Over 30 years of reporting on Congress, federal agencies and the White House for corporate America as well as national trade and professional associations.

Trump Administration Considers New Tariffs on Chinese Aluminum

The Fabricator-December 2017 for the original article go HERE

During his campaign for president, Donald Trump was not quiet about his desire to improve the U.S. trade deficit with its trading partners. In particular, he railed against China on a regular basis. He remains focused on this task, and in late November he asked the U.S. Department of Commerce to begin an investigation into the possible dumping of certain aluminum stock into the U.S. market. If trade penalties result from this investigation, domestic manufacturers may be forced to pay more for aluminum in late 2018 or early 2019.

The Trump administration’s decision to initiate an investigation on whether China is either dumping or subsidizing imports of certain kinds of aluminum in the U.S. will lead to both statistical analysis and political calculation.

To begin, the U.S. Department of Commerce (DOC) will have to see whether unclad and multialloy clad aluminum sheet is being sold here below the price of manufacture (also known as dumping) or if the Chinese government is subsidizing those same aluminum producers. The DOC estimated a dumping margin of between 56.54 and 59.72 percent. Common uses for the products under investigation include gutters and downspouts, building facades, street signs and license plates, electrical boxes, kitchen appliances, and tractor-trailers hauled by semitrucks.

Once the DOC establishes the accuracy of its initial analysis, then the matter goes to the U.S. International Trade Commission (ITC), which decides whether domestic producers of common aluminum alloy sheet are materially injured or threatened with material injury. That decision would be expected to be made within 45 days of the ITC picking up the case. If domestic producers are believed to have suffered, the DOC makes the final determinations regarding dumping, subsidization, and injury. Such a decision likely wouldn’t occur until late 2018 or early 2019.

The Aluminum Association welcomed the investigation, which has some added impetus because the Trump administration initiated it instead of waiting for U.S. aluminum manufacturers to file complaints with U.S. trade officials, which is generally how these investigations get started. Trump railed about Chinese imports while campaigning for president, and the aluminum investigation is the latest evidence of his interest in this area. Trump also has loudly advocated for U.S. manufacturers broadly, and many of them rely on cheap Chinese aluminum.

Where this could get tricky politically is if groups like the National Association of Manufacturers or the Alliance for American Manufacturing oppose new tariffs on Chinese aluminum. Neither of those two groups responded to emails asking for their official positions.

When asked about his group’s position, Francis Dietz, vice president, public affairs, Air-conditioning, Heating, and Refrigeration Institute, responded with a letter his association sent to U.S. Trade Representative Robert E. Lighthizer earlier this year after Trump initiated a national security investigation on imported steel. That letter said in part: “…increasing the cost of steel and aluminum are of great consequence to the HVACR and water heating industry and its consumers.”

Liftoff for the LIFT

Manufacturing USA, the consortium of 14 manufacturing institutes including Lightweight Innovations for Tomorrow (LIFT), which is dedicated to lightweight metals manufacturing research, just released its 2016 annual report. The 2016 report contains an overview of the 14 manufacturing organizations, jointly funded by various federal agencies, with private-sector companies matching $2 for every dollar of federal funding.

LIFT, established in February 2014, concluded its second full year of operation with 10 new projects getting underway, some of them now near completion, according to Joe Steele, LIFT’s communications director. Some of those projects are:
  • A melt processing project team successfully produced ductile cast iron differential cases with walls as thin as 2 mm at a Midwestern foundry. By reducing the wall thickness, the team achieved an overall 40 percent weight reduction on the component.
  • Within the thermomechanical process (TMP) technology area, researchers successfully modeled the TMP history and resulting microstructure for linear friction-welded titanium for a compressor application.
  • The joining and assembly project teams successfully produced a deckhouse prototype for a Coast Guard ship that featured fabricated parts with reduced distortion through the use of new weld and fixturing approaches. Also, new cost modeling tools have been developed and have demonstrated that the new approaches result in significant manufacturing cost savings in the shipyard.
Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Natural Gas Players Oppose Perry Coal/Nuclear Subsidy Proposal

Pipeline & Gas Journal-December 2017 for the original article go HERE.

The natural gas industry is attempting to turn back an attempt by Energy Secretary Rick Perry to in effect subsidize coal and nuclear suppliers to electric utilities at the expense of natural gas suppliers. Perry instructed the Federal Energy Regulatory Commission (FERC) in September to propose a rule to provide rate incentives to electric utilities with a 90-day fuel supply onsite in the event of supply disruptions. That would allow regional transmission organizations (RTOs) and independent system operators (ISOs), which essentially regulate wholesale electric supply and demand in various regions, to adjust rates to benefit utilities dependent on coal or nuclear power.

FERC was taking public comment on its Grid Resiliency Pricing Rule until Nov. 30 and will ostensibly decide whether to adopt Perry’s proposal, modify it or extend consideration of it. Chairman Neil Chatterjee emphasized on a FERC podcast on Oct. 25 that his is an independent agency and indicated that it doesn’t take orders from the Department of Energy. “I remain committed to upholding the Commission’s independence when considering the DOE NOPR, and the many other issues that may come before us,” he said.

Perry’s charge to the FERC follows a report issued by the Department of Energy this summer which reported on the state of the electric grid and its reliability, and surmised future reliability problems based on projected retirements of older coal plants, particularly. The report alluded to the impact, for example, of the early 2014 Polar Vortex, an extreme cold weather event, during which PJM Interconnection (PJM), a major RTO, struggled to meet demand for electricity because a significant amount of generation was not available to run.

According to the DOE staff report, the loss of generation capacity could have been catastrophic, but several fuel-secure plants that were scheduled for retirement were called upon to meet the need for electricity: American Electric Power reported that it deployed 89% of its coal units scheduled for retirement in 2014 to meet demand during the Polar Vortex, and Southern Company reported using 75% of its coal units scheduled for closure.

Paul Bailey, president and CEO, American Coalition for Clean Coal Electricity, explained at a recent hearing of the House Energy & Commerce Committee that the nation’s coal fleet is comprised of 1,004 individual generating units located at 377 power plants that represent a total of 262,000 megawatts (MW) of electric generating capacity. About 60,000 MW of coal-fueled generating capacity (20% of the coal fleet) had retired by the end of last year. An additional 41,000 MW have announced plans to retire. Altogether, these retirements represent one-third of the nation’s coal fleet.

In comments to FERC, the Interstate Natural Gas Association of America (INGAA) said the DOE proposal “disparages the reliability of natural gas-fired generators, and implicitly the reliability and resilience of the natural gas supply and delivery system, in attempting to make the case for the proposed grid reliability and resiliency rule.”

In fact, INGAA pointed to a recent DOE report which concluded: “Hurricanes Irene and Sandy did not have a major impact on natural gas infrastructure and supplies in the Northeast.” The group suggested instead that FERC ask RTOs and ISOs to report on how they value reliability and that FERC use that information to move forward with any rulemaking, but on a fuel-neutral basis.

The Natural Gas Supply Association argued, “The facts are impressive with interstate pipelines delivering 99.79% of firm contractual commitments over the last decade – a number that includes fulfilling firm shippers’ requests during the Polar Vortex when natural gas demand was at a record high and 9% higher than the previous winter.”

NGSA noted many generators in ISO and RTO markets choose to rely upon interruptible or secondary firm transportation service instead of primary firm transportation service so they may be more vulnerable to supply interruptions. But it is their decision to choose those contracts.

Moreover, the DOE Grid Study recounts that “many coal plants could not operate due to conveyor belts and coal piles freezing” during the Polar Vortex and “three nuclear reactors totaling 2,845 MW of capacity were shut down, and five operated at reduced levels due to disruptions in transmission infrastructure, reduced demand from distribution outages, and precautionary measures to protect equipment” during Superstorm Sandy.

The House Energy & Commerce Committee held two hearings in September and October on electric grid reliability. At one on Oct. 13, Marty Durbin, executive vice president and chief strategy officer, American Petroleum Institute, argued that increasing use of natural gas in electric power generation has not only enhanced the reliability of the overall system, it’s also provided significant environmental and consumer benefits. “As an example, since 2008 average annual wholesale power prices in PJM have decreased by almost 50%,” he related.

Major consumers of natural gas weighed in against Perry’s proposal. The Process Gas Consumers Group, composed of manufacturers who rely on natural gas for electric plants, stated FERC has already taken a number of steps to ensure reliability. For example, the commission approved the New England ISO’s “pay for performance” program and winter reliability programs which provide financial incentives for generators to be prepared to perform in extreme weather events.

Also, to handle issues related to possible natural gas supply interruptions, FERC issued an order to allow increased communication between electric system operators and pipeline operators, increasing electric operators’ information about gas pipeline status in dispatching gas-fired generators.

Solar and wind energy providers and environmental groups such as the Natural Resources Defense Council oppose the Perry proposal.

BLM Suspends Implementation of Methane Flaring Rule

The Bureau of Land Management (BLM) suspended and extended the deadlines for some provisions in its November 2016 final rule on methane flaring from gas wells on public lands. The 2016 final rule became effective on Jan. 17, 2017. Many of the final rule’s provisions are to be phased in over time and were to become operative on Jan. 17, 2018.

