Views Conflict on Trump’s Drug-Pricing Blueprint

P&T Journal - for the original article go HERE.  For a PDF version go HERE.
Most Actions Face Political, Legal, and Technical Roadblocks

Battle lines have been drawn and heavy political armaments have been moved to the front line as drug-industry partisans fight to protect the parts of their turf endangered by the policy advances proposed in President Donald Trump’s Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.¹ Its aggressive concepts, such as forcing the posting of drug list prices, ending rebate payments to pharmacy benefit managers (PBMs), introducing formulary management to Part B of Medicare, and changing formulary requirements for Part D, have been the equivalent of a trumpet rallying call to manufacturers, PBMs, health insurers, pharmacy professionals, and patient groups, who are often on the opposite sides of any anticipated initiative.

The wide-ranging Blueprint includes 136 questions or possibilities of changes that cover Medicare most heavily, but also affect Medicaid and private plans. The spotlight on the president’s suggestions burns a bit more brightly after Pfizer, Novartis, and Merck claimed national headlines this summer for postponing plans to raise drug prices in the third quarter of 2017 with the intention of giving the Trump administration time to finalize details and actions stemming from the Blueprint.

Some in the pharmaceutical distribution chain have even proposed doing Trump one better. Fanning the flames of the controversy surrounding high list prices, Express Scripts, the giant PBM, thinks drug companies should “reintroduce their products as competing brand drugs, with new/different NDCs [national drug codes], that would allow the market to move to lower list price products.” A spokeswoman for Pharmaceutical Research and Manufacturers of America (PhRMA), the drug manufacturers trade group, declined to comment on that proposal, which goes beyond anything in the Blueprint.

P&T committees could take on both added responsibilities and added burdens as a result of any Trump administration initiatives, particularly with regard to Medicare. The Trump administration wants to allow PBMs to negotiate prices for some or all Part B drugs. Those are pharmaceuticals infused or injected in either a physician’s office or an outpatient clinic. Currently, Medicare pays the list price for those drugs and patients pay for them subject to a Part B deductible of $250. These are often expensive oncology drugs, which, if they were paid for under Part D, as the administration wants, would be subject to formulary management by P&T committees at Part D plans or their PBMs. There is no guarantee, however, that patients would pay less for oncology, hepatitis C, and other expensive drugs under Part D. They could conceivably (in some instances) pay more.

Part D is also under the microscope as far as its formulary and P&T committee policies are concerned. The American Medical Association (AMA) thinks that disclosure of P&T committee information for Part D Medicare plans would constitute “a critical step forward.” There are a few rules today governing P&T committee membership, but very few if any requiring significant “transparency.” An AMA spokesman did not respond to a query asking what kinds of disclosures the group has in mind.

Backing From Congress Unlikely

The fact that drug companies are sitting on the edge of their seats waiting for the administration to put a plan in place doesn’t mean a plan will evolve quickly. It clearly won’t. Health and Human Services (HHS) Secretary Alex Azur told the Senate Health, Education, Labor, and Pensions (HELP) Committee on June 26, six weeks after the Blueprint was released, that, for example, he believes his department, through the Food and Drug Administration, has the authority to force drug companies to disclose list prices in television advertisements. But he added that he would welcome legislation to “shore up” that authority because manufacturers will “certainly challenge” any new requirement in court. He went on to say that he would also welcome legislation eliminating the 100% cap on drug rebates imposed under the Patient Protection and Affordable Care Act, “which would create a significant disincentive for drug companies to raise list prices.”

Congress is unlikely to jump at those requests. Senator Dick Durbin (D–Illinois), the second-ranking Democrat in the Senate, introduced the Drug-Price Transparency in Communications Act (S. 2157) in November of 2017.² No Republican has cosponsored it and no hearings have been held. In March of 2017, Senator Ron Wyden (D–Oregon) introduced the Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act of 2017 (S. 637), which would require the HHS to publish rebates PBMs obtained from drug manufacturers under Part D and the Marketplace Exchange insurance program.³ Again, no action taken, no Republican co-sponsors obtained. Neither the House Energy and Commerce Committee nor the Ways and Means Committee, the two committees with jurisdiction over health care, have held hearings on drug prices, much less the Blueprint.

Taylor Haulsee, spokesman for the Senate HELP Committee, did not respond to an inquiry asking whether the committee had plans to take up the Durbin and Wyden bills or to develop its own drug-pricing legislation. If the Republican president expects help from the Republican Congress to smooth the way for some of his more controversial policy proposals, he may be waiting a long time. That said, there is no question that the Trump administration has already moved perceptibly in some minor areas on drug pricing. But the Blueprint raises the stakes for drug companies, pharmacy benefit managers, insurance companies, health professionals, and consumers. Here are some of the more flammable, high-profile possibilities:

• requiring drug manufacturers to include list prices in drug ads
• putting a ceiling on out-of-pocket payments by Part D participants
• reducing from two to one the number of drugs offered in the six Part D protected classes
• allowing state Medicaid programs to use formularies and P&T committees
• moving drugs now paid under Part B to Part D and subjecting them to utilization review
• reimbursing for drugs based on their indication
• charging higher prices for a drug when it is used off-label

How Out of Whack Are Drug Prices?

The premise of the Trump administration’s attempt to rein in drug prices is that those prices are out of control. As a general premise, that probably is inaccurate. The American Hospital Association (AHA) cites figures from National Health Expenditures data showing that retail drug spending increased by 1.3% in 2016. But the AHA argues that while that level of growth may appear low, it follows two consecutive years of expansive growth in retail drug spending: 12.4% in 2014 and 8.9% in 2015.⁴
What are particularly worrisome are launch prices for new brand-name drugs. The AHA cited:⁴

• Taltz (Eli Lilly), used for treating psoriasis, costs $50,000 a year.
• Keytruda (Merck), used for treating melanoma, costs $152,400 a year.
• Kymriah (Novartis), used for treating leukemia, costs $475,000 for a course of treatment.
• Spinraza (Biogen), used to treat spinal muscular atrophy, costs $750,000 for the first year of treatment and $375,000 per year thereafter.

Moreover, there has been a spate of exorbitant price increases for existing brand-name drugs. America’s Health Insurance Plans (AHIP) says that during June 2018 and the first two days of July, drug companies announced more than 100 separate price increases for prescription drugs with an average increase of 31.5% and median percentage increase of 9.4%. Seemingly unfathomable price increases for old generics have led to Congressional hearings.

High drug prices can also be untenable in some instances for hospitals, where drug prices are bundled into diagnosis-related group (DRG) reimbursement. In 2016, the AHA and the Federation of American Hospitals worked with NORC at the University of Chicago (a nonprofit research institute) to document hospital and health system experience with inpatient drug spending. Specifically, NORC found that, while retail spending on prescription drugs increased by 10.6% between 2013 and 2015, hospital spending on drugs in the inpatient space rose 38.7% per admission during the same period.⁵ In its comments to the HHS, the AHA stated: “These price increases, from the hospitals’ perspective, appeared to be random, inconsistent and unpredictable: large unit price increases occurred for both low- and high-volume drugs and for both branded and generic drugs.”

Is Value Pricing the Answer?

