House and Senate At Odds On Drug Pricing Legislation

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

Neither bill will pass as is but there’s room for compromise.

Momentum in Congress to pass legislation aimed at slowing down prescription drug price increases seems to have slowed as Democrats and Republicans are at loggerheads over competing solutions. However, given the heated criticism of pricing by drug manufacturer from both parties, Congress is likely to do something, perhaps passing legislation forcing companies to provide transparency on costs of drug development and other pricing factors. Key committees in both houses of Congress have passed separate bills.

The Democratic House bill is called the Lower Drug Costs Now Act (H.R. 3). It passed three separate House committees with nary a Republican “yea.” It was expected to be approved by the House sometime before the end of 2019 and, again, probably along party lines. It won’t pass the Senate as is. The Senate bill, which was approve by the Senate Finance Committee, is called the Prescription Drug Pricing Reduction Act (S. 2543). The legislation represents the bipartisan work of the Republican chairman, Sen. Chuck Grassley of Iowan, and ranking Democrat, Sen. Ron Wyden of Oregon. The bill, which has not come to the Senate floor as P&T went to press, passed the committee by a vote of 19-9. Every Democrat voted for the bill, but most of the Republicans, with the exception of Grassley and a few others, voted against it.

Both the House and Senate bills have many provisions aimed at lowering drug prices for seniors, and, in some cases, all consumers. The bills would also reduce costs for the Medicare and Medicaid programs. But the key provisions in each attempt to limit drug price increases and introductory prices, but they do so in very different ways. That divergence is the main reason neither bill will pass Congress as is.

Republican support of the Senate bill is doubtful because many in the party see the provision in the bill that forces down manufacturers’ prices as federal price controls, a characterization that Grassley and Wyden refute. The provision they are arguing about would require prescription drug and biological manufacturers to pay a rebate to Medicare equal to the difference their price hikes for Medicare Part B or D drugs or biologicals and the inflation rate, as measured by the Consumer Price Index for All Urban Consumers (CPI-U).

Adding to the bill’s political tribulations is a threat by Wyden to withdraw Democratic support unless a vote is held on the Senate floor on cementing insurance protections for people with pre-existing conditions.

In the House, the partisan divide is clear and thorough: Democrats are solidly behind the bill and the Republicans just as solidly against it. The legislation, which was put together with strong input from House Speaker Nancy Pelosi, would allow the Health and Human Services secretary to directly negotiate prices of drugs that are determined to contribute the most to Medicare drug costs and are without generic competitors. As written, the legislation says that a minimum of 25 drugs can be on that list and a maximum of 250 drugs. Drug manufacturers who opt out of accepting the secretary’s negotiated rates would incur steep penalties, beginning at 65% of the drug manufacturer’s gross sales of the drug from the prior year. For every quarter the drug manufacturer elects not to participate, the penalty would increase by 10%, with a maximum penalty of 95% of a drug’s gross sales. Like the Senate bill, the House bill has less controversial other provisions, such as reducing out-of-pocket costs and creating discount programs for eligible Medicare beneficiaries.

The Pharmaceutical Research Manufacturers Association (PhRMA) opposes both the Senate and House bill. “If H.R. 3 becomes law, it is lights out for a lot of very small biotech companies that are pre-revenue and depend on attracting capital,” Steve Ubl, PhRMA CEO told reporters in October. A PhRMA blog criticizes the Senate bill this way: “Unfortunately, the Senate Finance Committee has pushed for changes that would upend Part D without any immediate and meaningful savings for most patients at the pharmacy counter.”

Some patient advocacy groups are concerned that the Pelosi bill will cause drug manufacturers to tap the brakes on drug development. But other groups, like AARP, support the legislation and the stated intent of reining in drug prices.

The near certainty that neither bill will pass as is doesn’t mean that there isn’t room for compromise. For example, the Senate bill has a provision that requires companies to report “documentation to justify price increases” in 2021 for drugs with price increases of 100% in the preceding 12 months or at least 150% in the preceding two years. The numbers change slightly in successive years. The House requires reporting on drug price increases of 10% in one year or 25% over three years. Compromise legislation might a middle ground between the two bills.

Stephanie Kennan, a senior vice president at McGuireWoods Consulting, a major lobbying firm who was health policy advisor to Sen. Wyden for about 10 years, says, “The House has passed bills that reflect some of the provisions in the Senate Finance Committee’s proposal. It would make sense that some form of the Senate Finance Committee’s bill becomes the base of a compromise.”