A coalition of gas and oil groups have challenged the legitimacy of the rule, arguing the Environmental Protection Agency (EPA) has the authority under the Clean Air Act to regulate methane emissions, the major contaminant among greenhouse gases. That was the argument made in April 2016 by The Independent Petroleum Association of America (IPAA), the Western Energy Alliance (WEA), the American Exploration and Production Council, and the U.S. Oil and Gas Association.

They argued that instead of worrying about methane emissions, the BLM would be better served directing its resources toward processing applications for the pipeline rights-of-ways across federal and Native American lands that are essential for the building of gas-capture technology. “Timely processing of such applications would have a much greater and more immediate impact on reducing flaring levels than BLM’s proposed one-size-fits-all, command-and-control regulation,” the groups said.

The BLM’s rule on venting and flaring of methane was also the subject of legal action undertaken by the WEA, IPAA and some of the western states most prominently affected. This litigation has been consolidated and is pending in the U.S. District Court for the District of Wyoming. The groups filed a separate request in federal court for an injunction and a stay of the rule, but those motions were denied by the court on Jan. 16, 2017 and the rule went into effect the following day.

Although the court denied the motions for a preliminary injunction, it expressed concerns that the BLM may have “usurped” the authority of the EPA and the states under the Clean Air Act, and questioned whether it was appropriate for the 2016 final rule to be justified based on its environmental and societal benefits, rather than on its resource conservation benefits alone. The next stage in the litigation will be the court’s consideration of the merits of the petitioner’s claims.

The possibility that the BLM rule could be overturned led to the BLM’s decision on Oct. 16, 2017 to delay until Jan.1, 2019 implementation of parts of the rule that would have gone into effect on Jan.1, 2018. In the meantime, the BLM will review the Obama administration rule to determine where it falls out of compliance, if it does, with President Trump’s Executive Order 13783, entitled, “Promoting Energy Independence and Economic Growth.”

Section 7(b) of Executive Order 13783 directs the Secretary of the Interior to review four specific rules, including the 2016 final rule, to determine whether to revise, suspend or rescind those rules. The result of that examination may lead to the BLM proposing a revision of the methane rule.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Medicare Allows Add-On Payments to Hospitals for Some New Products

P&T Journal - November 2017 for the original article go HERE.

For the past few years, the controversy over expensive new pharmaceuticals has involved concerns over the cost of and access to cancer drugs, hepatitis C regimens, and other therapies in an outpatient setting, and whether insurers and programs such as Medicaid could afford to provide what in many cases are true advancements to the patients who need them. In the case of Medicare, therapies provided on an outpatient basis are reimbursed by Part B or D (mostly B) because the drugs are predominantly infused.

Access to expensive new drugs for patients who are in hospital beds, however, has been a much less visible issue given that the costs of those drugs are bundled into diagnosis-related groups (DRGs) and reimbursed as part of the global payment to a hospital in Part A Medicare.

But Part A drug payments are an issue, too, for both hospitals that balk at providing expensive new drugs to inpatients and for drug companies that see less hospital uptake of those drugs. To promote uptake, since 2000, the Medicare program has approved what are called technology add-on payments for expensive new drugs and medical devices in Part A for two or three years.

But the approval process is extremely complicated. This past spring, pharmaceutical companies and their lobby, the Pharmaceutical Research and Manufacturers of America (PhRMA), pressed the Centers for Medicare and Medicaid Services (CMS) to ease the standards it uses to determine if a new drug qualifies for technology add-on payments. Drug companies must apply for these add-on payments, which typically equal either less than 50% of the estimated costs of the new technology or medical service or less than 50% of the difference between the full DRG payment and the hospital’s estimated cost for the case.

The CMS received nine applications for new technology add-on payments for fiscal year 2018, three of which were withdrawn before the proposed rule was issued. Of the remaining six applications, the CMS expressed varying concerns about each of them as to whether they met the three criteria necessary for a drug to be awarded an additional payment. The six applications were for: Edwards Intuity Elite valve system/LivaNova Perceval valve; Janssen’s Stelara (ustekinumab); Kite Pharma’s KTE-C19 (axicabtagene ciloleucel); Merck’s Zinplava (bezlotoxumab); Celator Pharmaceuticals’ Vyxeos (cytarabine and daunorubicin); and Isoray Medical/GammaTile, LLC’s GammaTile.

In order for Medicare to approve add-on payments, a drug, medical service, or technology must meet three criteria. It must: 1) be new; 2) be costly such that the DRG rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate; and 3) demonstrate a substantial clinical improvement over existing services or technologies.

The CMS does not consider a technology to be “new” if it is “substantially similar” to one or more existing technologies. The agency considers a technology substantially similar to an existing technology if it: 1) uses the “same or similar” mechanism of action; 2) is assigned to the same Medicare Severity DRG; and 3) treats the “same or similar” type of disease and the “same or similar” patient population.

Comments submitted by PhRMA contesting the application of these three criteria in the CMS’s proposed calendar year 2018 determinations argued the use of the “substantially similar” test is overly restrictive and could prevent beneficiaries from accessing novel treatments. Its comments stated: “PhRMA is concerned that, in establishing this standard, CMS may be inappropriately restricting consideration of new products—especially as this ‘substantial similarity’ analysis now dominates CMS’ discussion of virtually all the candidates for new technology payments.”

The complaints of PhRMA and additional evidence submitted by Janssen Scientific Affairs resulted in the CMS backing away from its initial decision that ustekinumab, a biologic prescribed for the treatment of Crohn’s disease, failed the “substantially similar” test. The CMS argued ustekinumab has the same mechanism of action as other cytokine-selective monoclonal antibodies used to treat Crohn’s disease. Janssen replied that a critical differentiator is that ustekinumab has a mechanism of action that sets it apart from other available biologic products. There are no other products on the market that specifically target the cytokines interleukin (IL)-12 and IL-23. It has become clear that while many patients respond to tumor necrosis factor (TNF) inhibition, 20% to 25% will not respond, regardless of the TNF inhibitor employed or the dose provided.

PhRMA also requested that the CMS expand its examples of “substantial clinical improvements.” That criterion came into play with Merck’s application for bezlotoxumab, which is indicated to reduce recurrence of Clostridium difficile infection (CDI) in adult patients who are receiving antibacterial drug treatment for a diagnosis of CDI and who are at high risk for CDI recurrence. The big question here was whether the reported adverse event of cardiac failure with bezlotoxumab disqualified it as an “improvement.” In the end, the CMS sided with Merck and agreed that because the drug represents a substantial clinical improvement over existing therapies, it would approve the extra payment given that the drug’s label makes it clear that bezlotoxumab should be reserved for use when the benefit outweighs the risk for patients with a history of congestive heart failure.

The Medicare program’s willingness to take a second look at initial decisions to deny add-on payments for drugs within DRGs is just another illustration of how the clearly delineated benefits of expensive new drugs can outweigh their costs.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Land Mines Lurk as Senate Considers its Version of Self-Drive Act

Aftermarket Business - October 25, 2017 for the original article go HERE.

Though the House passed the Self-Drive Act by a voice vote, reflecting Democratic and Republican unanimity on the importance of autonomous vehicles (AVs), no one should think that autonomous vehicle legislation is a done deal. All sorts of groups indicated they want changes to the House bill, and are hoping for the Senate to do just that. The Senate held a hearing on truck AVs a week after the House passed its bill on September 6.

The statement issued by the Alliance of Automobile Manufacturers (AAM) on Sept. 6 illustrates the mixed feelings the nation's auto lobby has about the bill."We are continuing to work to improve this legislative package and are eager to review what the Senate is expected to introduce next week on the heels of tomorrow's updated federal AV guidance," says Daniel Gage, spokesman for the AAM. "Clarity, consistency, and the removal of unnecessary barriers to expanded testing and deployment of these technologies are key."

Any legislation passed by Congress would trump the revised non-binding AV policy guidance Transportation Secretary Elaine Chao announced on September 12. The new National Highway Traffic Safety Administration (NHTSA) guidance doesn't require manufacturers to submit any safety information to the agency, nor did its first iteration published in the fall of 2016.

The Self-Drive Act does require submission of safety assessment letters, and further requires the agency to submit a rulemaking plan to Congress within one year and to issue the first rule, presumably with new, enforceable AV-related standards, within 18 months, with other rules to follow, though the bill conditions all of that on an "as necessary" clause. The first step, however, as soon as the bill passes, would be a requirement to submit safety assessment letters to the NHTSA on level 4 and 5 AVs that a manufacturer or parts supplier wants to test and deploy. Within two years after the bill's passage, the NHTSA would have to publish a rule laying out a "a clear description of the relevant test results, data, and other contents required to be submitted by such entity, in order to demonstrate that such entity’s vehicles are likely to maintain safety, and function as intended and contain fail safe features, to be included in such certifications." NHTSA cannot condition approval of deployment on those submissions, however.

Part of what appears to be the cautionary stance of manufacturers about the House version of the Self-Drive Act has to do with the safety assessment letters, which in the first year would be based on the 12 safety principles in the NHTSA voluntary guidance revised by Chao in September. In May of 2016, in response to a draft of the first iteration of the NHTSA AV guidance, Wayne Bahr, Global Director, Automotive Safety Office, Sustainability, Environment & Safety Engineering, Ford Motor Co., sent a letter to the NHTSA opposing NHTSA review of Ford's self validation of functional safety processes because Ford didn't think that review "would provide the intended confirmation, and is likely to create feasibility concerns." Bahr did not respond to an e-mail asking whether Ford's position has changed.