There are some who argue that seemingly unreasonably high drug prices themselves are not the problem. Jonah Houts, Vice President for Corporate Government Affairs at Express Scripts and the author of the company’s comments, suggested that lowering drug prices as an absolute goal might not even be the smartest thing to do. “The central flaw with focusing on incentivizing lower drug prices is that this concept necessarily assumes clinical efficacy of all drugs are equal across all classes and disease indications,” he wrote. “Incentivizing payments for lower-priced drugs comes at the expense of discouraging considerations of clinical effectiveness or other factors such as likelihood for adherence, then even the ‘cheapest’ drug ends up costing Medicare significantly by failing to potentially treat the patient’s condition according [to] their needs. Of course, such failures may eventually lead to more costly medical interventions in the future, or worse—patient harm.”

Certainly there is a good argument to be made for value-based drug pricing, which is in its infancy and has had trouble getting out of the crib because of, if one listens to the manufacturers, impediments ensconced in federal law such as the Anti-Kickback statute and the rules for reporting the Medicaid Best Price. That said, value-based drug pricing doesn’t help some patients, especially less well-heeled ones, who may have high deductibles and out-of-pocket costs. The fact that, in the long run, they may avoid the costs and terrible effects of a chronic disease such as hepatitis C may be hard to appreciate if they go bankrupt in the short term.

The HHS raises the possibility of “indication-based” pricing, in which consumer and payer costs are linked to the effectiveness of a drug’s indication. Joint comments submitted by a large number of patient advocacy organizations across many disease states said, “This is highly concerning for patients for a number of reasons. Patients using the medications in higher-priced indications would be discriminated against through higher cost-sharing and could have impeded access as a result.”

High List Prices and Their Link to Cost-Sharing

Those higher out-of-pocket costs are often linked to the “list prices” posted by the drug companies. The health insurers use those prices to determine coinsurance and deductible amounts. But the insurer doesn’t pay the list price because it, or its PBM, negotiates discounts and rebates, which don’t find their way to the pharmacy counter when the consumer reaches for his or her wallet. Patient out-of-pocket costs under Medicare Part D are distributed unevenly each year, such that patients face 100% coinsurance until they reach their deductible ($405 in 2018), up to 25% coinsurance until the patient reaches the initial coverage limit ($3,750 in 2018), 35% coinsurance in the coverage gap until the patient reaches the out-of-pocket threshold ($5,000 in 2018), and finally up to 5% coinsurance above that threshold. “For example, in 2015, beneficiaries without low-income subsidies who had spending above the catastrophic threshold (over 1,000,000 individuals) spent on average $5,200.92,” Bristol-Myers Squibb said in its comments. “These high out-of-pocket costs present affordability challenges that jeopardize patient adherence to needed medicines, which could in turn increase costs to the broader health care system.”

According to PhRMA, more than half of all new brand-name osteoporosis prescriptions, more than 40% of all new brand-name autoimmune and oral antidiabetic prescriptions, and more than 30% of all new brand-name antipsychotic prescriptions brought to a pharmacy in 2016 had cost sharing greater than $250. “Not surprisingly, many of these prescriptions went unfilled,” the group stated.

Two Part D reforms included in the president’s fiscal year 2019 budget proposal would provide much-needed financial relief for beneficiaries facing high cost-sharing and high annual out-of-pocket costs:

• Requiring plan sponsors to pass through a substantial share of negotiated rebates at the point of sale would immediately lower out-of-pocket costs for millions of beneficiaries.
• Establishing a maximum annual limit on beneficiary out-of-pocket spending would provide a true catastrophic benefit to protect the sickest patients.

The drug manufacturers have been pushing hard behind the proposal to force PBMs to fork over rebates at the pharmacy counter, a proposal the Trump administration appears to favor indirectly in the form of replacing rebates with a fixed price discounting model for PBMs. Big pharma believes rebates are bad, high list prices are not so bad. What they object to is the health insurers basing coinsurance and deductibles on those list prices. Manufacturers believe the health plans should pay all or a portion of all rebates off those list prices to the consumers who pick up that drug at the pharmacy counter instead of using the rebates to lower premiums for all members of a plan. Their argument appears to be that all plan members ought to suffer a little for high list prices rather than just those with expensive chronic conditions, who are suffering a lot.

Although the list price/rebate relationship is frequently cited as the main cause of high consumer drug prices, AHIP argues that rebates are not prevalent, including for the most expensive drugs. A report by the consultant Milliman found that nearly 90% of Part D drug claims were for drugs with no rebates. The Milliman report also found that, when measured on an individual drug basis (i.e., not a script count basis), approximately 70% of brand-name drugs did not have significant rebates. Further, physician-administered drugs paid for under Part B, which account for 30% of prescription drug spending, typically do not receive rebates.⁶

Power to the P&T Committee?

Insurance companies and their PBMs argue that with regard to the Part D program, the best way to cut costs would be to allow P&T committees more leeway in formulary development. That could entail decreasing from two to one the number of drugs that formularies have to offer in each class and category and doing away with the “all or almost all” language that forces Part D plans to offer all drugs in six categories, the so-called “protected” classes: immunosuppressants, antidepressants, anti-psychotics, anticonvulsants, antiretrovirals, and antineoplastics.

CVS believes Part D plans’ P&T committees are well qualified and structured to ensure that beneficiaries have an appropriate choice of drugs in these six classes on the plan’s formulary. Another reason CVS feels the six protected classes ought to be eliminated is that plans cannot impose any type of utilization management edits on the use of the drugs, even if these are based on clinical criteria. This is because Part D plans may only apply prior authorizations and transition fill limitations to beneficiaries who are considered new starters to these drugs. When beneficiaries are new to the plan, however, the plan frequently does not have enough claims history (at least 108 days) to determine whether the drug is considered new as opposed to ongoing therapy. In this case, the plan is required to assume that the drug is ongoing therapy and to provide it without the opportunity to recommend more cost-effective or clinically superior therapies.

Part B

While P&T committees are limited in certain respects, in terms of what they can do in Part D, they do not even have a role in Part B, which pays for physician-administered drugs, often expensive oncology medications. Part B drugs are provided “incident to” physician services and include some antigens, injectable osteoporosis drugs, erythropoiesis-stimulating drugs, blood-clotting factors, oral end-stage renal disease drugs, cancer medications, parenteral and enteral nutrition, nebulizers, immunosuppressive agents, intravenous immune globulin, and vaccines. Part D drugs are infused either in a physician’s office or a hospital outpatient clinic.

HHS Secretary Azar noted at a June 12, 2018, Senate HELP hearing that cost-savings are the key rationale for moving drugs from Part B to Part D, saying that “right now, we’re paying sticker price for these drugs, no discounting. We ought to be able to get 20 to 40% discounting, as we do in Part D, on those drugs. That’s $30 billion of spend.” The Blueprint, however, doesn’t specify which drugs might be switched to Part D, and what would happen if a Medicare recipient did not have a Part D plan.

For a variety of reasons, however, there are some categories of drugs now paid for under Part B that might have a smoother path than others into Part D, including insulin, antiemetics, inhalants, immunosuppressants, and oral anticancer medications, according to the Pharmaceutical Care Management Association, which represents PBMs and like seemingly every interest group—including PhRMA, which is totally opposed to the switch—has concerns about a Part B-to-D move.

