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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.

Formulary Policies a Battleground In HHS Proposal on Nondiscrimination

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

Are Tiering and Cost Sharing Civil Rights Issues?

Is the federal government once more on the cusp of tweaking rules for marketplace, Medicare, Medicaid, and other federally funded health programs with regard to formularies and P&T committees? It could happen. Patient advocacy groups and drug companies are pushing for more aggressive requirements with regard to things such as pharmaceutical cost sharing and utilization management techniques. Health insurers and pharmacy benefit managers (PBMs) are fighting against that.

The political venue for this is the proposed rule the Department of Health and Human Services (HHS) issued last September on Section 1557 of the Patient Protection and Affordable Care Act.1,2 It bans discrimination in health care and jumps off from previous nondiscrimination laws in the areas of voting rights, education, access to facilities, and much else. Those earlier, existing laws prohibit discrimination on the basis of race, color, national origin, sex, age, or disability.

However, the upcoming nondiscrimination rule from the HHS has prompted concerns from various quarters for a couple of reasons. The proposed rule extends the definition of sex discrimination to include discrimination based on gender identity. It will also require hospitals, health plans, physician offices, pharmacies, state and local programs, and others to do some things they currently do not do under existing civil rights laws in terms of notification, training, and translation services for patients. The HHS estimates the industry-wide cost at $558 million over a two-year period.

Interestingly, the proposed rule nowhere mentions the application of Section 1557 to “formularies.” That word doesn’t appear anywhere in the proposed rule’s text. Neither does “P&T committee.” The proposal concerns itself with such issues as access to facilities for the disabled, translation services for non-English speakers, and how health plans, hospitals, and other providers must describe and provide medical services for transgender and gay individuals. That said, many, if not most, of the 2,000-plus comments that arrived on the HHS doorstep in the wake of the proposed rule raise, among other concerns, the issue of formularies, either pressing for extension of Section 1557 to formularies or opposing it.

“It is our understanding that the department continues to face pressure from several patient advocacy groups and pharmaceutical manufacturers to prevent or severely restrict application of clinically based utilization management and formulary design processes under a pretext that use of step therapy, tiering, or other such tools are in fact discriminatory practices in and of themselves,” says Jonah Houts, Vice President of Corporate Government Affairs for Express Scripts, Inc.

Lisa Joldersma, Vice President of Policy and Research for Pharmaceutical Research and Manufacturers of America (PhRMA), says, “The evidence on today’s formulary landscape clearly indicates that too often plan formularies have designs that discourage individuals with certain disabilities from enrolling in their plans. Across HIV classes, certain cancer classes, and medicines that treat multiple sclerosis, many marketplace plans are putting all medicines, brand and generic, on the highest cost-sharing tier.”

Drug Access in Federal Health Plans Has Long Been a Controversy


The issue of formulary “discrimination” has come up over the past few years in the context of marketplace and Medicare Part D/Medicare Advantage guidance—which has no legal standing—and proposed rules dealing mostly with appeals to denials of particular drugs. Health plans have argued against the Centers for Medicare and Medicaid Services (CMS) addressing tiering and cost-sharing requirements and are doing so again with regard to the proposed 1557 rule.

“We recommend revising the rule to provide specific safe harbors with respect to pharmacy benefits, so that formularies designed by a pharmacy and therapeutics committee would not be considered discriminatory,” says David Schwartz, Head of Global Policy for Cigna Federal Affairs. “CMS has already issued detailed rules on drug formularies and the department should defer to CMS’s rules to ensure uniform, clinically based, sound formulary decisions.”

Again, the only rules the CMS has issued on formularies deal with time frames for health plans to respond to appeals of denials of specific medications, mandating that all drugs be provided in certain “protected classes” of drugs, and, with regard to marketplace formularies, establishing the standard for which drug classes must be made available.