Consumer groups have been skeptical of some portions of the Self-Drive Act. For example, on the day the House voted, the Consumers Union released a letter which started out by saying: "While several portions of the Self-Drive Act would benefit consumer safety, we are very concerned about other provisions in the bill that would change federal law in ways that would open regulatory gaps and fail to adequately protect consumers from vehicle safety hazards." The CU went on to argue that exemptions from Federal Motor Vehicle Safety Standards should only be granted "if backed by evidence that a new feature maintains and enhances safety."

There is one overlooked provision in the bill that has nothing to do with AVs and could have a big impact on aftermarket shelves. NHTSA would have to research the need for a revised standard "that would improve the performance of headlamps and improve overall safety" and propose a new standard if necessary. This mysterious provision never came up in House hearings, or on the House floor. One wonders on whose behalf it was inserted. The Insurance Institute for Highway Safety has issued reports in the past year faulting the performance of passenger and SUV headlights.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

More Clouds Form Over 340B Program

P&T - October 15, 2017 the original can be found HERE.

Potential Medicare Cut Underlines Need to Rein In Program

Drug manufacturers, and to a lesser extent hospitals, have complained for years about the shortcomings of the 340B Drug Pricing Program, which allows nearly 3,000 hospitals and approximately 10,000 health clinics around the country to buy pharmaceuticals at a deep discount as a means of generating revenue, ostensibly to help lower-income patients and their communities. Complaints from both parties have been validated by the Government Accountability Office (GAO)1 and the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS)2,3 and discussed at congressional hearings, where the program’s opaque guidelines and barely visible program integrity efforts have been thoroughly aired.

Yet since Congress established the 340B program in 1992, very little has changed, except for the program opening to many more hospitals and clinics thanks to the 2010 Patient Protection and Affordable Care Act (PPACA). At the latest hearings on the program’s weaknesses, held in July by the U.S. House of Representatives Committee on Energy and Commerce (E&C) Subcommittee on Oversight and Investigations, U.S. Representative Fred Barton (R-Michigan), who has a number of 340B hospitals in his district, said, “I am just trying to educate the subcommittee how screwed up this program is.”4

Of course, Congress, having ignored the program’s multiple deficiencies for years, has had a major role in the program’s dysfunction. Congress’ record on legislating improvements for the 340B program is somewhere between negligible and non existent. At the E&C hearings, U.S. Representative Frank Pallone (D-New Jersey), the top Democrat on the committee, said, “Last Congress, this committee worked on a bipartisan basis to try to address the concerns from stakeholders on all sides of this issue in a balanced and measured fashion.”4 Nothing came of that effort. Pallone’s spokesman did not respond to an email asking what the barriers were in the last Congress, and whether they are surmountable in this Congress.

But it looks like Democrats and Republicans on the Hill are waking up, and that has a lot to do with the Trump administration. The Centers for Medicare and Medicaid Services (CMS) wants to exact a severe reduction in Medicare reimbursement to hospitals for 340B drugs. That will probably force the House and Senate to confront the program’s problems and make some changes as the price for forcing the CMS to back off either somewhat or fully from its plans to hit some hospitals with revenue losses, a prospect that has hospital lobbyists crawling over Capitol Hill arguing the sky is falling.

How 340B Works

The 340B program allows participating hospitals and clinics to buy drugs at a discount, give them to eligible patients, and then bill the insurers (private companies, Medicare, or Medicaid) for the full price of the drug. That difference between the lower price hospitals pay for a drug and the higher price at which they are reimbursed constitutes an important revenue stream, especially for safety-net hospitals serving large uninsured populations. Medicare currently pays all hospitals, 340B or not, average sales price (ASP) plus 6% for drugs hospitals supply to eligible outpatients, such as oncology drugs provided in outpatient clinics and reimbursed under Medicare’s Part B program. The CMS wants to reduce its reimbursement to 340B hospitals to ASP minus 22.5%.5

That proposal has outraged the hospital industry, although only 45% of acute-care hospitals participate in 340B. “The CMS proposal to reduce reimbursement of 340B-purchased drugs has the potential to be very harmful to the sickest and most vulnerable patients by endangering their access to essential health care services,” said Kasey K. Thompson, PharmD, MS, MBA, Chief Operating Officer and Senior Vice President of the American Society of Health–System Pharmacists, in a July press release. “These changes run counter to the statutory intent of the federal 340B program and will incur a steep cost to the people and the organizations that can least afford it.”6

The reduction in Part B reimbursement to 340B hospitals would amount to an increase in the funds the CMS would be able to spend on other hospital outpatient services. How that extra money would be distributed has not been decided, and the CMS has asked for suggestions.5 But in an attempt to assuage concerns about the impact on the most vulnerable hospitals with the highest percentage of vulnerable patients, the agency is considering targeting recouped funds “to hospitals that treat a large share of indigent patients, especially those patients who are uninsured.” Many 340B hospitals already have large populations of uninsured patients; but some academic centers have smaller percentages as measured by their disproportionate share (DSH) percentage, which is an approximate measure of Medicaid patients.

Despite opposition to the reductions, it appears that key House members believe the price of averting some or all of that reduction will be Congress finally addressing some of the many underlying weaknesses of the 340B program. U.S. Representative Diana DeGette (D-Colorado) said at the hearings, “We probably do need to get more controls and that is why I said in my opening statement that we may need to have more—we need to have more legislative reporting and more transparency because you can’t have a program where nobody knows what’s going on.”4

The lack of transparency probably leads to understatement of some of the program’s substantive failings. The CMS argues that the program encourages hospitals to supply more expensive drugs than are necessary to too many patients. Some of the hospitals in the program that are profitable and serve mostly well-off clienteles, such as academic hospitals, earn substantial revenue from the program while providing limited charity care, raising questions about whether they deserve the discounts. Moreover, reports from the GAO establish that, on average, beneficiaries at 340B DSH hospitals were either prescribed more drugs or more expensive drugs than beneficiaries at the other non-340B DSH hospitals. In fact, it is possible for 340B hospitals to supply any billionaire with discount drugs. At the same time, it is perfectly legal for a 340B hospital to charge an uninsured patient full price for a 340B drug. The program is run by the Office of Pharmacy Affairs (OPA) within HHS’s Health Resources and Services Administration (HRSA). The OPA, one of Washington’s backwater agencies, has struggled to administer and enforce jumbled rules with just 16 staffers and a severely anemic $10 million budget.

How a Medicare Reimbursement Reduction Would Affect Hospitals and Patients

Part of the rationale for the proposed Medicare reimbursement reduction, according to Thomas E. Price, MD, Secretary of the HHS, is to reduce the price of pharmaceuticals. Democrats have lampooned that stance, and even some Republicans are skeptical of it. Theoretically, Medicare beneficiaries could see lower prices since they are required to pay a 20% copay for outpatient drugs they receive under Part B. That copayment is based on the Medicare reimbursement rate, which is ASP plus 6%. If that dropped precipitously to ASP minus 22.5%, the “Medicare price” would fall, reducing copayments for Medicare recipients, who are currently paying whopping copayments in some instances.

In the Federal Register notice announcing the prospective change in Medicare outpatient reimbursement in calendar year 2018, the CMS explained, citing an OIG report from November 2015: “Based on an analysis of almost 500 drugs billed in the hospital outpatient setting in 2013, the OIG found that, for 35 drugs, the ‘difference between the Part B amount and the 340B ceiling price was so large that, in a least one quarter of 2013, the beneficiary’s coinsurance alone … was greater than the amount a covered entity spent to acquire the drug.’ ” 5

Of course, to the extent a 340B hospital provides discounted drugs to Medicaid patients and then bills Medicaid, that will not affect the consumer prices those patients pay because the reduction to ASP minus 22.5% will not apply to Medicaid reimbursement. Medicaid patients do not pay much, if at all, for their prescription drugs. In an email response, Margaret Kemeny, MD, Director of NYC Health & Hospitals/Queens Cancer Center, a 340B participant, says the majority of her patients do not have insurance. “If they have cancer, we can put them on emergency Medicaid. Very few patients have Medicare,” she writes. “The hospital gets their drugs through 340B. All patients are not charged for the drugs.”

The fact that a high percentage of 340B patients are either uninsured or on Medicaid raises the question of how badly a reduction in Medicare payment would hurt hospitals generally, and 340B hospitals specifically. According to 340B Health, which lobbies for 340B “covered entities,” total sales to 340B covered entities in 2015 were $4.2 billion, or 0.9% of total U.S. drug spending. So the program itself has a minimal impact on drug pricing nationally. Tom Mirga, Editorial Director for 340B Health, says there are no statistics that shed light on the percentage of that $4.2 billion that went to Medicare patients, so it is hard to estimate the impact a reduction of ASP minus 22.5% would have on 340B providers.

One pharmacy manager for a chain of hospitals, who did not want to be identified, said the cut would affect the local 340B hospitals and nationally within his system in a big way, depending upon each site and their percentage of Part B Medicare patients. That varies from hospital to hospital. He guesses it averages perhaps 30%. Another worry is whether commercial insurances will try to negotiate these types of payment rates in the future.

