbor. “If they don’t have insurance and have to pay the actual cost of the drug, obviously generics would be much cheaper.”
Getting a generic cleared is a particular issue for drugs that come in a device such as the EpiPen, says HAP’s Petitta. Another drug-device combination, Advair, an inhaler used for asthma and chronic obstructive pulmonary disease, has no generic cleared in the U.S. yet, although three companies have developed them and have applied to the FDA. Advair has been the fourth-largest seller in the U.S. over the past 25 years.
Martha Conlon, 67, of Berkley, has been using Advair for about 10 years to control her asthma. When she temporarily dropped prescription coverage in her health insurance to save money, Conlon was shocked to see a $360 charge for a one-month supply. After learning the medication would also be pricy in Windsor, at $200, she turned to an online retailer from Australia that got the drug from India. “It worked fine, and it was $30,” says Conlon, who ordered her Advair online for a year. “It was a lifesaver.”
But the FDA, as powerful as it is, can only control so much.
“I think the biggest challenge is the litigation from the pharmaceutical manufacturers,” says Christina Barrington, vice president of pharmacy programs for Priority Health in Grand Rapids. “They can, and have, prevented a generic from coming to the market because they tie it up with patent infringement court cases.”
The current term for a patent is 20 years, but drugmakers game the system in different ways to get the longest time possible. Allergan, maker of the dry-eye medication Restasis, tried transferring its patent to a Native American tribe, a sovereign entity that can be sued only if it agrees. A much more commonly used strategy is to create a “patent thicket” like the one AbbVie Inc. formed by filing for more than 100 new patents on its biologic Humira, which controls autoimmune diseases and is now the world’s best-selling drug. The original patent for Humira expired in 2016, but those additional patent applications, for different aspects of making the drug, will push patent expiration out to 2034 (see next page).
“My recommendation would be to have some type of legislation or policy around the ability to speed up the patent infringement trials, so the generics can get to the market sooner,” Barrington says.
Another way large drugmakers block the entry of generics is by preventing potential competitors from getting samples of the branded product and by refusing to let generic makers participate in a sometimes-required safety protocol. A bipartisan bill originally introduced in 2016, then revised and reintroduced in 2017, the Creating and Restoring Equal Access to Equivalent Samples Act, would let generic manufacturers sue in federal court to get injunctive relief. It also gives the FDA more discretion in approving an alternative safety protocol rather than requiring the brand name and generic manufacturers to share one safety protocol.
Last May, the FDA published a list of companies it believes are blocking competition by withholding samples and a list of inquiries from generic drugmakers who report having trouble accessing brand-name drugs. The generic drug manufacturers may not always be the victims, though.
In November 2017, Michigan and 44 other states, Puerto Rico, and the District of Columbia sued 18 generic pharmaceutical companies and two of their CEOs for conspiring to fix prices, restrain trade, and impede competition. The case is pending in the U.S. District Court for the Eastern District of Pennsylvania.
Washington’s blueprint also targets pharmacy benefit managers, or PBMs, as a way to lower drug prices. Care providers and insurers are also hostile to PBMs, at times. The top three PBMs — Express Scripts, CVS Health, and Optum Rx — control 66 percent of the market, which prompted the White House Council of Economic Advisers to claim, in a February 2018 report, that they “exercise undue market power” and generate “outsized profits for themselves.”
The powerful companies insist on gag clauses in contracts that prohibit pharmacists from telling customers that paying out-of-pocket for a prescription would cost less than if they used their insurance. They receive legal kickbacks from manufacturers as the result of savvy price negotiations, and they impose pay-to-play and performance fees on pharmacies that fill prescriptions under Medicare Part D.
Trump’s blueprint calls for ending gag clauses, limiting kickbacks to the PBMs, and giving any cuts in price to Medicare seniors instead. “Anything that increases the competition within the United States and looks at the manufacturing pricing and the middleman, the PBMs, that’s where we need to focus our efforts,” Pawlicki says.
But Choe, who at U-M focuses on the clinical practices of the university’s medical center and physician group, has reservations about giving kickbacks to patients instead of PBMs.
“Conceptually that makes sense … but the whole notion of giving rebates to patients for using certain medications could create some challenges,” Choe says. “I could imagine a patient wanting drug X (because it offers a monetary incentive) instead of drug Y, even though drug Y is actually better for the patient. I don’t know how to mitigate that.”
Barrington, meanwhile, favors more openness around money flowing from drug manufacturers to middlemen. Like Patients for Affordable Drugs, she favors value-based payments.
“There needs to be transparency around the kickbacks and rebates, and I think steering toward outcomes-based rebates should be looked at in the future,” Barrington says. “Look at those drugs that drive the clinical outcome and make sure that if they don’t perform as the manufacturer says, there’s some type of rebate given back to the patient or to the payer.”