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

P&T Committees May Want to Alter Some Formulary Policies Because of New Medicare Part D Standards

P&T Journal - for the original article go HERE.  For a PDF version go HERE.

Medicare’s proposed use of a new electronic prescribing (eRx) standard for prior authorization requests between physicians and Part D plans has been well received by the various players in the prescription drug delivery chain. That doesn’t mean, however, that it is problem free and without a number of concerns.

The new standard, which won’t be implemented prior to 2021, may force pharmacy and therapeutics committees to reconsider which tiers they put a couple of categories of drugs on. It may also prompt revision of step therapy policies.

The first thing to remember, though, is that there is no requirement that prescribers or plans implement eRx for seniors with Medicare outpatient drug coverage. But if they do, they must use standards sanctioned by the Centers for Medicare and Medicaid Services (CMS).

The current standard with regard to electronic prior authorization—the X12 278 standard designed to conduct batch transactions—was adopted mainly because it is compliant with HIPAA and was established mostly for durable medical equipment. So, understandably, the X12 standard is not really the right tool for the job. Important prescribing information can’t be inputted, and it doesn’t allow for “real-time” responses, or follow-up by physicians, health plans, or pharmacies.

For these and other reasons, CMS has proposed replacing the standards with National Council for Prescription Drug Programs (NCPDP) SCRIPT Standard Version 2017071. CMS had already designated that SCRIPT standard for eRx prescriptions starting January 1, 2020. It would become mandatory for electronic prior authorization transactions one year later, if CMS finalizes its proposed rule.

Today under Medicare Part D, prior authorization requests and responses are transmitted mostly by fax and phone using the X12 standard. Prior authorization, both within and outside Medicare health plans, is a big deal these days as more plans use it for opioid prescriptions in response to overprescribing and the opioid epidemic.

Prior authorization requirements for oncology drugs are also an issue because the drugs are increasingly expensive. Howard Burris III, MD, the president of the American Society of Clinical Oncology, expressed reservations about streamlining prior authorization in his comments on the new standard. He urged the agency to “exercise caution in order to avoid unintended consequences of restricting or delaying care, resulting in harmful outcomes.”

CMS was required to designate a standard for electronic prior authorization by the 2018 SUPPORT for Patients and Communities Act. CMS had endorsed the SCRIPT standard for Medicare eRX standards prior to the SUPPORT Act, but it was constrained from extending the SCRIPT standard to electronic prior authorization transactions by the HIPAA issue. The SUPPORT Act eliminated that barrier by saying a new standard could be adopted “notwithstanding” any other provision of law, if such proposals were made in consultation with stakeholders and the NCPDP or other standard-setting organizations. As a result, HIPAA noncompliance is not a barrier to adoption of the SCRIPT standard by Medicare.

Health plans and pharmacists appear to be generally happy with the application of the SCRIPT standard to prior authorization requests and decisions, even though some health plans with both Medicare and commercial plans currently use non-SCRIPT standards.

Joel White, the executive director of the Opioid Safety Alliance pointed out in his comments to CMS that in considering only two sets of electronic prior authorization transaction standards (X12 and SCRIPT) CMS “seemingly ignores current industry use of HL7 FHIR standards or APIs [application programming interfaces].” Leaving these additional standards out of consideration “unnecessarily and prematurely” limits the scope of public consideration and comments, wrote White. The agency’s proposed solution also runs “contrary to other agency efforts, such as increased interoperability and prohibiting information blocking,” he stated.

The American Association of Family Physicians has a different concern: the “significant administrative burden and/or access issues” that general practitioners face in introducing relevant software into their practices. The AAFP wants a “safe harbor” for primary care physicians and, like the Opioid Safety Alliance, the freedom to use standards other than SCRIPT if both a prescriber and a health plan agree to that. One of the concerns about imposing SCRIPT is that physicians might be faced with having to use different standards for e-prescribing within the state Prescription Drug Monitoring Programs and the Part D programs.

When all is said and done, CMS is likely to give physicians, pharmacies, and Part D plans some leeway in a final rule for eletronic prior authorization. Even so, P&T commmitees in and out of Medicare will have to consider new factors when putting together their prior authorization policies and programs.

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

NIH Establishes Early Version of Personalized Medicine Platform

P&T Journal - for the original article go HERE.  For a PDF version go HERE.