Drug manufacturers have been the loudest complainants about the program. Discounts to 340B hospitals and clinics are mandatory if manufacturers want to sell drugs to state Medicaid programs. They are required to set discounts at whatever level they chose as long as it is below the ceiling price established by HRSA. Would the 600 or so drug manufacturers who participate in the program lower their prices to 340B hospitals if the CMS reduces reimbursement? Nicole Longo, Senior Manager of Public Affairs for the Pharmaceutical Research and Manufacturers of America (PhRMA), declines to answer the question about how reform of the program would affect the prices drug manufacturers charge 340B hospitals. “PhRMA cannot speak to how individual companies might react and whether any companies would adjust drug prices,” she says. For companies to increase their prices to 340B participants, Congress would either have to change the calculation HRSA is required to make to establish ceiling prices for each drug or drug companies now selling below the ceiling price could theoretically raise their price.

“The 340B program is in need of fundamental change that is beyond the scope of the Medicare proposed payment reduction,” Longo says, “and the congressional hearing held in July was an important first step toward modifying the 340B program to ensure it returns to serving the vulnerable or uninsured patients it was intended to help.”

If Congress finally makes an effort to reform the program, it will find a willing partner in the Trump administration beyond Medicare officials determined to slash reimbursement. Krista Pedley, PharmD, MS, CDR, USPHS, Director of the OPA, says, “In the fiscal year [FY] 2018 president’s budget, we did propose to intend to work with Congress on a legislative proposal to ensure the benefit of the program does benefit the low-income uninsured populations.”

340B Expansion Since PPACA

Reducing Medicare reimbursement would save the agency about $900 million a year based on the agency’s preliminary estimates, which could change going forward. Medicare’s proposal in July to severely reduce what it reimburses hospitals is the result of its soaring 340B costs, which are in part the result of Congress’s decision in the PPACA to greatly increase the number of health facilities, including types of hospitals, eligible to participate in the 340B program.

To be eligible for the 340B program, a hospital must be: 1) owned by a state or local government, 2) a public or nonprofit hospital that is formally delegated governmental powers by a state or local government, or 3) a nonprofit hospital under contract with a state or local government to provide services to low-income patients who are not eligible for Medicare or Medicaid. A 2015 report from the Medicare Payment Advisory Commission (MedPac) said regarding the third option for eligibility, for example, that HRSA has not specified criteria for contracts between nonprofit hospitals and state or local governments, such as the amount of care that a hospital must provide to low-income patients under such a contract.7 Thus, hospitals with contracts to provide a relatively small amount of care to low-income individuals could be eligible for 340B discounts, which may not have been what HRSA intended.

Several types of hospitals as well as clinics that receive certain federal grants from HHS (e.g., federally qualified health centers and Ryan White grantees) may enroll in the program as covered entities. In addition to DSH hospitals, which were always the key participant in the program since its creation, the PPACA greatly expanded the covered entities eligible to purchase 340B drugs to critical-access hospitals, rural referral centers, sole community hospitals, children’s hospitals, and freestanding cancer hospitals. The number of unique participating covered entities has grown from 3,200 in 2011 to 11,180 in February 2015 to 12,148 in October 2016. The number of hospitals in particular has grown significantly from 591 in 2005 to 1,673 in 2011 to 2,871 as of July 2017.
In addition, the number of contract pharmacies has grown greatly since HRSA issued its 2010 guidance on contract pharmacies.

Contract pharmacies are retail pharmacies in the community that allow a 340B hospital to expand the number of its patients, if properly qualified, who have access to discount drugs. The more patients getting 340B drugs, the more revenue the hospital gets. Prior to 2010, hospitals could only supply 340B drugs from one outpatient pharmacy, typically located in the hospital. In 2011, the GAO reported that while HRSA did not track individual contract pharmacies in use, there were more than 7,000 contract pharmacy arrangements through the program. In its 2018 Budget Justification, HRSA reported that 27% of covered-entity sites have contract pharmacy arrangements, resulting in approximately 18,078 unique pharmacy locations. The OIG found that contract pharmacy arrangements created difficulties for covered entities in preventing the diversion of drugs and duplicate discounts.

Once a hospital has determined it is eligible and has been accepted by HRSA for participation, it supplies discounted drugs to “eligible patients,” a term that has been murky from the start. The definition of “patient” was established in 1996 and includes three criteria:
  • The covered entity must have a relationship with the individual, which HRSA defines as maintaining the individual’s health care records;
  • The individual receives health care services from a health care professional who is employed by the entity or who provides care under contractual or other arrangements (e.g., referral for consultation), such that responsibility for the individual’s care remains with the entity; and
  • The individual receives a service or range of services from the covered entity that is consistent with the service or services for which grant funding or federally qualified health center look–alike status has been provided (this criterion does not apply to hospitals).
HRSA audits from FY 2012 to FY 2016 demonstrate that noncomplying entities violate program requirements in at least one of three ways: duplicate discounts, diversion to ineligible patients and facilities, and incorrect database reporting. In FYs 2012, 2015, and 2016, close to half of HRSA’s audited entities diverted benefits to ineligible patients: 31% of covered entities in FY 2012, 47% of covered entities in FY 2015, and 44% of covered entities in FY 2016 were found to have diverted drugs. Diversion violations reached a 54% high in FY 2014 and FY 2015, when more than 50 audited entities offered drug-pricing benefits to ineligible patients.8

HRSA has issued guidance on the definition of “patient.” According to part of the guidance, the individual must receive health care services from a health care professional who is employed by the entity or who provides care under contractual or other arrangements, such that responsibility for the individual’s care remains with the entity.9 But the MedPac report of 2015 stated HRSA has not clarified the meaning of “other arrangements” or “responsibility for the individual’s care.”7 The lack of specificity in the guidelines for who is an eligible patient makes it possible for covered entities to interpret this term either too broadly or too narrowly, according to the GAO. For example, HRSA has expressed concern that some covered entities may consider individuals to be eligible patients even when the entity does not have actual responsibility for their care.

Drug Pricing

Drug manufacturers have been vocal critics of the elasticity of the 340B program definitions, such as who are eligible patients and whether hospitals are providing adequate charity care. The hospitals, in turn, have criticized drug pricing within the program. HRSA establishes the ceiling price as the difference between the drug’s average manufacturer price and its unit rebate amount (URA). HRSA calculates URAs using a statutory formula that is based on the formula used to calculate Medicaid drug rebates. The statutory formula for the URA varies based on whether the drug is a single-source or innovator drug, a multiple-source drug (e.g., a brand-name drug), a noninnovator multiple-source drug (e.g., a generic drug), or a clotting factor or exclusively pediatric drug. According to statute, HRSA is allowed to disclose ceiling prices to covered entities but not to the general public.

Hospitals buy their drugs either directly from the manufacturer or from a company called Apexus, which manages the 340B Prime Vendor Program (PVP). By pooling the purchasing power of covered entities, Apexus negotiates subceiling prices on many 340B drugs with manufacturers, which allows covered entities to pay less than the ceiling price. By the end of FY 2013, Apexus had more than 7,000 drugs under contract, with an estimated average savings of 10% below the ceiling price. Apexus also negotiates discounts on other pharmacy products and services not eligible for 340B pricing, such as vaccines, billing software, and contract pharmacy vendors. As of April 2014, about 82% of covered entities participated in the PVP and accounted for $5 billion in 340B drug purchases, according to Apexus.7 DSH hospitals, children’s hospitals, and freestanding cancer hospitals that participate in 340B are prohibited from purchasing covered outpatient drugs through a group purchasing organization.

What the Hospitals Do With 340B Revenue

The premise of the 340B program is that the covered entities will use the revenue they earn to improve health care for low-income individuals and families in their communities. Mirga of 340B Health says nearly three-quarters (71%) of 340B Health members report that savings from participation in 340B increase their ability to provide free or discounted drugs to low-income patients. But it is not clear what levels of discounts are passed on to whom. No statistics on that exist. There is no denying that poor cancer patients at venues such as Dr. Kemeny’s Queens Cancer Center are able to obtain treatment at rock-bottom prices or for free. But the serious shortcomings of the program are starting to overshadow the “good” the program does.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Appeals Court Decision May Trump House Pipeline Bill

Pipeline & Gas Journal - September 2017 for the original article go HERE.

The House passed two pipeline bills – which could run into trouble in the Senate for lack of Democratic support – amid continuing industry unhappiness with federal and state regulatory agency foot-dragging on permit approvals.

The U.S. Court of Appeals for the District of Columbia Circuit, which has authority to clarify federal regulations, made decisions on two separate pipeline cases in June. In one of them, the court clarified that the Federal Energy Regulatory Commission (FERC) has the right to grant a pipeline an exemption from state law in the event a state drags its feet on permitting new construction.

The court’s actions – and one of the House bills – are particularly germane with regard to Transco’s 200-mile Atlantic Sunrise pipeline, meant to deliver Pennsylvania shale gas south. FERC approved the project in February. However, the state of Pennsylvania has yet to grant the three permits necessary for the $3 billion project to break ground.