Site Neutrality

A potential Part B-to-D shift for drugs brings up another potential Trump administration move likely to affect hospital outpatient clinics, where many Part B drugs are infused. The HHS is considering a site-neutral payment policy to account for differences in reimbursement between the outpatient prospective payment system and the physician fee schedule for drug administration services. In short, hospital outpatient reimbursement for Part B would be reduced.

The AHA opposes a site-neutral payment policy for drug administration services under Medicare Part B. Hospitals with newer off-campus hospital outpatient departments are already subject to significant payment reductions for the “nonexcepted” services they furnish in these settings.

The Blueprint has a host of other suggestions related to the uptake of biosimilars, risk evaluation and mitigation strategies (which have been cited as reasons to deny generic-drug companies samples of brand-name drugs), 340B, Medicaid, and so-called “gag clauses” imposed on pharmacists and other programs. For Medicaid, the Blueprint suggests a new demonstration authority for up to five states to test drug coverage and financing reforms that build on private-sector best practices. This would open the door to “closed formularies” developed by P&T committees, now absent from state Medicaid drug programs. But there is opposition to that limited initiative, as there is to everything the Blueprint considers, from one corner of the industry or another. As to formularies in Medicaid, GlaxoSmithKline says, “We strongly oppose any proposals that ration access to prescription drugs in Medicaid through a closed formulary.”

One thing stands out from reading through some of the 3,000 comments on the Blueprint. They all start out pledging fealty to the Trump administration’s efforts to lower drug prices. Then they all degenerate into opposition to most of the Blueprint’s suggestions. Normally that reaction—and it is broad and deep—would be enough to sink any significant reforms. Of course, President Trump has been known to remain impervious to any cloud of negativity surrounding him—witness trade tariffs or immigration, for instance. Will drug pricing be the next arena in which he upends conventional thinking?

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

Trump Loosens Steel and Aluminum Import Restrictions

The Fabricator - September 2018 for the original article go HERE.

Quotas set for Argentina, Brazil, and South Korea

By: Stephen Barlas

Argentina, Brazil, and South Korea are no longer subject to the tariffs, according to a presidential proclamation. This could make sourcing steel and aluminum trickier down the road as other countries look to negotiate their own deals to get out from under the tariffs.

President Trump made a slight concession on steel and aluminum tariffs via a presidential proclamation on Aug. 29, but it is unclear whether the White House will conduct a broader review of the exclusion process, which has been heavily criticized.

The proclamation only covered steel imports from Argentina, Brazil, and South Korea and aluminum imports from Argentina. Steel and aluminum import quotas were placed on those countries in lieu of the 25 percent steel and 10 percent aluminum tariffs. No exclusions were allowed for those “quota”
countries.

Now, according to the Trump proclamation, at the end of August exclusions from quotas will be allowed if importing fabricators can make the case that insufficient quantity or quality is available from U.S. steel or aluminum producers. In such cases, an exclusion from the quota may be granted and no tariff would be owed.

A second provision in the proclamation affects steel articles destined for use in a facility construction project in the U.S. that were contracted for purchase before the decision to impose quotas and cannot presently enter the country because a quota has already been reached. In that instance, an exclusion from the quota may be granted, but the product may only be imported upon payment of the 25 percent tariff.

One aluminum industry official who did not want to be identified explained, “This new process won’t affect aluminum much right now, but it would if other countries opt to take a quota instead of the tariff. Absolute quotas are tricky to implement and can be disruptive for consumers, since it’s hard to know when exactly the quota will be reached and therefore hard to plan for purchasing and shipping. An exclusion process on the quotas could be a sort of ‘last resort’ option for the companies that might have purchased their steel before the quota was reached but haven’t yet had it delivered.”

NAFTA Reboot Would Help Manufacturers

The U.S.-Mexico revisions to the North American Free Trade Agreement (NAFTA) contain some major benefits for domestic manufacturers, particularly those in the auto industry. But metal fabricators may be unhappy that the agreement does not do away with U.S. tariffs on imported Mexican aluminum and steel.

Whether the U.S.-Mexico agreement even goes into effect probably hinges on whether Canada signs on to the U.S.-Mexico revisions, which may be necessary before Congress would approve the new NAFTA. It also is unlikely U.S. manufacturers would support a Mexico-only agreement.

“Because of the massive amount of movement of goods between the three countries and the integration of operations which make manufacturing in our country more competitive, it is imperative that a trilateral agreement be inked,” said National Association of Manufacturers (NAM) President and CEO Jay Timmons.

The agreement encourages U.S. manufacturing and regional economic growth by requiring that 75 percent of auto content be made in the U.S. and Mexico. Auto industry manufacturers that don’t meet these requirements will pay a 2.5 percent tariff on vehicles crossing the border. The original NAFTA sets the floor at 62.5 percent. Another provision requires that 40 to 45 percent of auto content be made by workers earning at least $16 per hour.

One thing the new agreement does not do is eliminate the 25 percent tariff on steel and the 10 percent tariff on aluminum imported into the U.S. from all countries, including Mexico and Canada. Mexico’s Secretary of Economy Ildefonso Guajardo Villareal said after the agreement was signed that he hoped the tariffs on Mexican exports to the U.S. of steel and aluminum would be eliminated in any agreement approved by Congress.

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

FERC Pressed to Change Pipeline Approval Policies

Pipeline & Gas Journal - September 2018 for the original article go HERE.

Interstate pipeline companies are fending off efforts by environmental groups to pressure the Federal Energy Regulatory Commission (FERC) to make significant changes to its 1999 pipeline certificate policy. Groups such as the Chesapeake Bay Foundation, Delaware Riverkeepers, some members of Congress and others want the FERC to make it hard to establish economic need for a project and if that initial barrier is crossed, if it is crossed, look at an expanded menu of landowner and environmental concerns, both of which could lead to either slowing down approval for or even cancelation of a project where substantial demand exists. 

The Notice of Inquiry published in April cites four particular areas for reconsideration: “(1) The reliance on precedent agreements to demonstrate need for a proposed project; (2) the potential exercise of eminent domain and landowner interests; (3) the Commission's evaluation of alternatives and environmental effects under NEPA and the NGA; and (4) the efficiency and effectiveness of the Commission's certificate processes.”

Pipeline and anti-pipeline forces are on opposite sides of all those issues. The Interstate Natural Gas Association of America (INGAA) thinks the 1999 policy remains sound  but perhaps certain elements could use “a freshening up.” The INGAA adds, “Wholesale changes are unnecessary and likely would be counterproductive.” 

On the other hand, the Delaware Riverkeeper Network, which has worked to oppose nearly two dozen FERC pipeline projects “has identified significant and fundamental failures in FERC’s review and approval of pipelines.”

The FERC has this year made a number of pro-pipeline decisions that may indicate which way the wind is blowing at the commission. For example, in granting a certificate to DTE Midstream’s 14-mile Birdsboro pipeline in Berks County, PA in March 2018 the FERC said it would clamp down on allowing “out-of-time intervenors,” that is commenters who want to have their say after a comment deadline has passed. The FERC had previously said out-of-time comments could submitted for “good cause” but in Birdsboro the “good cause” caveat was eliminated, drawing dissenting comments from Commissioners Glick and LaFleur.