Congress has been pumping money into the precision-medicine initiative at the National Institutes of Health (NIH). The first, early results of that spending were announced on May 7, when the All of Us research project went live with three types of aggregate health data on 142,000 individuals. It was the first wave of what is expected to amount to, or hoped to amount to, one million participants. All of Us grew out of the 21^st Century Cures Act and is a favored target for federal funding. President Trump has proposed a 12% cut in NIH funding for fiscal 2020 (starting on October 1, 2019), which Congress is likely to reverse, as it has done in the last few years when similar cuts were asked for by the White House. However, the President’s 2020 budget does contain $313 million for All of Us.

The program was kicked off one year ago in seven cities around the country, with a particular emphasis on convincing members of underrepresented and minority communities to come forward with their health data. The idea is eventually to be able to check genomic data against environmental experience with a view to finding clues on the origin of various health conditions, so as to better target prevention and treatment measures. So far, more than 206,000 people have begun the enrollment process, and more than 142,000 have completed all the steps in the protocol. Most participants (> 75%) are from communities that have been underrepresented in biomedical research. “Those people are often left behind,” said Francis Collins, Director of NIH. “We’re hoping to chip away at vexing health disparities.”

A number of universities around the country have received grants to pay for participant enlistment efforts, including the University of Alabama at Birmingham (UAB). Bruce Korf, MD, Chief Genomics Officer, UAB Medicine, says, “The All of Us research program is creating an unprecedented rich set of medical and biological data on one million participants who reflect the diversity of the United States. It will provide the foundation for the broad application of precision medicine for years to come, including the development of approaches to predict individuals at risk of disease and more precise and effective treatments.”

The NIH program is headed by Eric Dishman, former vice president of the Health and Life Sciences Group at Intel Corporation, where he was responsible for driving global strategy, research and development, product and platform development, and policy initiatives for health and life science solutions. Dishman––and Collins, among others––spoke at the one-year anniversary conference held at NIH on May 6. He explained that All of Us works with a consortium of 2,000 organizations and people from local communities to convince individuals to provide three types of data: electronic health records, responses to survey questions, and physical measurements. The data are available on the All of Us website (https://databrowser.researchallofus.org/.), where one can view, for example, the top 10 health conditions and then drill down in each category to get breakdowns, such as the age of those people affected and other measures.

Dishman was honest in his appraisal of the initial product. “Our tools are pretty crude,” he said. “Over time, the viewer experience will get better.” He noted that the early data can’t be sorted by ethnicity or race, which would seem like a pretty important goal considering that the project’s overarching objective is mining health statistics from the African American and Hispanic populations.

Gary Gibbons, MD, Director of the Heart, Lung and Blood Institute at NIH, posited the potential by explaining that further study of genomic variations among African Americans could help explain the root causes of sickle cell disease. He noted that individuals’ African roots may have caused variations in their hemoglobin genes via interaction with malaria vectors, and ultimately resulted in the sickle cell trait. An individual could have one genetic copy of that trait, or two, and that difference would have health implications. On one hand, the variations could have been protective, against malaria. On the other hand, that same sickle cell trait may predispose African Americans to chronic kidney disease, for which they are at higher risk.

Beyond sickle cell disease, Gibbons noted that genomic/environmental interaction could identify people who are at increased risk for heart disease, hypertension, coronary disease, and asthma. “We’re working toward a day when we can predict that you’ll have atrial fibrillation, which today may only become manifest when you come to an emergency room feeling dizzy and short of breath with a rapid heartbeat. But if we already know from your polygenic risk score that you are [susceptible to] atrial fibrillation, you may be wearing a watch that detects your heart rhythm, allowing us to detect the arrhythmia and provide an electric jolt to short-circuit it.”

Much of the promise of the All of Us initiative appears to rest on genomic exploration, and there are no genomic data available at present. Collins said that the data would be included in 2020 and that the program has a “bold timetable” for enrolling the 800,000 individuals who would complete the cohort of one million.

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

House Democrats Push Competing Drug Price Transparency Bills

P&T Journal - for the original article go HERE.  For a PDF version go HERE.