However, the D.C. court, while clarifying FERC’s exemption authority, a victory for the pipeline industry, also made it clear that deadlines for issuance of  permits under the Clean Water Act (12 months) and Clean Air Acts (18 months) take precedence over timeframes FERC typically establishes under its Natural Gas Act authority. FERC normally gives state and federal agencies 90 days to issue permits after it approves an environmental impact statement.

“We are still working with the Pennsylvania Department of Environmental Protection and are awaiting clearances from the state before we can begin pipeline construction in Pennsylvania,” said Transco spokesman Chris Stockton. The project includes 183 miles of greenfield pipeline to gas from Pennsylvania and move it south to Maryland, Virginia, North Caroline and South Carolina.

“After nearly three years of intense regulatory scrutiny, it is time for our own state government to complete its review of this important infrastructure project so that Pennsylvanians can immediately benefit from the economic growth and jobs it promises to deliver,” said Rep. Mike Turzai, speaker of the Pennsylvania House of Representatives, in a June statement.

The failure of states to participate in a timely manner in the FERC completion of an environmental impact statement and their ability to withhold permits after FERC project approval were the rationales for the Promoting Interagency Coordination for Review of Natural Gas Pipelines Act (H.R. 2910) passed by the House on July 19 on a mostly party-line vote. The legislation requires that federal and state agencies conduct their respective permit reviews concurrently with FERC as it develops its environmental impact statement.

The second bill that passed the House was the Promoting Cross-Border Energy Infrastructure Act (H.R. 2883). It replaces the presidential permitting approval needed before constructing an oil and gas pipeline or electric transmission line that crosses a border with Canada or Mexico with a more transparent, efficient and effective review process.

Because H.R. 2910, strongly supported by the Interstate Natural Gas Association of America (INGAA), may get hung up in the Senate, the bigger impact on pipeline construction approvals may come from the two cases decided by the D.C. appeals court. One case involved Millennium Pipeline Company, LLC which asked the court to force New York state to certify Millennium’s request for a water quality certification, required under Section 401 of the Clean Water Act, that would allow Millennium to construct its Valley Lateral Project. Millennium submitted its application with the state agency in November 2015, but almost 19 months later, the agency has still failed to act on Millennium’s application.

In the other case, Tennessee Gas Pipeline Co., LLC, a subsidiary of Kinder Morgan, argued that a local government was refusing to issue a permit under the Clean Air Act for additional compressor capacity.

FERC approved Millennium’s 7.8-mile Valley Lateral in November 2016 after completing an environmental impact statement earlier that year. Millennium applied for a water quality certificate from the New York Department of Environmental Conservation in November 2015. The NYDEC did not participate in that FERC EIC because it argued Millennium had not submitted a completed permit application until August 2016.

Under the Clean Water Act, New York had 12 months to complete its review of the Millennium application. The state argued the clock began in August 2016 when it judged Millennium to have submitted a complete application. The D.C. Court essentially disagreed and said Millennium could file a request for an exemption from the CWA with FERC, and FERC could grant it. FERC has never granted an exemption like that for a pipeline, though it has done so for hydro projects.

The Pennsylvania Department of  Environmental Protection has held up a permit to Transco for Atlantic Sunrise because of nitrogen oxide emissions generated by construction equipment involved in building the pipeline. Those emissions would violate the Clean Air Act. However, Transco has asked the agency to allow it to claim emission-reduction credits earned when improving air pollution from one of its compression stations on the existing Transco pipeline in Ellicott City, MD. That “offset” would presumably allow Pennsylvania to approval the permit.

But clean air issues aren’t the only state regulatory barriers in Pennsylvania. The state has sent Transco technical deficiency letters having to do with applications for two other permits, one dealing with water obstruction and encroachment, the other with erosion and sediment control.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Early Biosimilars Face Hurdles to Acceptance

P&T Journal - June 2016 for the original article go HERE.

The FDA Has Approved Few, So Lack of Competition Is Keeping Prices High

The Food and Drug Administration (FDA) approval of Inflectra (infliximab-dyyb) in March as the second bio-similar cleared for sale in the U.S. gave the agency a small victory in a war of sorts that it has been losing badly. But the agency’s green-lighting of a biosimilar is no guarantee that the market will receive the product with open arms, as the experience of Zarxio (filgrastim-sndz) proves.

Five years after Congress gave the agency the authority to approve supposedly cheaper alternatives to budget-busting biologics, the FDA has cleared only two. “I know people are anxious to see more progress and certainty,” admits Janet Woodcock, MD, head of the FDA’s Center for Drug Evaluation and Research. “Most of the progress so far has been under the hood.”

Pfizer’s Inflectra will compete with Janssen’s Remicade, the reference drug. Zarxio (marketed by Novartis subsidiary Sandoz) competes against both Amgen’s Neupogen (filgrastim) and Teva’s Granix (tbo-filgrastim); the latter was approved as a biosimilar in Europe but as a biologic in the U.S. Pfizer says it will be selling Inflectra by the end of 2016, once all legal barriers fall. Hospital pharmacists are eagerly awaiting its arrival. In usage, infliximab is typically at or near the top among the drugs in a hospital pharmacy. Hospitals use it for rheumatoid arthritis, Crohn’s disease, colitis, and a host of secondary and tertiary off-label purposes. Moreover, doses typically escalate. Remicade’s cost was $3,159 per administration and $18,129 per beneficiary in 2013, according to a June 2015 report from the Medicare Payment Advisory Commission.1

But Zarxio’s early experience shows that biosimilars, when first introduced, face hurdles. “Our P&T committee has not reviewed Zarxio yet and we have not used it in patient care,” says John Fanikos, Executive Director of Pharmacy at Brigham and Women’s Hospital in Boston, Massachusetts. “Granix was not approved as a biosimilar but through the biologics license application pathway. Since its list of indications is comparable to Neupogen but not all-inclusive, we added it to the formulary as our preferred growth factor.”

When Zarxio first came to market, it was more expensive than Granix but less expensive than Neupogen. “We could not see a reason to use Zarxio on the inpatient or outpatient sides of care,” Fanikos explains. “Sandoz has recently come forward with a contract favorable in terms of pricing, but the other companies have made adjustments in their pricing, too.”

Moreover, physicians haven’t been clamoring for Zarxio. “I was somewhat shocked; many of physicians had no idea what the biosimilar process even is,” states one hospital pharmacist who did not want to be named. “Even those that do would have to be aware of the differences between Neupogen, Granix, and Zarxio. Physicians who have prescribed filgrastim for years are likely to keep prescribing Neupogen rather than going down the list to filgrastim alternatives with suffixes,” he adds.

Even if physicians were totally up to speed on biosimilars, neither Granix nor Zarxio is available in a vial. Because children use filgrastim in lower doses, children’s hospitals need it in a vial. Their only alternative is Neupogen. Pediatric hospitals such as St. Jude’s Children’s Hospital and Children’s Healthcare of Atlanta make up about 5% to 10% of the client base for Vizient, Inc. “That is very influential when organizations like those cannot use a product in question,” says Steven Lucio, Senior Director of Clinical Solutions and Pharmacy Program Development for Vizient, a large group purchasing organization that represents academic medical centers, pediatric facilities, community hospitals, integrated health delivery networks, and nonacute health care providers. Vizient represents almost $100 billion in annual purchasing volume.

Biosimilars in different therapeutic categories face different challenges. For example, Pfizer won’t have to deal with a Granix-like competitor once Inflectra comes to market. The biosimilar will go head-to-head with Remicade. However, infliximab is a mono clonal antibody and therefore a more complicated biologic than filgrastim. Infliximab patients are not immune-compromised, which means the prescribing physician has to be much more concerned about potential side effects. Filgrastim patients are already immune-compromised. “Rheumatologists, dermatologists, and other physicians using infliximab will have to have more of a clinical conversation with patients before using Inflectra since it is not an exact copy of Remicade,” Lucio says. “And that will pose a higher hurdle for its use.”

The FDA Is Part of the Problem

The FDA’s assignment of suffixes is one of a number of controversial regulatory issues that stymie acceptance of biosimilars. The agency published a proposed rule on suffixes2 in the summer of 2015 and has still not produced a final rule. The agency received different opinions from different parties as to whether a suffix ought to mimic a biosimilar marketer’s name, as is the case with filgrastimsdnz, or whether the suffix should not conjure up the marketer’s name, or whether the reference drug ought to have a suffix, which is not now the case. Neupogen is simply filgrastim.

Numerous, important guidance documents are also stuck in the FDA’s maw. The FDA’s slow pace is not fully its own fault. Congress has never appropriated segregated funds for the biosimilars program. As part of the Patient Protection and Affordable Care Act (PPACA), the agency was allowed to charge companies user fees for submitting applications. But given the regulatory uncertainty, few applications have been submitted. Instead, the agency has charged companies for meetings during which the FDA advises them on what they need to do prior to submitting an application. Those fees totaled $6 million, $13 million, and $23.8 million in fiscal years (FY) 2013, 2014, and 2015, respectively. Meanwhile, a study by the consulting firm Eastern Research Group (ERG)3 commissioned by the FDA had the agency spending $23.6 million in FY 2013, $21.4 million in FY 2014, and $28.7 million in FY 2015. That $74 million total compares to the $42 million the agency raised in user fees. Still, the mismatch in funding only partly explains why the agency has missed quite a few deadlines it set for itself in terms of answering sponsors’ questions posed during user-fee meetings.