That is not to say the CMS and the HHS are not worried about drug cost-sharing policies adopted by health plans and how P&T committees arrive at those formularies. The CMS has already been doing an outlier analysis that assesses marketplace plans’ cost-sharing requirements. Year 2015 and 2016 “Letters to Issuers in the Federally-facilitated Marketplaces” sent by the CMS promised to perform “an outlier analysis on QHP [qualified health plan] cost sharing (e.g., co-payments and co-insurance) as part of the QHP certification application process.” Both letters go on to say that “outliers may be given the opportunity to modify cost sharing for certain benefits if CMS determines that the cost-sharing structure of the plan that was submitted for certification could have the effect of discouraging the enrollment of individuals with significant health needs.” QHPs are required to ensure nondiscrimination in each of the 10 categories of essential health benefits they must provide, one of which is prescription drugs. In that vein, the 2015 letter said, “CMS intends to review plans that are outliers based on an unusually large number of drugs subject to prior authorization and/or step therapy requirements in a particular category and class. We encourage states performing plan management functions in an FFM [federally facilitated marketplace] to implement this type of review.” 3,4

The 2017 draft “letter” went further. It said: “CMS is also concerned about adverse tiering, which occurs when a formulary benefit design assigns most or all drugs in the same therapeutic class needed to treat a specific chronic, high-cost medical condition to a high cost-sharing tier. Since adverse tiering is potentially discriminatory, this review may examine the tier placement of prescription drugs to determine whether QHPs are also consistently placing drugs used to treat these medical conditions on a high cost-sharing tier.” 5

These “letters,” whether to marketplace health plan or Part D providers, are advisory. They do not have the force of law. Moreover, while the CMS has apparently been applying outlier analyses to federally regulated formularies, the agency has never published the results of these, nor published a list, for example, of “bad practices,” which might guide health plans.

Timothy Jost, Emeritus Professor at Washington and Lee University, who has written widely on federal health policy, notes that the CMS and states review marketplace and Part D plans annually and, if they feel an individual plan uses drug tiering in a discriminatory fashion, they can kick the plan back for remediation. Jost adds that where states review marketplace plans, “they are all over the lot” in how they enforce marketplace essential health benefit standards as they apply to pharmaceutical access.

The CMS has, however, established federal policies related to P&T committees operating in Medicare Part D plans. There is some concern among PBMs and health insurers that the HHS might extend those policies, or even enrich them, in the context of a final Section 1557 rule. “As we share the department’s priorities in preventing discriminatory practices from occurring in health care, our concern focuses on whether any future proposals affecting the P&T committee process will enhance the protections already available to patients, or add only complexity and costs to plan compliance at the expense of patients and sponsors,” says Express Script’s Houts.

First in its Call Letter for 2015 and again in its 2016 letter for Medicare Part D plans, the HHS laid out refinements of “independence” requirements for P&T committees. A minimum of two members on each P&T committee must be independent from the plan sponsor and drug manufacturers, but not the PBM. The 2016 letter, for example, required that the sponsor’s P&T committee clearly articulate and document processes to determine that members who are supposed to be independent are indeed independent, and committees must have a policy to manage recusals due to conflicts. Those processes must be enforced by “an objective party,” which may be a representative of the PBM—as long as that representative is not also a member of the sponsor’s P&T committee.

Jost believes the HHS may have its work cut out for it in applying Section 1557 to formularies and P&T committees. He believes nondiscrimination in the context of disabilities, as is the case with Section 1557, is different than nondiscrimination with regard to health status, which is what the marketplace plans are charged with avoiding. Also, the proposed rule doesn’t raise the issue of discriminatory formularies. “The HHS is limited in going off in a new direction if that direction is not mentioned in the proposed rule,” Jost explains. “But it could issue a final rule and another proposed rule dealing with formulary discrimination.”

Allyson Funk, Senior Director of Communications at PhRMA, thinks the HHS could and should apply Section 1557 to formularies. “We would like to see additional clarification in the final rule which would be a logical outgrowth of the proposed rule’s prohibition on ‘benefit designs that discriminate on the basis of race, color, national origin, sex, age, or disability in a health-related insurance plan or policy, or other health-related coverage,’ ” she says.

Expansion of Current Nondiscrimination Policies ... or Not


Complaints about current discrimination have been loud from transgender advocacy groups, who have been among those pressing for formulary expansion provisions. But they have been equally concerned about availability of medical services. In the proposed rule, the HHS said “coverage for medically appropriate health services must be made available on the same terms for all individuals, regardless of sex assigned at birth, gender identity, or recorded gender.” It used pelvic exams as an example. They cannot be denied for an individual for whom a pelvic exam is medically appropriate based on the fact that the individual either identifies as a transgender man or is enrolled in the health plan as a man.