May Provide Useful Data, But Not Downward Pressure on Prices

It was undoubtedly a coincidence that Novartis subsidiary AveXis announced “innovative access” programs on May 24, 2019, for its new drug Zolgensma (the highest-priced ever) three days after the House Energy and Commerce health subcommittee was considering new bills to rein in costs of new and existing drugs. Zolgensma (onasemnogene abeparvovecxioi) is the latest entrant in the expensive gene-therapy category; the onetime treatment for a fatal early childhood disease is projected to cost somewhere around $2 million. This price is based on the fair-price analysis that the Institute for Clinical and Economic Review carried out, and which Avexis cited in its May announcement (although they didn’t include the dollar amount). Avexis argued that Zolgensma’s one-time cost will be 50% lower than the current 10-year cost of spinal muscular atrophy (SMA) therapy.

Novartis’ agreeing to some form of value-based pricing with several health insurers is unlikely to silence criticism of the $2 million pricetag, however. What’s more likely is that Zolgensma will become a topic of congressional rhetoric as Sovaldi and Firdapse did during the May 21 hearings. Those hearings featured two competing drug price “transparency” bills, which Democrats are pushing as part of their effort to reduce high prices.

One bill––Stopping the Pharmaceutical Industry from Keeping Drugs Expensive Act, aka the “SPIKE Act” (H.R. 2069)––has already passed the House Ways and Means Committee. The Energy and Commerce health subcommittee also considered the Fair Accountability and Innovative Research Drug Pricing Act or “FAIR Drug Pricing” Act (H.R. 2296).

The two bills are similar, as both require companies to notify the Department of Health and Human Services (HHS) when the price of an existing drug increases by a certain percentage, or when a new drug is introduced whose price exceeds some threshold (SPIKE Act only). That notification must include certain information, including total expenditures on R&D, as well as revenue and profit for the applicable drug. Neither bill limits price increases.

Mark Miller, until recently the executive director of the Medicare Payment Advisory Commission, said the bills might produce some useful information, “but in and of themselves [they] won’t be enough to affect the drug price issues you’re facing now.”

Fred Isasi, Executive Director of Families USA, was particularly critical of Sovaldi and Firdapse’s makers. Gilead ended up with Sovaldi after purchasing Pharmasett, which had undertaken substantial R&D in 2011. Isasi stated that Gilead asked someone on Wall Street how it should price Sovaldi, got an answer, and then quadrupled the recommended price. Sovaldi, used to treat hepatitis C, was originally priced around $84,000.

Raymond Schinazi, who is now a professor at Emory University and Co-Director of the HIV Cure Scientific Working Group within the Emory University Center for AIDS Research, was co-founder of Pharmasett and did some of the early research on Sovaldi. Schinazi says, “Gilead bought Pharmasset for $11.4 billion but made more than $15 billion selling Sovaldi in the next 12 to 14 months after launch. Pretty impressive! I wasn’t involved in any way in the pricing, but I do feel it was somewhat excessive [as] this isn’t an orphan disease... more than 71 million people are infected globally.”
He adds, “When Gilead bought Pharmasset, the drug wasn’t perfect [because] it had to be combined with something other than interferon and/or ribavirin. There was no guarantee the drug was going to be approved. Gilead did do a lot of R&D and sponsored many clinical trials that led to Sovaldi’s approval.”

Firdapse, which is used to treat a rare neuromuscular disease, was acquired last year by Catalyst Pharmaceuticals from Jacobus Pharmaceutical. Its cost increased to $375,000 per year, after having been free through the FDA’s compassionate-use program for people who needed it. Extraordinary price hikes for long-existing generic drugs such as insulin have also been the subject of previous congressional hearings.

The consulting firm KEI submitted a paper to the health subcommittee noting that many developed countries limit annual price increases for drugs. Canada limits increases to the consumer price index increase (CPI). “It should be noted that the United States is an outlier regarding the freedom to increase prices beyond the general rate of inflation,” KEI reported.

Representative Mark Pocan (D-WI) has introduced a bill that would limit price increases. The Stop Price Gouging Act (H.R. 1093) imposes an excise tax on companies selling prescription drugs that are subject to price spikes and that exceed the annual percentage increase in the Chained CPI.
Pocan’s bill wasn’t included in the May 21 hearing, and there was no response from his spokesman as to why.

Miller informed the health subcommittee about several options for Congress to rein in high drug prices, particularly regarding Medicare Parts B and D. He has endorsed a number of initiatives that the Trump administration has either proposed or accomplished via rulemaking. However, the bills that the House subcommittee considered on May 21 touched on very few items on Miller’s list, if any.