If rebates were funneled to payers instead of PBMs, as Barrington proposes, Medicare — which pays out more money for prescriptions than any other entity — might be the No. 1 recipient. Washington’s proposals also suggest changes to the federal program’s formulary and price-negotiating ability, as well as making some drugs free for low-income patients.
Petitta says he’s concerned about changes that would produce savings for Medicare.
“Frequently what happens is when you create laws that reduce cost in one area, it pushes higher costs into other areas,” he says. “So, cost reductions in some of the federal programs may increase costs to commercial members.”
Petitta’s counterpart at Priority favors the idea of loosening Medicare formulary requirements that currently mandate covering at least two drugs to treat a condition and, for some classes like antidepressants and immunosuppressants, all drugs in the class.
“The issue is that many physicians are unaware of the actual costs of these drugs and many times prescribe higher-cost agents that have a lower-cost alternative or generic available that provides the same or better clinical outcomes,” Barrington says. “This is what really keeps the Medicare formulary very expensive … when we have to put multiple products in a category to meet this requirement, when they’re not really cost-effective.”
Prescriptions account for 20 percent of the money Priority pays for its 800,000 members’ health care, according to one of its media representatives. HAP declined to disclose any information about the money it spends on medications for its 570,000 members.
While Medicare may pay more for medications than anyone else, potentially giving it the most clout in the marketplace, it’s been barred from negotiating prices for drugs since prescriptions were added to coverage by the federal program in 2003. Washington’s blueprint proposes changing that.
“I don’t think that’s a bad idea, I just don’t know what the detail is,” Pawlicki says. “I think what we don’t want to see is anything that ends up not addressing the manufacturers’ pricing and instead ends up being more of a cost to the health care provider (and patients).”
What’s Happening in Lansing?
While 20 other states passed 37 bills to curb drug costs in the 2018 legislative session, Michigan had one proposed bill that would create more transparency, but it and similar measures never gained much traction.
The most recent effort, Senate Bill 825, which didn’t make it to the new Legislature, would have created a reporting mechanism for pharmaceutical manufacturers to disclose R&D and marketing costs, government money used for drug development, and more.
Trish Riley, executive director of the policy education group National Academy for State Health Policy, says it’s not unusual for bills to take time to build support. “This happens iteratively as legislators get educated about issues,” Riley says, “so I don’t think there’s anything necessarily (unusual) about Michigan. There were many states that didn’t have legislation, (and) I think it was 20 that passed them, so it was still a minority.”
In addition, six physicians and five pharmacists on the Michigan Pharmacy and Therapeutics Committee in Lansing are tasked with recommending which prescription drugs various health programs, including Medicaid, should cover. Like some of their counterparts nationally, some committee members have received money or perks from pharmaceutical manufacturers, an apparent conflict of interest.
In fact, four physicians on the 11-member committee in 2018 — Dr. Andrew D. Adair, Dr. David R. Neff, Dr. Anthony F. Ognjan, and Dr. Venkat K. Rao — reported receiving such payments in 2017, the latest year on the Center for Medicaid and Medicare Services’ open payments database. Another physician, Jayne Courts, reported receiving perks in prior years, but not in 2017. One commissioner, Bradley Uren, wasn’t listed in the database.
In a statement, a public information officer for the Michigan Department of Health and Human Services says several doctors are disputing particular information in the database, and having some of it removed.
“Transparency and avoiding any conflict of interest is important to the department, so we appreciate the purpose of the CMS* open payments database,” the information officer writes. “MDHHS is evaluating the report as it relates to members of the Michigan Pharmacy and Therapeutics Committee and will take corrective action if necessary.”
Humira, a biologic medication used for immune system disorders, was initially cleared for use in 2002 and may be the perfect drug for its maker, AbbVie Inc.
Rank: World’s No. 1-selling drug
Forecast: U.S. highest-grossing drug through 2022
Price Increase: 144 percent since 2012
Global Sales (2017): $18 billion
Portion of Maker’s Net Revenue (2017): 68 percent
Treats: Ten conditions, including rheumatoid, juvenile and psoriatric arthritis; ankylosing spondylitis, an arthritis of the spine; Crohn’s disease and ulcerative colitis, both chronic inflammations of the digestive tract; chronic plaque psoriasis; a particular eye inflammation; and a skin condition that causes lumps in the armpit and groin.
Patents: 247 applications; 132 approvals
Original Patent Expiration Date: 2016
New Expiration Date: 2034
Competition: Right now, there is none. A coalition of patient advocacy groups, including the Crohn’s and Colitis and Arthritis foundations, along with the Lupus Foundation of America, oppose an automatic substitution of a cheaper biosimilar (the name for generic biologics) when a doctor prescribes a biologic.
Drug Company Money to Foundations Listed Above (2015):
Sources: I-MAK Overpatented, Overpriced Report; Kaiser Health News; Bloomberg Businessweek; Humira.com.