The HHS goes on to say that coverage cannot be denied for gender transition. If, for example, a health plan or state Medicaid agency denies a claim for coverage of a hysterectomy that a patient’s provider says is medically necessary to treat gender dysphoria, the HHS Office of Civil Rights (OCR), if it gets a complaint, will evaluate the extent of the plan’s coverage of hysterectomies under other circumstances. The OCR will also carefully scrutinize whether the covered entity’s explanation for the denial or limitation of coverage for transition-related care is legitimate and not a pretext for discrimination. But the HHS makes it clear that a final rule will not require covered entities to cover any particular procedure or treatment for transition-related care; nor do they preclude a covered entity from applying neutral standards that govern the circumstances in which it will offer coverage to all its enrollees in a nondiscriminatory manner.

However, the HHS proposed policy on transgender access to services is not totally clear to everyone. “As it is currently worded, the proposed rule suggests that clinicians who recommend screening tests and similar services usually performed only on those of the individual’s birth gender may be acting in a prohibited manner. We do not believe this was HHS’s intention,” says Ashley Thompson, Acting Senior Executive of Policy at the American Hospital Association.

Nondiscrimination Beyond Medical Services


Whatever the HHS decides in the final rule, any edicts will affect not just the kinds of services that hospitals, physicians, and pharmacies will have to provide, but potentially even the continuation of certain federally funded health programs. For example, Unite for Reproductive & Gender Equity (URGE) wants some federally funded health programs to be canceled because they do not square with Section 1557. It cites abstinence-only-until-marriage (AOUM) programs currently funded by HHS and administered by the Family and Youth Services Bureau within the Administration for Children and Families. “AOUM programs are inherently discriminatory against LGBTQ [lesbian, gay, bisexual, transgender, and queer] young people,” says URGE. According to the Society for Adolescent Health and Medicine, “in addition to abstinence-only classes being unlikely to meet the health needs of LGBTQ youth, as they largely ignore issues surrounding homosexuality, they often stigmatize homosexuality as deviant and unnatural behavior.”

But insurance companies worry about how antidiscrimination laws newly applied to transgender individuals might adversely affect them. According to Cigna’s Schwartz:
While Cigna supports measures of diversity and inclusivity, there are operational procedures today that may be construed as violating Section 1557, albeit unintentionally. Claim adjudication programming helps to protect against abusive billing practices by using edits, such as gender identifiers, to identify an anomaly; such as a male gender indicator on a claim for an annual well-woman exam or a female gender edit for a prostate exam. Medical claim adjudication procedures as well as pharmacy claim adjudication procedures would be impacted by the proposed rule. Furthermore, based on the language in the proposed rule, it is unclear if a gender question on an application is even acceptable or if it could be construed as sex stereotyping.
Disability groups are concerned that Section 1557 regulations would allow private entities to essentially decide for themselves when their provider network is “readily accessible” to people with disabilities. “A large for-profit insurance carrier could arbitrarily decide that, among the great majority of its providers who operate in existing facilities, only 10% need to be physically accessible or have accessible equipment,” says the Consortium for Citizens with Disabilities (CCD). “Moreover those accessible providers could be clustered together in some central location, and whenever a member calls member services and mentions the need for accessibility, that member will be actively directed toward ‘the accessible provider offices.’ ”

Groups representing the deaf also cite shortcomings in interpretation services currently available and thus the need for Section 1557 regulations to specify more rigorous requirements than those in the current nondiscrimination laws. “Too often, patients who use ASL [American Sign Language] are denied access to health care because most providers do not provide qualified ASL interpreters,” reports the National Association of the Deaf. “Furthermore, the department should emphasize that by no means should family members act as interpreter for the deaf or hard of hearing patient. Many health care entities mistakenly believe that it is perfectly acceptable to utilize family members as interpreters. In fact, the website for the American Medical Association states that ‘qualified interpreters may include: family members or friends,’ which demonstrates an incorrect understanding of the regulatory definition for a ‘qualified interpreter’ (QI).”