In its May 18, 2018 Order denying rehearing of a certificate of public convenience and necessity issued to Dominion Transmission, Inc., the FERC, according to the Riverkeepers, “announced a sudden and unprompted departure from FERC’s practice of evaluating the environmental impact of downstream greenhouse gas emissions from natural gas infrastructure projects and announced a new policy of not evaluating upstream or downstream greenhouse gas emissions in the vast majority of cases.”

Dominion has been in the cross-hairs of many environmental groups because of its Atlantic Coast Pipeline (ACP) which runs through West Virginia, Virginia and into North Carolina. A federal appeals court has sided with the Sierra Club and others about potential damage to stream crossings in very small sections of the 600-mile pipeline. The same court has also cited problems with compliance with Nationwide Permit 12, issued by the Army Corps of Engineers, by the Mountain Valley Pipeline (built by EQT Midstream Partners) which also runs through Virginia along the same general route as the ACP.

Sens. Tim Kaine and Mark Warner, both Democrats from Virginia, argue the two projects should have had their economic and environmental reviews done concurrently, and they should have been co-located along the same right of way, easing the use of eminent domain by pipelines. This support for “regional analysis” of new pipeline applications is a popular demand. The New Jersey Department of Environmental Protection seems to go even further arguing for co-location of the majority of a new pipeline and compressors in an existing right-of-way.

But it was by no means the only popular change supported by landowner and environmental groups who are pressing for greater weight being given to greenhouse gas emissions, both upstream and downstream. 

Although the INGAA, Dominion and other interstate pipeline companies are standing firm behind a “no significant change” position, they do open the door narrowly to small changes in the 1999 pipeline certificate policy. That includes more critical analysis of precedent agreements with affiliates. Boardwalk Partners says, “The Commission should place greater focus on ensuring that precedent agreements are the product of true arm’s-length negotiations.  For projects that are supported largely by precedent agreements entered into by affiliates of the pipeline, the Commission should ensure that the agreements are the product of genuine competition rather than an attempt to bolster the bottom line of the pipeline and affiliate’s common parent.” Boardwalk is a wholly owned subsidiary of Loews, Inc. whose interstate natural gas subsidiary companies include Texas Gas Transmission, LLC; Gulf South Pipeline Company, LP; Gulf Crossing Pipeline Company LLC; and Boardwalk Storage Company, LLC.  

Boardwalk’s position appears to put it at odds with the INGAA which argues, “The Commission should not distinguish between precedent agreements with affiliates and non-affiliates when considering the need for a proposed project because both appropriately represent market need.”

  

It terms of showing demand for a project, the INGAA urges the FERC to consider the economic and national security benefits stemming from exports of natural gas via cross-border pipelines and as liquified natural gas (LNG) that are facilitated by natural gas pipeline infrastructure. That may have some particular resonance given the European Union’s commitment in late July to buy more U.S. LNG as the price of forestalling President Trump’s threat to impose import duties on European autos. 

In terms of the “freshening up” the INGAA would support, that would include expanding FERC communication with landowners. It also advocates for allowing pipelines, following the issuance of a certificate, to conduct limited-scope work outside of approved work areas to accommodate landowners’ requests for non-pipeline related work. That work would be paid for by the pipelines, according to INGAA’s Cathy Landry. 

Author bio:

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

The 21st Century Cures Act: FDA Implementation One Year Later

P&T Journal - March 2018 for the original article go HERE or for a PDF go HERE.

Some Action, Some Results, Some Questions

Stephen Barlas 

Last July, Mallinckrodt announced that its regenerative skin tissue product StrataGraft had received a regenerative medicine advanced therapy (RMAT) designation from the Food and Drug Administration (FDA).¹ The RMAT designation was established in the 21st Century Cures Act,² the bill passed by an overwhelming vote in Congress in December 2016 and signed by President Barack Obama amid praise from industry and patient advocacy groups. The bill opened the door to a grab bag of FDA regulatory initiatives, including the new RMAT designation, aimed at making it easier, faster, and cheaper for drug manufacturers to introduce new products, such as StrataGraft, a cell-based tissue graft that would provide a treatment for burn victims that does not exist today. By bestowing the RMAT designation, the FDA put Mallinckrodt on a path to earn priority review and/or accelerated approval of the product.

Since the start of 2017, the FDA has awarded 13 RMAT designations out of approximately 43 applications, according to the agency. Michael Werner, Co-Founder and Senior Policy Counsel for the Alliance for Regenerative Medicine (ARM), says the FDA “has moved very, very quickly to implement statutory language from the Cures bill.”

The establishment of the RMAT designation was one of about 60 initiatives the Cures Act authorized the FDA to take. The key provisions in the law are found in Title III, Part II, which contains Subtitles B–G, each of them containing multiple requirements. Subtitle B is “Advancing New Drug Therapies,” Subtitle C is “Modern Trial Design and Evidence Development,” and Subtitle D is “Patient Access to Therapies and Information.” Each contains provisions concerning items such as qualification of drug development tools, real-world evidence (RWE), standards for regenerative medicine, and grants for continuous manufacturing. Subtitle F contains provisions on medical device innovation.²

 A year into implementation, the FDA has already chalked up some accomplishments, such as launching the RMAT designation. But implementation of the nearly 60 “to-do” items in critical Title III appears to be moving slowly in some areas and faster in others, in some cases because of the long lead times Congress allowed for FDA action and in other cases because of personnel limitations.
Where implementation has been minimal may have something to do with the multiplicity of open jobs at the FDA. “It is hard for me to argue that if we are down hundreds of slots in our drug center, for example—and I think that is what you refer to—that that doesn’t have an impact on the overall operation,” FDA Commissioner Scott Gottlieb, MD, told the House Energy and Commerce Committee on November 30 when he provided an update of progress a year after the bill passed Congress.³

“It is my opinion that Commissioner Gottlieb is leading the charge on implementation and has energized FDA staff with great expectations and a sense of possibility due to the Cures Act,” says Mark McLellan, Chairman of the FDA Science Advisory Board and Vice President for Research at Utah State University. “Regarding personnel limitations, the board is on record with concerns regarding hiring limitations and challenges as seen over the years.”

Many of the 60 initiatives under Title III were supposed to be funded (i.e., staff hired) with money from a $500 million Innovation Fund, which would be available over 10 years starting in fiscal year (FY) 2017, which ended last September 30.² But the money has to be appropriated each year by Congress, and the annual amounts—$20 million in FY 2017 and $60 million in FY 2018—are fairly minimal. The FDA has received the first $20 million. However, Congress must appropriate FDA Innovation Funds every year, and that is no sure thing.

The FDA can use its base budget from Congress to fund Title III programs. The Center for Drug Evaluation and Research (CDER) had a $1.4 billion budget in FY 2017, while the Center for Biologics Evaluation and Research (CBER) was funded at $360 million. Some of the Title III sections concern CBER programs. However, it is a bit more problematic for the FDA to take user fees that drug companies pay to the FDA and apply them to Cures Act programs because those user fees, totaling $866 million in FY 2017 for CDER, comprise a big percentage of the FDA’s operational budget and are generally tied to commitments the FDA made to the pharmaceutical industry when the two sides negotiated a new user fee agreement in 2016 prior to the Cures Act being passed. Nonetheless, some of the user fee commitments were negotiated with Cures Act provisions somewhat in mind.