“The FDA infrastructure put into place for BsUFA I is insufficient to meet the objectives and manage the workload it currently faces,” says Hubert C. Chen, MD, Chief Medical Officer of Pfenex. “This is consistent with the experience of Pfenex, as we have worked with the agency across multiple programs in diverse therapeutic areas.” BsUFA is the Biosimilar User Fee Act included in the PPACA.

Dr. Woodcock paints the early troubles of biosimilars with the brush of perspective. She argues the small-molecule generic-drug approval program launched by the Hatch-Waxman law in 1984 took a while to gain momentum. “We didn’t have success overnight with that program,” she says. “But today, over 88% of prescriptions are filled by generics.”

Of course, three decades ago the eight leading drugs in U.S. sales were not expensive biologics, all costing Medicare, for example, more than $1 billion a year and sapping the savings of Americans in all walks of life. So the exigencies surrounding the need for faster biosimilar introductions are magnitudes greater than they were for chemical generics in the 1980s. Express Scripts, one of the largest U.S. pharmacy benefit management organizations, estimates potential savings of $250 billion in the next decade with the approval of just 11 biosimilar products.4 A 2014 RAND Corporation study estimates that biosimilars will lead to a $44.2 billion reduction in direct spending on biologic drugs from 2014 to 2024, with anti–tumor necrosis factor agents such as infliximab accounting for the largest chunk of savings (Figure 1).5

However, because of the shortage in funding, the FDA’s progress on biosimilars may well get worse before it gets better. As of January 21, 2016, 59 proposed biosimilar products to 18 different reference products were enrolled in the Biosimilar Product Development (BPD) Program. “What I am concerned about is that the program is going to explode and we will not have the staff to handle it,” Dr. Woodcock says.

At hearings of the House health subcommittee on February 4, 2016, Mary Jo Carden, RPh, JD, Vice President of Government and Pharmacy Affairs for the Academy of Managed Care Pharmacy expressed concern about the ability of biosimilars to reach their full potential in the United States because of incomplete guidance from the FDA, confusing federal and state regulatory guidance, and lack of clarity related to payment, coding, and reimbursement.

FDA Guidance Documents Are Coming Slowly

The FDA cleared Inflectra two months after the House subcommittee hearings. Manufactured by Celltrion, it is being marketed in the U.S. by Pfizer’s Hospira subsidiary. Inflectra is approved for a half-dozen uses, including psoriasis and five other conditions in which the immune system attacks the body’s tissues. The drug helps reduce inflammation and control the immune system, which slows those diseases. Remicade, first approved in 1998, is the top-selling medicine of Johnson & Johnson (Janssen’s parent company), with sales of $6.56 billion in 2015.

Inflectra and Zarxio were approved while many critical FDA guidance documents were incomplete. Although the Biologics Price Competition and Innovation (BPCI) Act does not require the FDA to issue guidances before approving a biosimilar application, the FDA understands the importance of guidances in helping to ensure successful implementation of this new pathway.

Perhaps the most important upcoming guidance concerns interchangeability. The FDA did not deem Inflectra interchangeable with Remicade; the same was true for Zarxio, which is not interchangeable with Neupogen. If they were interchangeable, a pharmacist could substitute the biosimilar for the reference product without checking with the physician first. The FDA has not yet established the standard it will use when judging whether a biosimilar is interchangeable.

The FDA expects to publish the eagerly awaited draft interchangeability guidance by the end of 2016. To meet the standard for interchangeability, an applicant must provide sufficient information to demonstrate biosimilarity and also to demonstrate that the biological product can be expected to produce the same clinical result as the reference product in any given patient. The applicant must also demonstrate that if the biological product is administered more than once to an individual, the risk in terms of safety or diminished efficacy of alternating or switching between the use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switching.

“Interchangeability is the thing about biosimilars that makes a lot of physicians nervous,” explains Donald Miller, PharmD, a Professor of Pharmacy Practice at North Dakota State University. “Interchangeability means a pharmacist could switch products without physician authorization, and thus potentially expose a patient to a product with slightly different immunogenicity without the physician being aware of it.” Dr. Miller is a member of the FDA advisory committee that recommended approval of Inflectra in February.

While the FDA will determine interchangeability, the states will control automatic substitution—and states are already approving a variety of limits on that still-to-come process.

Even if pharmacists don’t have to notify physicians when a biosimilar is rated interchangeable, pharmacists could still be in an uncomfortable position. Pharmacists may feel that they are “under the microscope” when switching to a biosimilar based on their own judgment, and they may hope that any unilateral substitution doesn’t come back and cause trouble for them, for whatever reason.
However, the publication of draft guidance does not suddenly quiet controversy. That wasn’t the case after the FDA published its draft labeling guidance in March.6 The guidance says biosimilars can use the clinical data gathered by reference product sponsors. That is a point of controversy, with some companies and patient groups saying the company producing the biosimilar ought to include its own clinical trial data on the label. Regulators would also allow biosimilar labels to include the statement that the product is biosimilar to the reference product.

That doesn’t mean the biosimilar’s label has to be identical to the reference product label. It does not. It needs to reflect currently available information necessary for the safe and effective use of the product. Certain differences between the biosimilar and reference product labeling may be appropriate. For example, biosimilar product labeling conforming to the physician labeling rule and/or pregnancy and lactation labeling rule may differ from reference product labeling because the reference product labeling may not be required to conform to those requirements at the time of licensure of the biosimilar product. In addition, biosimilar product labeling might have to reflect differences such as administration, preparation, storage, or safety information that do not otherwise preclude a demonstration of biosimilarity.

The Generic Pharmaceutical Association (GPhA) and its Biosimilars Council praised the draft guidance. Chip Davis, Jr., GPhA President and Chief Executive Officer, says the guidance takes steps to avoid confusion and in many aspects mirrors the protocol for the labeling of generic drugs. For example, a statement defining biosimilarity would be included rather than lengthy and already established scientific data proving biosimilarity. And immunogenicity details would mirror the label content of the reference product. “GPhA and the council are especially pleased that the proposed label contents avoid causing confusion or raising unnecessary questions about the safety and efficacy of biosimilar products,” he adds. “We also commend the agency for postponing guidance on interchangeable biologic labeling at this time.”

Andrew Powaleny, Senior Manager of Communications for Pharmaceutical Research and Manufacturers of America, declined to provide his group’s views on the draft guidance in advance of the deadline for written comments.

The Undermanned FDA

The FDA’s tentative decision in the draft labeling guidance not to require biosimilar companies to cite their own data from their own clinical trials may be a practical necessity given that the FDA clearly does not have the staff to review all that data. Budget begets staff, of course, and budgets have not been kind to the FDA’s biosimilars program. The ERG study proved that.3 User fees have simply not been sufficient for the FDA to provide necessary staff resources for prospective biosimilar marketers who pay for one of five types of meetings the FDA offers under its BsUFA program. The number of those meetings has far outpaced what the FDA projected when the user-fee program was put in place. There were 59 BPD program participants as of November 2015. When the BsUFA went into effect, the FDA had anticipated a total of 11 participants in the BPD program by FY 2015.

In December 2015, the FDA held a meeting to get input on the changes it needs to the biosimilar fee program. Any modifications would be made by Congress when it reauthorizes the BsUFA. David R. Gaugh, RPh, Senior Vice President for Sciences and Regulatory Affairs at the GPhA, says the meetings the FDA holds with potential biosimilar sponsors are extremely useful, but at times there are uncertainties about the outcomes. “With that said, the meetings should have well-defined objectives, clear outcomes, and meaningful decisions about future development options,” he explains. “Where the outcome or guidance is unclear to the sponsor, there should be an opportunity for a timely follow-up teleconference to promote better understanding, communication, and transparency.”

Critics Complain About Medicare Policy, Too

Criticism over biosimilar policy has also encompassed the Centers for Medicare and Medicaid Services (CMS). In October 2015, the CMS clarified its policy on reimbursement for biosimilars, which are paid for mostly under Medicare Part B, where physicians administer the drugs in their offices or outpatient infusion clinics provide the drugs. But reimbursement also goes through Part D when patients are able to self-administer. The new policy managed to offend nearly every pharmaceutical sector; both generic and brand-name industry associations decried a number of aspects of the new policy, in some instances the same aspect.

The final rule clarifies that the payment amount for a biosimilar is based on the average sales price (ASP) of all National Drug Codes assigned to the biosimilars included within the same billing and payment code.7 So all biosimilars citing Remicade as their reference drug would be paid the same. This is the way Medicare pays for chemical generics, which are considered multiple-source drugs. The CMS would assign the first biosimilar, such as Zarxio, a code under the Healthcare Common Procedure Coding System (HCPCS). All other Remicade biosimilars would have the same HCPCS code. Zarxio’s code is Q5101 Injection, Filgrastim (G-CSF), Biosimilar, 1 mcg. Zarxio would then pick up a modifier to help track its use and potential adverse effects. For Zarxio, that would be ZA-Novartis/Sandoz.