Implications for Pharmacies and Hospitals


As opposed to formularies, the Section 1557 proposed rule does have specific requirements for brick-and-mortar health facilities covered by the upcoming rule. They would have to notify patients that they offer auxiliary aids and services, free of charge, in a timely manner, to individuals with disabilities. The notice would need to be translated into at least 15 different languages.

Another requirement would force hospitals, pharmacies, and health plans to provide language assistance services, including interpreter and translation services for non-English speakers and similar services for the deaf. Those have to be available at the point a service is being provided.

In the case of an individual with limited English proficiency, the covered entity must offer that individual an on-the-spot, qualified, oral interpreter, who generally may not be a family member and almost never a child. There is an exception which is narrow in scope. Interpreters at a remote location can be used.
The American Pharmacists Association (APhA) is making the argument that pharmacies shouldn’t be covered (though hospital pharmacies, as part of a hospital’s corporate structure, would be) to the same extent as other “covered providers.” Retail pharmacies do not get marketplace, Medicare, or Medicaid reimbursement, though, in the latter case, they do receive dispensing fees. The APhA believes the amount of federal financial assistance a covered entity receives for a particular service should be a determinative or heavily weighted factor when imposing requirements related to Section 1557 and in OCR’s determinations related to nondiscrimination claims. Scaling down the requirements on pharmacies is important, in the APhA’s view, because of the mandates related to things such as translation services for customers, to give one example.

“APhA is very concerned that OCR requires the notice to include a statement that the covered entity provides auxiliary aid and services and language assistance services, free of charge, and makes no mention of the inclusion of a disclaimer or caveat related to the fact that the provision of services is balanced against the burden placed on the entity,” says Thomas E. Menighan, Executive Vice President and CEO of APhA. “Such a notice basically provides a guarantee of the services and fails to factor in the burden on the entity which OCR claims to consider.”

Pharmacies currently providing translation services (written or oral) have noted that costs may be considerable. Additionally, written translation services are effective only if the patient is literate. Pharmacists may also have difficulty identifying which language the patient is speaking, further exacerbating the difficulty of connecting the patient to a qualified QI. Even if a QI can be found, those without the appropriate medical training may be unable to accurately translate technical information, making such services less meaningful to patients and a source of potential liability for pharmacies.

At least hospitals and pharmacies know what they are in for when the Section 1557 final rule is published. The rule’s impact on QHP and Part D formularies is harder to predict. The political pressure has been building on the HHS to take a stronger stand on tiering and associated practices. But given the very recent disclosures of the money major health insurers are losing on their marketplace plans, it may be hard to justify putting out of reach what the plans have long argued are major, justifiable cost-control practices.

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

Major Energy Bill Includes Manufacturing Provision

The Fabricator - February 12, 2016 - for the original online article go HERE.

Under the provision, Industrial Assessment Centers would be able to do more than advise manufacturers.

The Senate passed its first major energy bill since 2007, and it's a whopper, with all sorts of various provisions affecting various sectors. The House passed its own omnibus bill in December, and the two will have their differences worked out in a conference committee. The good news for the manufacturing sector is that both bills contain very similar manufacturing "aid" provisions and they are focused on small and medium-sized companies.

The provisions seek to add muscle to the Department of Energy’s Industrial Assessment Centers (IAC) program, which is run out of 24 federally funded university sites. The IACs go to manufacturing facilities and write recommendations as to how the companies can save energy with energy efficiency improvements, waste minimization, pollution prevention, and productivity improvements. Both bills give the IACs new authority to help companies adopt “smart manufacturing” technologies and processes.

A problem with the program, however, has been IACs’ lack of follow-up. By law they cannot work with the company to implement recommendations.

Both bills fix that by establishing what would be called a new “Future of Industry” program that would link the IAC program to the National Institute of Standards and Technology’s Manufacturing Extension Partnership Centers and allow the IACs to provide on-site technical assessments to manufacturers seeking efficiency opportunities.

The bills also support the effort to expand the IAC program by linking it to the national laboratories and establishing a joint industry-government partnership program to research, develop, and demonstrate new sustainable manufacturing and industrial technologies and processes. Companies eligible for this consulting service would be those with gross annual sales of less than $100 million, fewer than 500 employees at the plant site, and annual energy bills totaling more than $100,000 but less than $2.5 million.