Malcolm Bertoni, the FDA Associate Commissioner for Planning, explained the complexity surrounding funding for the Innovation Fund when he addressed the FDA’s Science Board on May 9, 2017. He stated, “That complexity is compounded by the uncertainty introduced by the transition to a new administration and the uncertainty in how budget priorities are going to play out, as well as the uncertainty about the reauthorization of the user fee programs and whether the current draft legislation will pass as written.”⁴

Oncology Center for Excellence: A Marquee Provision

At the House hearings at the end of November, Dr. Gottlieb highlighted the FDA’s “standing up” of its new Oncology Center for Excellence (OCE) as “one of our first achievements” related to the Cures Act.³ Actually, former FDA Commissioner Robert M. Califf, MD, announced the establishment of the OCE six months before Congress passed the Cures Act, in good part to support the National Cancer Moonshot Initiative established by President Obama in 2017 and spearheaded by Vice President Joe Biden. What the Cures bill did was require the FDA to create additional centers of excellence patterned after the OCE. That has not happened. Dr. Gottlieb noted the FDA is “contemplating” similar centers for immunology and neuroscience.³

The Cures Act did not provide the FDA with money for the OCE; however, the National Institutes of Health (NIH) was tasked with sharing some of its $1.8 billion Moonshot money (over 10 years) with the OCE. The NIH received $4.8 billion over 10 years for four programs, including the Cancer Moonshot (see related coverage on page 131 of this issue).² At the House hearings, Dr. Gottlieb explained, under questioning from U.S. Representative Diana DeGette (D-Colorado), “There have been some challenges associated with transferring those funds to FDA, some legal challenges.”³ He was referring to the transfer of Moonshot money to the OCE. The implication was that the OCE has been hamstrung, its small budget of $3.6 million in FY 2017 undoubtedly less than the FDA hoped for when it expected an infusion of Moonshot funds.

Reflecting its underfunded status, the OCE has nine employees to date in a full-time but “acting” capacity. Richard Pazdur, MD, was named the permanent Director on January 19, 2017, but he also serves as Acting Director of the Office of Hematology and Oncology Products at CDER. So his time is split between the two offices.

The OCE appears to be a promising model. It apparently made a major contribution when the FDA approved tisagenlecleucel (Kymriah, Novartis) in late August for certain pediatric and young adult patients with a form of acute lymphoblastic leukemia. At the time, the FDA called the approval “historic,” making it the first gene therapy available in the United States, ushering in a new approach to the treatment of cancer and other serious and life-threatening diseases.

Before the House committee, Dr. Gottlieb called the OCE’s role in the approval of tisagenlecleucel “instrumental” and stated, “I think the essential point is the center allows us to consolidate the clinical review and take a more multidisciplinary approach to how we look at the evaluation of efficacy and safety around these products. And we do think that this kind of center approach represents the future of how we want to approach other therapeutic spaces.”³

In December 2016, the American Society for Clinical Oncology (ASCO) issued a press release calling the Cures Act “historic.” Despite Dr. Gottlieb’s praise, ASCO spokeswoman Rachel Martin says, “Unfortunately we don’t have enough information to provide additional comments on the OCE.”

Biomarkers

Just as the existence of the OCE predated passage of the Cures Act, so did the FDA’s biomarker program, which has been in place since 2006 when a White Paper was issued. Biomarkers are seen as a means of telling drug developers earlier whether their drug may have toxicity or that it may not work at all, and to get that early read on what’s going to be successful. In the past, biomarkers have been developed by single companies conducting clinical trials and have been, for the most, proprietary. But rousing successes on biomarkers have been few and far between. At the House hearings, U.S. Representative Eliot Engel (D-New York) said, “My understanding is that a lack of taxonomy and evidentiary standards has made it difficult to develop workable biomarkers that can be replicated during the drug approval process.”³

The Cures Act anticipates consortiums applying for biomarker qualification, and once accepted and validated, those biomarkers would be publicly available, allowing any company to use them. Dr. Gottlieb said the FDA currently has eight biomarkers under consideration as part of the new three-step qualification process endorsed by the Cures Act. The sponsors of those eight applications have not been made public.

Besides establishing this new qualification process, it is not clear if the FDA is using standards different than it was using before. The minimal FDA biomarkers qualification website is silent on that. So it is hard to tell whether the 21st Century Cures bill has led to substantive changes in qualification or to bureaucratic changes only, given that there has been some “office shuffling” within the FDA to ostensibly ease the way for biomarker approval. What is known is that the FDA has progressed further with clinical outcomes assessment (COA) tools that are linked with biomarkers in the Cures Act provision on “drug development tools.” The first COA from the COA Drug Development Tool Qualification program has been accepted—the Symptoms of Major Depressive Disorder Scale—and the agency expects to act on that submission soon, according to Dr. Gottlieb.³
Dr. Gottlieb was a little defensive with regard to progress on drug development tools, both biomarkers and COAs. “So that might not sound like a big number,” he explained to the House committee, referring to the number of applications in the new qualification pipeline. “In our estimation, it is a profound number given the fact that these are still early days in the development of these new frameworks, and we are seeing this level of interest.” ³

Real-World Evidence

While the promise of biomarkers is that they will shorten clinical trials, clinical trials will remain the sine qua non of drug development. Sections 3021 and 3022 of the Cures Act focus on novel clinical trial designs and RWE, respectively.² These have been hot topics, especially RWE, considered to be post-market data from health insurance databases, disease registries, and other compendia that can be used by the FDA, instead of clinical trials, to approve new uses of existing drugs. The Cures Act gives the FDA two years to establish a draft framework for a program to evaluate the potential use of RWE.

The FDA has made more progress on RWE for medical device approval than for drug approval. There is final guidance on the former, but none on the latter. The FDA actually used RWE, in this case data from the Transcatheter Valve Therapy Registry, a partnership of the American College of Cardiology and the Society of Thoracic Surgeons, as part of the rationale for its approval last June of the Sapien 3 transcatheter heart valve (Edwards Lifesciences), which is implanted in high-risk patients whose surgically placed aortic or mitral bioprosthetic valves are old and worn out.

On the drug side, with regard to RWE, the FDA has established a big data analytics initiative called Information Exchange and Data Transformation (INFORMED), which is being run out of the OCE.⁵ One aspect of that effort is a collaboration with Flatiron Health to examine how RWE can be used to gain insights into the safety and effectiveness of new cancer therapies. In addition, in June 2017, the FDA announced a partnership with CancerLinQ, ASCO’s big data initiative. The initial focus will be on immunotherapy agents approved for melanoma.⁶

RMAT Designation

Moving from data to disease, the FDA established the RMAT designation program, as authorized in section 3033 of the Cures Act.² The program covers therapeutic tissue engineering products, human cell and tissue products, and combination products, as well as gene therapies that lead to a durable modification of cells. To qualify, a product must be:

• Defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products;
• Intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and
• Preliminary clinical evidence indicates the product has the potential to address unmet medical needs for such a disease or condition.