Sandie Preiss, Vice President of Advocacy and Access for the Arthritis Foundation, says, “We believe that treating biosimilars as multiple-source products stands counter to other biosimilar policies and the intent of Congress in passing the Biologic Price Competition and Innovation Act. Further, this proposal is not consistent with other CMS reimbursement policies, which treat biosimilars as single-source drugs within certain Part D programs and Medicaid.”

The Cost of Biosimilars Is at Issue

Based on the experience in Europe, where biosimilars have been available longer, it had been a given that a biosimilar coming onto the U.S. market would have a price somewhere in the neighborhood of 15% to 25% lower than the reference drug. But early anecdotal experience with Zarxio doesn’t bear that out.

Vizient’s Lucio says the prices of Neupogen, Granix, and Zarxio have all come down between 15% to 20% since Zarxio’s introduction in September 2015. Typically Neupogen is the most expensive of the three, with Granix and Zarxio trading second and third place depending on the market they are selling to. But the price difference between the three is normally not great. “Until you have two or three biosimilar providers for same-molecule competitors to branded [products], biologicals will not be priced definitively lower,” Lucio says.

Some of the other biosimilars now in the application phase at the FDA (there are seven or eight, but the FDA doesn’t confirm those numbers) will be much more likely to be self-administered than Zarxio or Inflectra. That means they will ostensibly be available for retail purchase, and therefore reimbursed under Medicare Part D and outpatient drug plans in the private sector or through the PPACA. A study from the consulting firm Avelere, published in April, found that Medicare patients in Part D plans are likely to pay more for biosimilars than for the reference drug.8 That is because the Part D plans, under federal law, get a discount from the brand-name manufacturer when a Medicare recipient hits the so-called “doughnut hole,” the gap in Part D coverage where a senior must pay more of the cost of a drug. The reference-drug manufacturer must provide rebates to Part D plan members who fall into that coverage gap. Biosimilar marketers cannot match those rebates. “Any voluntary point-of-sale discounts would be viewed by the OIG [Office of the Inspector General] as a kickback and would likely lead to punitive action,” says Caroline Pearson, Senior Vice President at Avalere.

“The unintended consequence of the ACA is that consumers have a financial disincentive to switch to a lower-cost biosimilar,” Pearson adds. “While the Medicare program will save money if beneficiaries take biosimilars, higher consumer out-of-pocket costs are a barrier to patient adoption.”
It may be that biosimilars will become a boon to patients, payers, and providers. But until the FDA moves more quickly to approve biosimilars and they start to populate therapeutic categories in numbers that lead to lower prices, their success won’t be a given.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

The White House Launches a Cancer Moonshot

P&T Journal - May 2016 for the original article go HERE.

Early in January 2016, the Obama administration, with great fanfare, announced a new initiative to find cancer cures. Vice President Joseph Biden was apparently the leading advocate for the effort. He wanted to honor his son Beau, who died from brain cancer in 2015. With an abundance of excitement and public relations strategy, Biden labeled the effort a “moonshot” and said he hoped to spur a decade’s worth of advances in cancer research in five years.

But when Biden visited the Abramson Cancer Center in Philadelphia later in January, he was already backing away from the atmospheric moniker. The center’s director, Chi Van Dang, PhD, MD, described a conversation in which the vice president said the choice of the term “moonshot” was unfortunate. Dr. Dang relayed the context of Biden’s comment: “It implies something too simple; that we can just assemble the engineers and the astronauts, make the rocket, and we’ll get to the moon and back.”

Maybe a better metaphor (drawn from the golf world) would have been “chip shot.” Considerable progress has been made in the past decade in reducing cancer mortality rates, and the arrival of immunotherapies is giving victims of some cancers leases on life that were unfathomable just two years ago. Like golfers, health researchers are getting close to “the pin.” But the terrain is tricky and there’s no guarantee the ball will drop into the symbolic cup.

Richard Schilsky, MD, Chief Medical Officer of the American Society of Clinical Oncology (ASCO), put it this way:
If there is anything that we have learned it is that there are hundreds of cancers and it is hard to make a sweeping statement. We are making remarkable progress in some cancers, like melanoma. Look at former President Jimmy Carter. A decade ago, he would have died from advanced melanoma. Now with Keytruda [pembrolizumab, Merck Oncology], he is cancer free. However, some cancers such as pancreatic are still very difficult to treat.
Whether it’s described as a moonshot, a chip shot, or something else, Dr. Schilsky believes Biden has elevated the discussion about the need for a robust national commitment to cancer research. “He is taking it upon himself to break down silos in the cancer community,” Dr. Schilsky states. “We don’t have to go to the moon, we’ve already been there. But the vision needs to be transformative, in the same way the moonshot transformed our psyche.”

Funding Uncertainty

Transformative visions are good, of course, but research is still the bedrock of cancer treatment developments, and it costs money—lots of it. To the extent that the Obama administration’s cancer initiative has been criticized, it has been over its $1 billion budget. That figure consists of $775 million for cancer-related research requested for the 2017 fiscal year, which begins on October 1, 2016, and about $195 million for the National Institutes of Health (NIH) for the current 2016 fiscal year.1

Actually, many in the cancer community are unhappy with the way the White House has structured this $1 billion “moonshot” funding. First of all, the $195 million in fiscal 2016 will come from a rejuggling of existing National Cancer Institute (NCI) funds. There will be no new money. The $775 million in new spending in fiscal 2017 would come from a confusing maneuver in which the NIH budget would receive a $1.8 billion mandatory increase as part of its authorization while suffering a $1 billion decrease in its annual appropriation. That would yield the $800 million increase, and since it would be mandatory, that increase would be tacked on to NIH budgets, as protected funding, in future years. Of that $800 million extra, $680 million would go for the cancer “moonshot” initiative; $100 million for the “Precision Medicine Initiative Cohort Program,” which was initially funded in the current 2016 fiscal year; and $45 million for “Brain Research through Advancing Innovative Neurotechnologies.”

Congress has added to the budgetary confusion. The House has approved $1.8 billion in mandatory additional funds for the NIH in each of fiscal years 2017 to 2021 as part of the 21st Century Cures bill (H.R. 6) that it passed in July 2015 by a vote of 344–77.2 So it essentially adopted the White House approach, which is problematic, in the eyes of the biomedical research community, because it would lead to three favored cancer-related programs getting increases and the remainder of the $32 billion or so in NIH programs (in fiscal 2016) having flat funding.

That opposition and other concerns about H.R. 6 have swayed the Senate, which appears unlikely to follow the House’s lead. The American Association for Cancer Research (AACR) and cancer research advocacy groups don’t support mandatory funding, and they aren’t thrilled that the Obama administration proposed it. They prefer a $2 billion increase in the congressional appropriation for fiscal 2017 (not a mandatory authorization), which Republican leaders of the House and Senate Appropriations Committees seem to favor. Jon Retzlaff, Managing Director of Science Policy, Government Affairs, and Advocacy for the AACR, says, “We much prefer NIH growing at a robust, sustainable, predictable rate through the annual appropriation process. Roy Blunt and Tom Cole, the two Republican chairmen of the relevant appropriations subcommittees, have indicated they will support another significant increase for the NIH in 2017. We applaud that. We don’t oppose mandatory spending, we oppose it supplanting increased appropriations.” Congress did increase the NIH appropriation by $2 billion in fiscal 2016.

However, if Congress does decide to increase the NIH appropriation by $2 billion or some other sum in fiscal 2017, there is no guarantee that the White House moonshot will be funded in full. “Congress has historically sought to provide all the NIH institutes and centers with an increase when there’s an overall increase in NIH funding,” Retzlaff explains. “Therefore, Congress is likely to propose allocating the dollars differently than the President has proposed.”

What’s the Problem?

Of course, whatever additional funds the federal government commits to cancer research will be a drop in the bucket compared with what private industry spends. In May 2015, the IMS Institute for Healthcare Informatics reported total global spending on oncology medicines—including therapeutic treatments and supportive care—reached the $100 billion threshold in 2014, an increase of 10.3% over the year before, even as the share of total medicine spending on oncologics increased only modestly.3 Growth in global spending on cancer drugs—measured using ex-manufacturer prices, which approximate the actual prices received by manufacturers and do not reflect off-invoice discounts, rebates, or patient access programs—increased at a compound annual growth rate of 6.5% on a constant-dollar basis during the past five years. Murray Aitken, IMS Health Senior Vice President and Executive Director of the IMS Institute for Healthcare Informatics, explains the trend:
The increased prevalence of most cancers, earlier treatment initiation, new medicines, and improved outcomes are all contributing to the greater demand for oncology therapeutics around the world. Innovative therapeutic classes, combination therapies, and the use of biomarkers will change the landscape over the next several years, holding out the promise of substantial improvements in survival with lower toxicity for cancer patients.
That spending and the focus on immunotherapies, for example, have led to considerable progress in the fight against cancer. The numbers, according to the American Cancer Society (ACS), bear that out (Figure 1). The total cancer death rate rose for most of the 20th century because of the tobacco epidemic, peaking in 1991 at 215 cancer deaths per 100,000 persons. However, from 1991 to 2012, the rate dropped 23% because of reductions in smoking, as well as improvements in early detection and treatment. Death rates are declining for all four of the most common cancer types—lung, colorectal, breast, and prostate.4

But the number of annual cancer deaths continues to increase. According to the ACS, about 1,685,210 new cancer cases are expected to be diagnosed in 2016. This estimate does not include car cinoma in situ (noninvasive cancer) of any site except urinary bladder, nor does it include basal cell or squamous cell skin cancers because these do not have to be reported to cancer registries. About 595,690 Americans are expected to die of cancer in 2016, which translates to about 1,630 people per day. Cancer is the second most common cause of death in the U.S., exceeded only by heart disease, and accounts for nearly one in four deaths.4 In 2030, the number of new cancer cases will rise to nearly 2.3 million.