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

340B Guidance Riles Hospitals, Drug Makers

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

They Push in Opposite Ways on Eligibility, Discounts, and More
The Health Resources and Services Administration (HRSA) may have gotten it more right than wrong with its new proposed guidance on the 340B outpatient drug program.1 Hospitals and drug manufacturers, the program’s two key constituencies—long at loggerheads—are both complaining to high heaven about proposed changes. The program requires drug companies to sell medicines at deep discounts to hospitals (generally those located in rural or poor areas with significant indigent populations) that use those discounts to fund medical services they couldn’t otherwise afford.

The guidance, which may be revised based on public comments, greatly reduces the number of patients who would qualify to purchase 340B drugs. That has enraged hospitals and buoyed pharmaceutical companies. But the guidance proposed in August does very little to crack down on how hospitals use contract pharmacies, to prevent duplicate discounts where drug companies can be billed once for the 340B discount and again for a Medicaid discount, and to prevent private hospitals with no local or state government contracts from participating in the program. The HRSA’s failure to propose such restrictions is just fine with hospitals, but drug companies are beside themselves because of those and other omissions.

The 340B program is controversial, and some of its requirements are sketchy. The HRSA, part of the Department of Health and Human Services (HHS), has been prohibited by federal courts from issuing legally binding regulations in all but a few areas—hence the guidance the HRSA published in an attempt to clear up confusion about program rules. It would change the standard for patient eligibility, make it more difficult for patients receiving infusion to qualify for drugs, require hospitals to implement new billing and tracking systems, and make other changes. However, guidance, as opposed to regulation, is not legally enforceable.

Upward of 2,000 covered entities—general, rural, and children’s hospitals and AIDS and rural clinics—buy drugs from nearly 650 manufacturers. The drugs are sold at discounts of around 25% to qualified patients who receive the drugs at outpatient pharmacies, either on the grounds of the hospital or at satellite locations, including nonaffiliated contract pharmacies. Covered entities make money because insured patients buy the drugs at discounted prices and the covered entity bills their insurance company for the full price of the drug, pocketing the difference between that price and the lower, discounted 340B price. Over the years, the program rules have been abused both by covered entities and drug manufacturers, each side says, and the HHS inspector general has confirmed their suspicions— hence the need for clarification.

The key change riling hospitals concerns the way the HRSA would limit the number of patients eligible to purchase 340B drugs. The HRSA wants to substitute a six-pronged test for the current three-pronged test. The new standard would restrict the number of physicians who could write 340B-eligible prescriptions. Even if they were somehow affiliated with a hospital, physicians who did their own billing could not write a 340B-eligible script. Physicians would have to be employed by the hospital; having “privileges” would not meet the test. The guidance would limit the covered-entity facilities where individuals could be seen and still fit the definition of “patient.” For example, outpatient facilities would have to be listed on a reimbursable line in the hospital’s most recently filed Medicare cost report and the services provided would have to have associated outpatient Medicare costs and charges. An inpatient who receives a prescription while in the hospital, from an eligible provider, could not go to his or her local pharmacy and qualify for a 340B prescription.

“The guidance would require every prescription to pass at least 10 requirements to qualify for 340B discounts,” says Bruce Siegel, MD, President and CEO of America’s Essential Hospitals, which represents 340B hospitals. “The test must be applied to each prescription written and depends on where an individual patient sought care for a particular medical condition, which clinician wrote the prescription, and what type of insurance, if any, the patient has. This would be disastrous for patients and providers.”

The Pharmaceutical Research and Manufacturers of America (PhRMA) wants the HRSA to narrow the requirements for hospitals to qualify as covered entities. Over the past few years, U.S. Senator Charles Grassley (R-Iowa) has questioned whether academic medical centers are using 340B revenue for purposes intended by Congress, and whether they ought to qualify given their upscale patient mix. So PhRMA wants the HRSA to require private, nonprofit hospitals that have a contract with a state or local government to provide “at least a specified amount of care to low-income people ineligible for Medicare and Medicaid with the specified minimum threshold selected so as to ensure that a minor contract to care for this population cannot confer 340B eligibility.”

The HRSA guidance appears to try to split the difference between the demands of two opposing interest groups. But given its failure to do that successfully, and the fact that guidance is only guidance, Congress is likely to step in. If so, it is not clear which side of the scale Congress will put its thumb on.

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