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

EPA Ditches Spray Requirement for Two Key Metal Fabrication Sectors

The Fabricator - for the original article go HERE.

Agency won’t mandate the use of high-efficiency spray equipment for coatings application.  The Environmental Protection Agency’s (EPA) final rule on air contaminant limits for two metal manufacturing sectors involved in surface coating applications was notable for provisions the agency did not include.

The good news for those in the metal furniture and large-appliance manufacturing segments is that the agency, in the end, stepped back from some mandates it had been thinking of requiring. One mandated the use of high-efficiency application equipment for spray coatings. In its proposed rule, the EPA made a critical assumption that the four high-efficiency spray equipment technologies rulemaking (which covered high-volume, low-pressure; electrostatic application; airless; and air-assisted, airless spray equipment) would achieve at least 65 percent transfer efficiency when used in painting metal furniture and large appliances.

Those two fabricating sectors are under separate National Emission Standards for Hazardous Air Pollutants (NESHAP). The EPA is supposed to conduct a residual risk and technology review (RTR) every eight years after a NESHAP goes into effect. The idea is to see whether air contaminant limits in the NESHAP are still appropriate. But the agency said in the final RTR rule that new information led it to conclude that the transfer efficiency of the proposed high-efficiency spray application technologies may be less than 65 percent, as it is dependent on parameters such as part size, part shape, distance of the spray gun from the parts, atomizing air pressure, fluid pressure, painting technique, type of coating, viscosity of the coating, and other factors.

The EPA, after getting pushback from the American Coatings Association, admitted it did not have enough good data to make a new requirement stick. Besides that, the agency said a number of states already require high-efficiency spraying, and that companies already lean toward using it, required or not, because it reduces coatings consumption and lowers waste disposal costs.

As a result of this joint RTR, the EPA did not tighten air emission limits for either metal furniture or large-appliance manufacturers. However, the EPA did finalize a new requirement that companies in the two categories must submit electronic copies of certain required performance test reports through the agency’s Central Data Exchange website.

EPA also is requiring manufacturers to conduct control device performance testing in certain situations.

The good news for those in the metal furniture and large-appliance manufacturing segments is that the agency, in the end, stepped back from some mandates it had been thinking of requiring. One mandated the use of high-efficiency application equipment for spray coatings. In its proposed rule, the EPA made a critical assumption that the four high-efficiency spray equipment technologies rulemaking (which covered high-volume, low-pressure; electrostatic application; airless; and air-assisted, airless spray equipment) would achieve at least 65 percent transfer efficiency when used in painting metal furniture and large appliances.

Those two fabricating sectors are under separate National Emission Standards for Hazardous Air Pollutants (NESHAP). The EPA is supposed to conduct a residual risk and technology review (RTR) every eight years after a NESHAP goes into effect. The idea is to see whether air contaminant limits in the NESHAP are still appropriate. But the agency said in the final RTR rule that new information led it to conclude that the transfer efficiency of the proposed high-efficiency spray application technologies may be less than 65 percent, as it is dependent on parameters such as part size, part shape, distance of the spray gun from the parts, atomizing air pressure, fluid pressure, painting technique, type of coating, viscosity of the coating, and other factors.

The EPA, after getting pushback from the American Coatings Association, admitted it did not have enough good data to make a new requirement stick. Besides that, the agency said a number of states already require high-efficiency spraying, and that companies already lean toward using it, required or not, because it reduces coatings consumption and lowers waste disposal costs.

As a result of this joint RTR, the EPA did not tighten air emission limits for either metal furniture or large-appliance manufacturers. However, the EPA did finalize a new requirement that companies in the two categories must submit electronic copies of certain required performance test reports through the agency’s Central Data Exchange website.

EPA also is requiring manufacturers to conduct control device performance testing in certain situations.

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

Democratic Takeover of House Sparks Drug-Price Legislation Talks

P&T Journal - for the original article go HERE.  For a PDF version go HERE.

But Strong Legislation Unlikely Given Patient and Industry Opposition

Representative Elijah Cummings (D–MD), chairman of the House Oversight and Reform Committee, was apoplectic. He was delivering his opening statement at the committee’s first hearing for 2019, titled Examining the Actions of Drug Companies in Raising Prescription Drug Prices. He was describing the devastation felt by his leading witness, Antoinette Worsham, whose diabetic daughter had died for lack of the insulin medicine she could not afford. “It would have cost $1,000 for three months of insulin!” Cummings thundered into the microphone in his opening statement. “She died.”