What’s more, some types of cancer remain particularly difficult to treat. The five-year relative survival rate for pancreatic cancer, for instance, is just 7%. Not all patients appear to benefit equally from the progress, either: Five-year relative survival for a woman with breast cancer is about 91% if the woman is white, but 80% if the woman is black (Figure 2).5

Treatment Advances Unquestionably Impressive

Immunotherapies started to have a positive impact on cancer mortality a decade ago with the introduction of interleukin-2. In November 2015, Richard Pazdur, MD, Director of the Office of Hematology and Oncology Products at the Food and Drug Administration (FDA), told an audience at the annual meeting of the Friends of Cancer Research that the agency was on pace to approve 15 new oncology molecular entities in 2015 (it did). That is more than in any year in the past decade (Figure 3).6

Over the past few years, the all-stars of those new approvals have been antibody immunotherapies, first in advanced melanoma and later in a range of other cancers, including the most common type of lung cancer. These new therapies have significantly extended survival for patients who previously had no effective treatment options. Recent long-term studies indicate that antibody immunotherapies can continue keeping tumor growth in check for years after completion of the treatment. Another kind of immunotherapy, which reprograms the body’s own immune cells to attack cancer, is also showing promise in certain blood cancers, as well as in a range of solid tumors.

Recent approval of immune checkpoint inhibitors for the treatment of melanoma and lung cancer has generated a new excitement in the field of cancer therapeutics. The programmed death-1 and programmed death ligand-1 (PD-1/PD-L1) pathway is an important regulator of immune tolerance in the tumor microenvironment. Pembrolizumab is a highly selective, humanized monoclonal IgG4-kappa antibody against the PD-1 receptor that promotes an antitumor immune response by preventing interaction of PD-1 with its ligands PD-L1 and PD-L2. The FDA granted accelerated approval for pembrolizumab in October 2015 to treat patients with advanced non–small-cell lung cancer (NSCLC). Pembrolizumab was already marketed for melanoma, having received an accelerated approval from the FDA in September 2014 for use in patients with metastatic melanoma who were no longer responding to ipilimumab (Yervoy, Merck), the first of the immunotherapies to be approved for melanoma and until recently the standard of care for first-line treatment. Then in October 2015, the FDA approved a new type of immunotherapy for the treatment of advanced melanoma. Talimogene laherparepvec (Imlygic, Amgen) is an oncolytic virus therapy. This is a genetically engineered virus that has been tweaked to preferentially kill cancer cells. In the case of Imlygic, the virus is a modified version of the herpes simplex virus 1, the virus that causes cold sores.

Next-Generation Promise for Immunotherapy

A leading candidate for kicking off the next generation of immunotherapy is called chimeric antigen receptor T-cell therapy, CAR-T for short. After blood is collected from a patient, the patient’s T cells are genetically engineered to produce special receptors on their surface called CARs. CARs are proteins that allow the T cells to recognize a specific protein (antigen) on tumor cells. These engineered CAR T cells are grown in the laboratory until they number in the billions. The blood is then given back to the patient. According to the NCI, in several early-stage trials testing CAR-T in patients with advanced acute lymphoblastic leukemia (ALL) who had few if any remaining treatment options, many patients’ cancers disappeared entirely. Several of these patients have remained cancer free for extended periods. Equally promising results have been reported in several small trials involving patients with lymphoma.

One CAR-T therapy called CTL019 is apparently furthest along, and has received breakthrough therapy status from the FDA for pediatric and adult patients with relapsed/refractory ALL. Novartis and the University of Pennsylvania Medical School are conducting a phase 2 clinical trial. “With each child we treat as part of this trial, we learn more about the potential of CTL019 to help patients whose cancers cannot be controlled with conventional therapies,” says Stephan Grupp, MD, PhD, the Yetta Deitch Novotny Professor of Pediatrics in Penn’s Perelman School of Medicine and Director of the Cancer Immunotherapy Frontier Program at The Children’s Hospital of Philadelphia. “The response rate and durability we are seeing are unprecedented, and give us hope that personalized cellular therapies will be a powerful key to long-term control of this difficult cancer.”

Improvements to the FDA Approval Process

The decisions pharmaceutical companies make about the depth and expense of their research efforts are to some extent tied to what the FDA requires from the company before the agency will approve a new drug. Sundeep Khosla, MD, Dean for Clinical and Translational Science at the Mayo Clinic, says clinical trials are subject to the “Valley of Death.” He explains, “This refers to the fact that the average length of time from target discovery to approval of a new drug currently averages approximately 14 years, the failure rate exceeds 95%, and the cost per successful drug exceeds $2 billion, after adjusting for all of the failures.” Congress has recognized that equation and has passed new FDA drug-approval methodologies in recent decades. The FDA has also at times acted administratively, on its own authority, to establish new approval programs.

The “fast-track” designation was created in 1997 and is bestowed on drugs that meet two criteria: 1) the drug must show promise in treating a serious, life-threatening condition; and 2) the drug must have the potential to address an unmet medical need, meaning that no other drug or remedy either exists or works as well. Fast-track applications may be evaluated through a “rolling,” or continual, review procedure that allows sponsors to submit to the FDA parts of the application as they are completed, rather than waiting until every section is finished. The FDA receives approximately 100 to 130 applications a year, and close to 80% will be approved.

The FDA has granted breakthrough therapy status since 2012. Approximately 110 requests have been granted: 50 were for cancer, and 24 of those were immunotherapies (48%) for 15 cancer types—ALL, bladder cancer, brain cancer, triple-negative breast cancer, colorectal cancer, kidney cancer, chronic lymphocytic leukemia, Hodgkin’s and non-Hodgkin’s lymphoma, NSCLC, melanoma, multiple myeloma, Merkel cell cancer, pancreatic cancer, and sarcoma.

“Breakthrough status allows the FDA to prioritize internal resources and take an ‘all hands on deck’ approach,” notes ASCO’s Dr. Schilsky. “FDA is the fastest agency on the planet; no other country is doing it faster.” But he adds that the FDA could use more federal funding.

Is More Federal Funding Needed?

The FDA’s oncologic drugs section has received escalating funding over the past decade. The division now employs about 70 medical oncologists overseeing the product approval process. In 1999, there were 12 medical oncologists. The moonshot would add $75 million to the FDA’s oncology program in fiscal 2017. The new FDA funds, which still need approval from Congress, would help create a virtual Oncology Center of Excellence and new data-sharing initiatives. The virtual center would leverage the skills of regulatory scientists and reviewers with expertise in drugs, biologics, and devices.

Many also argue that the NCI needs more funding after about a decade of flat congressional appropriations that was only partly remedied by a 6% increase for fiscal 2016 to $5.21 billion. The Obama request for fiscal 2017 is $5.45 billion, an increase of $241 million. It is not clear whether that $241 million is part of the $775 million moonshot request for 2017 or is in addition to it.
There is agreement within the cancer research community and in Congress that, besides additional funds, the FDA also needs continuing regulatory reforms such as the earlier ones that allowed for breakthrough therapy status. The 21st Century Cures bill would authorize changes in the FDA and NCI approval and research processes and passed the House in July 2015 with a strong bipartisan vote. However, the Senate Health, Education, Labor, and Pensions Committee has decided to take a different route by approving many separate bills, some of them echoing provisions in H.R. 6, some of them not.

H.R. 6 would provide an additional $9.3 billion in mandatory funding over the next five years to fund the NIH and establish a Cures Innovation Fund to support work toward breakthroughs in biomedical research. It also provides $550 million in added FDA funding over the same period. Those sums would be over and above normal annual appropriations, which is to say major increases in both budgets. But again, these would be increases in the mandatory authorization, not the annual appropriation. The bill is stocked with tens of different provisions, including one to give the FDA even more leeway to approve breakthrough therapies, for example. There are numerous changes to the FDA approval process and the structure of clinical trials, as well as advancement of “precision medicine,” which depends on development of a new patient-data network.

Critics of the bill argue the FDA is already the fastest drug-approval agency in the world, and that additional steps to speed new drug approval run the risk of compromising patient safety. Provisions allowing simplification and cost reduction in clinical trials under the NCI’s auspices are more universally supported, particularly if they lead to innovative cancer trial structures such as the Lung-MAP clinical trial for patients with advanced squamous cell lung cancer. The trial adapts some of the “precision medicine” techniques endorsed in the 21st Century Cures bill, such as DNA tumor tissue testing leading to biomarker-driven substudies.

Clearly, though, the big issue for the cancer community in 2016 is not the provisions in the House and Senate bill, whenever the latter’s form becomes evident, but rather the appropriation of additional funding for the NIH and dedication of a moonshot portion for the NCI.