The RMAT program is housed at CBER. Products granted designation are eligible for increased early interactions with the FDA, including all the benefits available to breakthrough therapies. Because these are considered investigational products, the FDA does not identify which products have gained RMAT designations unless the company makes an announcement itself, as Mallinckrodt did with StrataGraft.¹

In November 2017, the FDA released two draft guidance documents describing the expedited programs available to sponsors of regenerative medicine and describing how CBER will encourage flexibility in clinical trial design to facilitate the development of data to demonstrate the safety and effectiveness of regenerative medicine therapies. The first addresses how the FDA intends to simplify and streamline its application of the regulatory requirements for devices used in the recovery, isolation, and delivery of RMATs, including combination products.⁷ The second draft document describes the expedited programs that may be available to sponsors of regenerative medicine therapies, including priority review and accelerated approval.⁸

Michael Werner, of ARM, explains that the RMAT designation is significant for two reasons. First, it sends a signal to the regulated industry and patients waiting for therapy that there will be a specific pathway for new products. There wasn’t one before. That puts the U.S. on the same footing as countries such as Japan, which have been more aggressive. Second, the designation allows a company to have meetings early in the clinical trial process with the FDA, which are, according to Werner and many others, “a real factor in determining success.” Designees also acquire the ability to use RWE, which is particularly important where a chemical is seen as having an impact on a rare disease but where recruitment for large clinical trials is close to impossible. There is also access to expedited approval pathways.

Peter Marks, MD, Director of CBER, acknowledged to the FDA’s Science Advisory Board last May that the scientific challenges behind regenerative therapies are “significant.” One of the key challenges is trying to facilitate reproducibility in manufacturing. Dr. Marks said CBER was “in the process now of working toward getting these partnerships in place because we very much agree that having development in a collaborative manner of standards that help with the development of these products will facilitate reproducible manufacturing and will hopefully take some of the uncertainty out of product development.”⁴ With that challenge in mind, the FDA awarded a $2.3 million contract in November to Nexight Group LLC, which has one year to write a report on the standards landscape for regenerative medicine therapies.

While the Cures Act seeks to set the stage for manufacturing improvements for regenerative products via an initial framework of consensus standards, there is a Cures Act provision that jumps directly into manufacturing, in this case what is called continuous manufacturing. Continuous manufacturing—a technologically advanced and automated manufacturing method—provides a faster, more reliable way to make pharmaceuticals. This can help reduce drug shortages and recalls related to problems with product or facility quality. During FY 2017, CDER granted an award to the University of Connecticut to develop and build a continuous manufacturing platform with modular components for complex dosage forms, as well as to create a library based on graphical user interfaces. These activities support quality-based risk assessment and provide a roadmap to modernize technology and solve continuous manufacturing challenges for complex dosage forms. They can also help the agency with review processes and provide necessary information to guide policy development.

The FDA has made significant progress implementing some of the 60 provisions of the 21st Century Cures Act. To the extent that it could have been expected to make more progress in some areas, the fault lies partly with funding shortfalls, which is no fault of the agency’s. Those money problems may be remedied. That will be up to Congress.

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C., who covers issues inside the Beltway. Send ideas for topics and your comments to sbarlas@verizon.net.

References

1. Mallinckrodt Pharmaceuticals. U.S. FDA designates Mallinckrodt’s StrataGraft as regenerative medicine advanced therapy July 18, 2017; Available at: www.mallinckrodt.com/about/news-and-media/2286957 (link is external). Accessed January 16, 2018
2. Upton F.H.R. 6—21st Century Cures Act. 114th Congress (2015–2016) July 13, 2015; Available at: www.congress.gov/bill/114th-congress/house-bill/6/text (link is external). Accessed January 16, 2018
3. Committee on Energy and Commerce Subcommittee on Health. Implementing the 21st Century Cures Act: An update from FDA and NIH November 30, 2017; Available at: https://energycommerce.house.gov/hearings/implementing-21st-century-cures-actupdate-fda-nih (link is external). Accessed January 16, 2018
4. Food and Drug Administration. Transcript: meeting of the Science Board to the FDA May 9, 2017; Available at: www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/ScienceBoardtotheFoodandDrugAdministration/UCM563680.pdf (link is external). Accessed January 16, 2018
5. Food and Drug Administration. Information Exchange and Data Transformation (INFORMED) May 10, 2017; Available at: www.fda.gov/AboutFDA/CentersOffices/OfficeofMedicalProductsandTobacco/OCE/ucm543768.htm (link is external). Accessed January 17, 2018
6. American Society of Clinical Oncology. CancerLinQ partners with FDA to study real-world use of newly approved cancer treatments June 1, 2017; Available at: www.asco.org/about-asco/press-center/news-releases/cancerlinq-partners-fdastudy-real-world-use-newly-approved (link is external). Accessed January 17, 2018
7. Food and Drug Administration. Evaluation of devices used with regenerative medicine advanced therapies: draft guidance for industry November 2017; Available at: www.fda.gov/downloads/BiologicsBloodVaccines/GuidanceComplianceRegulatoryInformation/Guidances/CellularandGeneTherapy/UCM585417.pdf (link is external). Accessed January 17, 2018
8. Food and Drug Administration. Expedited programs for regenerative medicine therapies for serious conditions: draft guidance for industry November 2017; Available at: www.fda.gov/downloads/BiologicsBlood-Vaccines/GuidanceComplianceRegulatoryInformation/Guidances/CellularandGeneTherapy/UCM585414.pdf (link is external). Accessed January 17, 2018

Talk of a “Default” Drug Formulary Rattles Industry

P&T Journal - February 2018 for the original article go HERE or a PDF version go HERE.

CMS Could Move in That Direction for Marketplace Plans After 2019, but the Discussion Has Already Started

The Trump administration’s creep toward significant prescription drug policy changes across federal health programs has rattled drug industry sectors up and down the distribution pipeline. In its proposed regulatory initiatives for the federal health insurance exchanges in 2019,¹ the Centers for Medicare and Medicaid Services (CMS) startled manufacturers, pharmacy benefit managers (PBMs), P&T committees, and pharmacies alike by promising to consider a federal default prescription drug benefit in years after 2019. The agency wants that discussion to begin now, and the chance that a national formulary will be dictated for the marketplace plans, along with drug price transparency changes that remain unspecified in the proposed rule, would amount to a small earthquake for the pharmaceutical industry.

Any federal standard might impinge on the current flexibility that marketplace insurers have to develop formularies. The CMS doesn’t provide data to explain why it is holding out the possibility of a federal default standard, which would ostensibly crimp state regulatory flexibility over the marketplace, except to cite an Institute of Medicine report from 2011 called Essential Health Benefits: Balancing Costs and Coverage.² That report advocated a federal standard for the 10 essential health benefit (EHB) categories that each qualified health plan (QHP) must offer to “better align medical risk in insurance products by balancing costs to the scope of benefits.” Pharmaceuticals make up one of the 10 categories. Currently, QHPs in every state must at a minimum provide all the benefits in a state’s benchmark plan. The benchmark plans vary from state to state.

In its proposed rule for 2019 exchange policies, the CMS says it might establish a federal default standard for all 10 EHB categories. But the agency appears to single out the pharmaceutical category by implying that even if it doesn’t mandate a federal default standard for all 10, it may do so for drugs alone. The proposed rule states: “For now, we solicit initial comments on this longer-term approach, particularly with regards to setting a national prescription drug benefit standard under a Federal default EHB definition and the tradeoffs in adjusting benefits from the current EHBs.” The use of the word “particularly” seems to single out prescription drugs compared with the other nine categories.