On the other side of Capitol Hill, that same day, Senator Ron Wyden (D–OR), was pounding his right hand on the dais during the Finance Committee’s first hearing of the year, probably not coincidentally titled (given the House committee’s hearing the same day) Drug Pricing in America: A Prescription for Change, Part 1. Wyden had just addressed Kathy Sego, another mother whose college-age son with stage 1 diabetes had resorted to rationing insulin because the cost per month, even with insurance, was $1,700. “Manufacturers are taking advantage of families like yours,” Wyden, the top Democrat on that important committee, said, his voice rising. Then pounding the tabletop in front of him, he added, “No one has been willing to take them on. That ends today.”

President Trump has been condemning high drug prices since the start of his term, and his Department of Health and Human Services (HHS) has issued a number of proposed regulations that would attack high prices on a number of fronts. In the last Congress, there was plenty of fire and brimstone aimed at drug companies, and from both parties, but no significant pricing-reform legislation advanced. That was in large part a result of legislative roadblocks in the Republican-controlled House.

With Democrats taking control of the House this year, the 116^th Congress looks to be in sync with Trump on drug prices and theoretically—theoretically being the key word—able to move forward with legislation clamping down on unreasonable drug prices. But although there is a lot of rhetorical thundering from Democrats in this new Congress, there are indications that actions may not speak louder than words. Already, key Democratic House committee chairmen have indicated opposition to some of the reforms pushed by the Trump administration, such as ending the current safe harbor for rebates paid to pharmacy benefit managers (PBMs) by drug manufacturers. The HHS proposed a rule in early February ending that safe harbor and proposing a new one that would cover rebates passed along to consumers at the pharmacy counter (see Prescription: Washington column on page xx). Numerous patient advocacy groups support the proposed rule.

However, key Democrats in the House are opposed to ending the current safe harbor for rebates in Medicare, putting them on the PBMs’ side and against consumers. Ways & Means Committee Chairman Richard Neal (D–MA) and Energy and Commerce Committee Chairman Frank Pallone, Jr. (D–NJ) issued a statement saying, “The Trump administration’s rebate proposal will increase government spending by nearly $200 billion and the majority of Medicare beneficiaries will see their premiums and total out-of-pocket costs increase if this proposal is finalized. While we agree that the cost of prescription drugs must be addressed, we are concerned that this is not the right approach.”

That pro-rebates position from Democrats surprised some patient advocacy groups, who are opposed to rebates and support HHS’ proposed rule. Carl Schmid, Deputy Executive Director of the AIDS Institute, says, “I was surprised they took that position. Maybe they didn’t have all the information; maybe it was a knee-jerk reaction because it came from the Trump administration.”

It is too early to tell whether Democrats will propose legislation to nix Trump’s proposed rule on rebates, and, if they do, whether they will gain any Republican support, which is crucial for passing any drug-pricing legislation on broader health care or otherwise. However, some bills that faltered in the last Congress because of Republican control of the House will undoubtedly advance in and probably be approved by this new Congress.

A key example is the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, which would give generic companies more leverage to force brand-name companies to supply drug samples. That bill passed the Senate Judiciary Committee last year with bipartisan support but never came up in the House because of GOP leadership opposition. This year, Pallone replaces Representative Greg Walden (R–OR) as chairman of the House Energy & Commerce Committee. Walden opposed the CREATES Act; Pallone is an enthusiastic supporter. But Erik Komendant, Vice President of Federal Government Affairs at the Association for Accessible Medicines, the generic industry trade group, says, “Nothing is a done deal.” He points out that there are 90 new members in the House and 10 in the Senate. “Many of them campaigned on and heard from constituents about high drug prices,” he says. “And now is the time for Congress to pass CREATES and take meaningful action to lower the cost of prescription drugs for patients.”

However, CREATES does nothing to solve the more important brand-name- versus-generic conflict: brand-name extension of patents to block the entry of generics, as has been the case of the best-selling drug in the world, AbbVie’s Humira, whose main patent expired in 2016. But AbbVie has extended that drug’s patent to 2034 by gaining other, follow-on subsidiary patents. AbbVie has licensed Humira to seven companies that will be allowed to sell Humira in 2022 in Europe, but not in the U.S. Humira, an arthritis drug, has a list price that has increased from $19,000 to $38,000 a year over six years, according to Wyden.