The prospect of a federal default standard for drugs has been taken to mean that the CMS would establish an arbitrary, restrictive drug count for each medication category and class, eliminating the flexibility QHPs have now. In doing so, the government might favor certain pharmaceuticals, perhaps using a “value-based” analysis to determine drug placement. The Pharmaceutical Research and Manufacturers of America (PhRMA) “was both surprised and dismayed that CMS stated it is considering adopting a ‘national prescription drug standard under a Federal default EHB definition’ for some benefit year after 2019,” Karyn Schwartz, PhRMA’s Vice President for Policy and Research, wrote in response to the proposed rule.

It isn’t just drug industry partisans who are worried. Patient advocacy groups have also reacted negatively. “Developing a ‘federal default plan,’ which ironically would be the antithesis of providing state flexibility, raises red flags because it most likely would not be expansive and meet the needs of people living with serious and chronic conditions,” said Beatriz Duque Long, Senior Director of Government Relations for the Epilepsy Foundation, who was quoted in a press release expressing opposition from a wide range of groups.³ “It also could lead to the creation of a national drug formulary, which we strongly oppose because it would limit access to only a select list of drugs and fail to meet individual patients’ health care needs.”

Any new national prescription drug benchmark, which all states might have to follow, would undercut the role of P&T committees, which QHPs are required to use for the purposes of considering newly approved medications and establishing treatment guidelines. P&T committees also play a role with regard to “nondiscrimination” requirements, which prohibit excessive patient cost-sharing, excessive utilization management techniques (such as prior authorizations), and placement of every drug that treats a certain condition on the highest tier.

“Express Scripts has serious concerns with any proposal attempting to set a national prescription drug benefit because we have always believed that P&T committees should play an integral role in developing clinically appropriate formularies that meet the needs of plan sponsors’ diverse patient populations,” wrote Sergio Santiviago, Director of Government Affairs for Express Scripts.

PBMs, QHPs, and others appear to believe that a federal default standard for drugs would be even worse than the current standard, which gives states two options. A national benchmark is presumed to be an effort to narrow formularies and cut the legs out from under P&T committees that have flexibility to shape plans in a given state. In fact, patient advocacy groups, pharmaceutical manufacturers, PBMs, and others are pressing the CMS to go in the opposite direction by broadening allowable exchange formularies, not contracting them.

What is likely to happen now is a much more in-depth, national discussion about whether the 13 million Americans who had exchange policies in 2017 were able to access drugs they needed at an affordable price (that 13 million is almost certain to decrease in 2018 and beyond because Congress canceled the requirement to obtain coverage or pay a fine). Any analysis will examine trade-offs such as the relationship between formulary construction and consumer drug prices underlined by an examination of tiering, copayments, and premiums.

Under current law, states establish benchmark plans that contain benefits in 10 categories. Those benefits must meet federal minimum standards. One category is pharmaceuticals. There, the benchmark must have: 1) one drug in every United States Pharmacopeia (USP) category and class, or 2) the same number of prescription drugs in each category and class as the EHB benchmark plan. There are additional requirements, too, related to P&T committees, exceptions for drugs not on a formulary, appeals to plans, and other issues

Are Drug Costs for Exchange Consumers a Problem?

There is nothing preventing a QHP from offering as many drugs in a category and class as it wants. Nor does the CMS have any data on how many QHPs offer only one drug in each USP category and class. With regard to cost, every exchange member has an annual out-of-pocket dollar limit. For the 2017 plan year, that limit was $7,150 for an individual plan and $14,300 for a family plan.⁴ How quickly someone reaches those caps depends on his or her plan’s deductibles and coinsurance.

Exchange plan deductibles cut more deeply into consumer pockets when it comes to drugs. Each QHP offers four levels of care based on cost, the so-called four metal categories: bronze, silver, gold, and platinum, with platinum having the highest premiums, lowest deductibles, and lowest coinsurance payments. But deductibles at all four levels have been increasing. Deductibles for individuals enrolled in the lowest-priced Patient Protection and Affordable Care Act (PPACA) health plans averaged more than $6,000 in 2017. Families enrolled in bronze plans had average deductibles of $12,393, according to a study by the consumer insurance comparison site HealthPocket.⁵

Those high deductibles take a bigger bite out of pocketbooks in the pharmaceutical category because consumers pay the list price for a drug prior to reaching their deductibles, when they start paying the discounted price the QHP’s PBM has negotiated with the manufacturer. In its comments, PhRMA pointed to an analysis from the actuarial firm Milliman that suggests this shift toward higher-deductible plans has had a disproportionate impact on cost-sharing for medicines. In its analysis, Milliman found that patients in a typical silver plan with a $2,000 deductible paid 46% of their total prescription drug costs while paying less than 30% of their costs for other medical care.⁶

The proposed rule the Department of Health and Human Services (HHS) issued in November is called the Patient Protection and Affordable Care Act: Benefit and Payment Parameters for 2019.¹ Comments were accepted until the end of November and a final rule could come in late winter or early spring 2018, given that QHPs must typically present their initial 2019 plans for approval to HHS by mid-May.

The proposed rule was extremely wide-ranging and technical, covering administrative, financial, medical, and legal issues, from risk adjustment models to medical loss ratio calculations to premium setting to EHB requirements, where states would be able to substitute benefits from other states’ EHB categories into their own benchmark plans, except in the case of pharmaceuticals, or eliminate some offerings within categories—for example, for pregnancy coverage.

The Rationale for the Proposed Rule

The exchanges established by the PPACA and considered a major legacy of President Barack Obama have been under attack since President Donald Trump took office in 2017. The Republican Congress failed to take a sharp legislative ax to the marketplace exchanges, though the requirement that individuals not covered by an employer or Medicare buy policies or pay a tax was canceled by the tax bill Republicans passed at the end of 2017. In the absence of a Congressional blade, the HHS has used its annual responsibility to update the exchanges as the vehicle to suggest changes that, on their face, are pegged as efforts to reduce insurance costs for consumers by increasing flexibility offered to both the states and the insurers, whose numbers have been decreasing as premiums have been rising.

The Republicans have been walking a politically narrow path, not wanting to incur retribution at the polls in 2018 for totally blowing up the exchanges but at the same time wanting to satisfy their base by fulfilling a promise to cancel key aspects of the PPACA. That will not happen legislatively, so the GOP is in fallback mode, depending on the Trump HHS to inject free-market solutions into the exchanges in an effort to stop the bleeding of insurers, put a tighter lid on premium increases, and hopefully induce salutary modifications to insurance policies related to coinsurance and deductions, the latter being particularly troublesome in the area of pharmaceuticals.

The potential replacement of the two-option standard with a new federal prescription drug benchmark and the agency’s stated intention to consider proposals in future rulemaking that would help reduce drug costs and promote drug price transparency are a clear Trump administration effort to continue its recent initiatives aimed at lowering consumer drug prices. The proposed exchange rule’s assault on allegedly high drug prices aligns with the administration’s final rule reducing reimbursement for 340B outpatient drugs and its proposal to force PBMs and Medicare Part D drug plans to convert a significant percentage of manufacturer rebates into pharmacy-counter discounts for seniors.⁷

But critics believe any attempt to reduce exchange premiums via a federal default drug standard would be a net negative in terms of plan affordability because formularies would contract and coinsurance would increase across all tiers. “We are concerned that efforts to improve plan affordability may focus solely on reducing premiums at the expense of offering meaningful coverage to patients at accessible cost-sharing levels,” wrote Angela Wasunna, Vice President of Global Policy at Pfizer, Inc.