But where Democrats and Republicans agree––either in substantial numbers as with the CREATES Act, or when a bipartisan team of leading members of an influential committee sponsor a bill––legislation will move. Wyden’s Right Rebate Act (S.205), which closes a loophole that allowed the EpiPen manufacturers to “rip off” consumers, according to Finance Committee Chairman and act co-sponsor Senator Chuck Grassley (R–IA), is an example of a bipartisan bill with a tailwind. At the hearings on February 26, Grassley also referred to Senator Amy Klobuchar’s (D–MN) Pay for Delay bill, of which he is an original co-sponsor. It would limit brand-name companies from paying generics companies to delay the introduction of generics, including biosimilars. Another example is legislation forcing drug companies to include list prices in television advertisements. Such a bill passed the Senate last year by a bipartisan vote but never came up in the House because of GOP committee chairmen opposition. The Trump administration has proposed a rule mandating the publication of list prices but the drug industry has threatened a lawsuit, so congressional passage of a bill would make any lawsuit null and void. There is also bipartisan support for a Grassley bill allowing the importation of lower-priced foreign drugs, a proposal that some patient groups, not to mention the drug manufacturers, oppose.

In fact, the Democrats who are now in control of the House will find Republican members freer—no longer having to buck leadership—to support drug-pricing legislation. Representative Bob Gibbs (R–OH) questioned Gerard Anderson, Professor of Health Policy and Management at Johns Hopkins University, at the Cummings hearings about a number of issues, including orphan drug pricing, the use of risk evaluation and mitigation strategies (REMS) by patented companies to thwart generic introduction, and PBMs. “There are lots of problems about how the PBMs are operating. If we address the orphan issue, the REMS, and the PBMs, we’ll make a lot of progress without over-regulating and disincentivizing, and let the market function,” Gibbs said.

These bipartisan drug-pricing bills will probably not pass Congress as separate legislation. Rather, they will be added to a larger health care bill. Senator Lamar Alexander (R–TN) began a hearing on February 5 in the Senate Health, Education, Labor and Pensions Committee, of which he is chairman, by referring to his request to health care groups to provide suggestions on what the federal government can do to lower the cost of health care for American families. “This year I am committed to passing legislation based on that input,” he stated. Alexander said that he and Senator Patty Murray (D–WA), the ranking Democrat on the committee, have met with Grassley and Wyden “to see if we can find one or two big things and several medium-sized things that will help reduce health care costs.” Alexander is retiring in 2020 so it is likely that the committee, on a bipartisan basis, will pass some health care legislation during this session of Congress to memorialize his tenure.

House Republicans Closely Aligned with Drug Industry

To get some idea as to why House GOP leaders may have been protective of the pharmaceutical industry and opposed legislation such as the CREATES Act, which drug manufacturers have also opposed, one only has to go to www.opensecrets.org. and view the top recipients of drug industry political action committee (PAC) contributions in the 2017–2018 congressional session (the category includes both pharmaceuticals and health care products). OpenSecrets is a database run by the Center for Responsive Politics. Of the top four senators and representatives receiving PAC contributions from the drug industry, three were House Republicans, and all were in leadership positions, especially regarding drug industry legislation. Representatives Greg Walden (R–OR), Kevin McCarthy (R–CA), and Kevin Brady (R–TX), who received contributions of between $315,000 and $460,000, were, respectively, chairman of the Energy & Commerce Committee, majority leader of the House, and chairman of the Ways & Means Committee.

The Pharmaceutical Research and Manufacturers Association (PhRMA) contributed $28 million in the 2017–2018 election cycle to candidates and party PACs. Its biggest contribution was to the Grand Old Party Political Action Committee (GOPAC), whose motto is Educating and Electing a New Generation of Republican Leaders. PhRMA’s $215,000 contribution was more than four times the amount of the next biggest contribution GOPAC received, and was a significant percentage of the PAC’s $747,900 total revenue. PhRMA’s millions went to numerous Washington lobbying firms, 10 of whom received more than $250,000 in 2018. Their contributions put PhRMA in the number four position among trade associations, behind the U.S. Chamber of Commerce, the National Association of Realtors, and the Open Society Policy Center.

Among drug industry companies, Pfizer and Amgen were number one and number two in regard to lobbying expenditures ($11.3 million and $10.9 million, respectively), with eight other companies spending over $6 million, including the Biotechnology Innovation Organization (BIO), the trade association for the biologics industry.