The proposed CMS rule does not answer two very important questions: “what is wrong with the current drug standard,” and “why would a federal drug benchmark be preferable.” As to the first question, there isn’t much substantiation. Take oncology drugs, for example. They are among the top cost drivers among pharmaceuticals. Jennifer Singleterry, Senior Analyst of Policy Analysis and Legislative Support at the American Cancer Society Cancer Action Network, says that studies by her organization show that almost all cancer patients reach the annual out-of-pocket limit. But those patients typically are paying first for expensive diagnostic tests and some medical expenditures before they start racking up drug costs. So by the time they reach expensive cancer infusion drugs, they are already close to or at their cap, and not because of drug costs.

The EHB Category for Drugs

While nearly no one greeted the possibility of a default standard for drugs with cheers, neither is there much love lost for the current federal two-option standard. Although it offers state plans some flexibility, that standard still uses a vilified “drug-count” mechanism, specifying adherence to the USP methodology or “at least” the number of drugs in the state benchmark plan, which is generally based on a typical employer plan. Each plan offered in the state has flexibility regarding the tier where it places each drug. Typically, each formulary has four tiers, with the top tier holding the most expensive drugs with the highest coinsurance. The Kaiser Family Foundation’s 2017 Employer Health Benefits Survey found that 83% of covered workers are in a plan with three, four, or more tiers of cost sharing for prescription drugs.⁸

“P&T committees consider category and class frameworks, such as USP’s, in addition to a myriad of other information and evidence, and we see no reason why CMS should continue to use a drug-count standard that, at best, is unnecessary, and at worst, undermines the role of the P&T committee and the ability of issuers and their PBMs to negotiate better discounts with manufacturers,” wrote Wendy Krasner, Vice President of Regulatory Affairs for the Pharmaceutical Care Management Association, which represents PBMs.

CVS Health, which has 2.3 million lives under PBM management in the exchanges (18% of the total exchange population), says the current drug-count standard increases costs for plans and patients. CVS’s influence on exchange patients will grow if its acquisition of Aetna is completed, not to mention its influence over Anthem once that insurer gets its IngenioRx PBM up and running in 2019 with the help of CVS Health, which is required to develop and maintain at least 50 formularies for exchange plans in 50 states. This is in stark contrast to the typical employer plan serving workers in different states, which generally adopts a single national formulary. “Not only does the current approach pose operational difficulties and significantly increase administrative costs for issuers, but it also hampers their ability to harness the full power of their enrolled population in negotiating drug discounts with pharmaceutical manufacturers,” wrote Don Dempsey, Vice President of Policy and Regulatory Affairs for CVS Health.

Manufacturers, of course, generally want to see as many branded products as possible in each category, although companies vie with one another within categories to win favorable placement on tiers through higher rebates. But the two-option standard has significant hypothetical limitations in certain categories—oncology, for example. In its comments to the CMS, PhRMA used tyrosine kinase inhibitors (TKIs) as an example. First approved as a treatment for a rare form of blood cancer called chronic myelogenous leukemia (CML), TKIs represented a tremendous, targeted advance over traditional chemotherapy treatments that destroy healthy and cancerous cells indiscriminately. However, despite TKIs’ effectiveness, cancer often develops resistance to an individual TKI over time. Other options have become available. Dasatinib (Sprycel, Bristol-Myers Squibb) is a TKI specifically approved by the FDA for treatment of CML that is resistant or intolerant to prior therapy, including imatinib (Gleevec, Novartis), another TKI that may be considered to fall into the same class. Everolimus (Afinitor, Novaris) is approved for treatment of advanced renal cell cancer after treatment failure of sunitinib (Sutent, Pfizer) or sorafenib (Nexavar, Bayer Healthcare). If only a single drug were available in each class, patients whose cancer had progressed on or proven resistant to that initial treatment would not have access to appropriate care.

However, not everyone agrees that the current two-option benchmark floor presents a problem for patient access. Asked about PhRMA’s example, Mary Gleason Rappaport, Director of Policy Communications for the American Society of Clinical Oncology, replied, “At this point, we’re not seeing treatment access a problem for cancer patients on the exchanges.”

Measures to Improve Drug Price Transparency?

The proposed rule laying out exchange policy modifications also opens the door to drug price transparency measures. CMS seeks comments on ideas to “foster market-driven programs that can improve the management and costs of care and that provide consumers with quality, person-centered coverage,” particularly in relation to value-based insurance design.

Value-based drug contracts are a touchy subject. While drug manufacturers have been partly open to the notion, there has been little uptake, and the methodology used by the Institute for Clinical and Economic Review (ICER) has put it in the crosshairs of the National Pharmaceutical Council. On November 21, 2017, the ICER issued an evidence report for the first two drugs approved for tardive dyskinesia (TD), a repetitive, involuntary movement disorder caused by prolonged use of medications, most commonly antipsychotic drugs, that block the dopamine receptor. Until recently there were no FDA-approved therapies for TD. Valbenazine (Ingrezza, Neurocrine Biosciences, Inc.) became the first FDA-approved drug for TD in April 2017, and deutetrabenazine (Austedo, Teva) was approved for TD in August 2017. The ICER judges the cost-effectiveness of a drug based on gains in quality-adjusted life expectancy. At current pricing levels, however, the estimated lifetime cost-effectiveness of these agents fails by a large margin to meet common cost-effectiveness thresholds.⁹

That ICER has in effect undermined the appeal of some new drugs (and older ones, too) has encouraged groups such as the Academy of Managed Care Pharmacy (AMCP) to come up with a more amenable measuring stick for the value of drugs. In June 2017, AMCP held a multistakeholder Partnership Forum, “Advancing Value-Based Contracting,” where representatives from health plans and integrated delivery systems, PBMs, data and analytics experts, and biopharmaceutical companies agreed on areas to strengthen and improve value-based contracting (VBC), including: 1) a definition of VBC for facilitating discussion with key policy-makers, regulators, and other stakeholders; 2) strategies for advancing development and utilization of performance benchmarks; 3) best practices in evaluating, implementing, and monitoring VBCs; and 4) action plans to mitigate legal and regulatory barriers to VBC.¹⁰

But any move by the CMS to encourage VBC by insurers offering policies on the exchange (or under Medicare, for that matter) would have to involve parallel regulatory action outside the exchanges because federal antikickback and Medicaid pricing rules stand in the way of broader use of VBC.
Rather than focusing on VBC, PhRMA emphasized the cost-minimizing effect of PBMs, generics, and reduced hospitalizations. PhRMA suggested that the CMS somehow incentivize first-dollar coverage of drugs, meaning that they would not be subject to a deductible.

PhRMA makes some reasonable suggestions. And although drug price increases inside the exchanges and outside have moderated, some patient populations are paying eye-popping amounts for prescription drugs—amounts that are untenable for certain economic groups, even with annual caps on spending. A more aggressive cost-limiting approach in some categories is warranted. Whether a federal benchmark standard for drugs would accomplish that remains to be seen. But perhaps it is at least worth discussing.

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C., who covers issues inside the Beltway. Send ideas for topics and your comments to sbarlas@verizon.net.