Where Debate Is Headed

The big question with regard to any legislation on drug prices is whether facts intercede with rhetoric and emotion. Drug prices in general declined over the past year, according to the Bureau of Labor Statistics, which says that the consumer price index (CPI) for the prescription drug category (all urban consumers) dropped 0.6% between the end of 2017 and the end of 2018. The increase in the CPI for all items was 1.9% over this period; medical care services as a whole were up 2.5%. However, regardless of whether prices are up or down, it is clear that prices for drugs in the U.S. are unquestionably higher than they are elsewhere in the world, often by substantial amounts.

Douglas Holtz-Eakin, president of the American Action Forum, says, “Fundamentally, there is no broad prescription- drug pricing crisis. Indeed, in most instances, things are working just fine. Rather, what we face are more nuanced challenges.” Those nuanced challenges concern new, expensive, and often sole-source specialty drugs. Some sole-source generics have also posted ridiculous price increases. There are some problems, too, with the extension of brand patents in ways that have drawn critics—AbbVie’s Humira being a prime example—as well as efforts to block the entry of generics, which, in Humira’s case, the CREATES Act attempts to alleviate.

Any anger over drug prices and medical costs more broadly will only translate into legislative action where there is bipartisan agreement, Democratic takeover of the House aside. Thus, legislation giving Medicare the authority to negotiate drug prices, which is the topic of one bill sponsored by Senator Klobuchar, a presidential aspirant supported by many Democrats, is going nowhere.

Congress is likely to focus on current costly federal programs that need reform. At the top of that list are the Medicare Part D outpatient drug program, the Part B physician office/outpatient facility-reimbursement program, and the Medicaid drug-rebate program. Outside groups such as the Medicare Payment Advisory Commission (MedPAC) and its Medicaid counterpart annually recommend the reform of all three programs.

Part D spending was over $100 billion in 2016; Part B spending was close to $30 billion. Mark Miller, executive vice president of health care at the Laura and John Arnold Foundation, and former executive director of MedPAC, told the Finance Committee at its January 29 hearings that the average Medicare household will use approximately 15% of their total expenditure on health care. In Medicaid, spending on drugs grew by almost 50% between 2011 and 2017. “The federal government and states spent about $30 billion on drugs in Medicaid in 2017, after rebates,” Miller explained.

Miller said new treatments are launching at increasingly unsustainable prices that are not justified by their research and development costs. He cited life-extending cystic fibrosis treatments that cost close to $300,000 per year. Chimeric antigen receptor T-cell (CAR-T) therapy can easily top $500,000, and several companies have discussed pricing gene therapies in the region of $2 million.

Aaron Kesselheim, MD, director of the Program On Regulation, Therapeutics, And Law at Harvard Medical School, says list prices for brand-name drugs have increased from about 8% to 16% per year over the last decade, well beyond the CPI general inflation rate of 1–3% per year. U.S. drug prices and spending far exceed those of other, similar industrialized countries around the world. For example, in countries like Canada, Germany, France, and Australia, all of which have excellent health care systems, per-capita expenditure for prescription drugs is $400 a year compared to $850 a year in the U.S. The main driver behind the U.S. figure is brand-name drugs, which account for 10% of prescriptions and 75% of outlays.

But legislation to trim federal and patient spending on Part D, Part B, and Medicaid is hardly a done deal, given the broad opposition from drug manufacturers, PBMs, and patient advocacy groups to many of the Trump administration’s regulatory initiatives meant to cut federal and patient costs by reining in prices of specialty drugs, which account for the lion’s share of federal (and commercial) drug spending.

The Medicare Part B program allows physicians and hospital outpatient clinics to bill Medicare and patients, where there is a deductible or co-payment or both based on the “average sales price” alone—that is, what the market can bear—with no consideration as to the value or cost-effectiveness of the drug. Again, these are typically the expensive oncology, hepatitis C, and arthritis drugs, often biologicals. Among the 75 drugs with the highest annual Part B expenditures in 2016 (accounting for about $20 billion, or 77% of Part B drug spending), prices for 65 of the 67 drugs with evaluable data (97%) were considerably higher than the median prices in other high-income countries (Japan, Germany, Switzerland, and the UK), and generally made and sold by the same manufacturers as in the U.S. In May 2018, drug prices were, on average, 46–60% lower in those countries than in the U.S.’s Medicare drug-benefit program.

Pressure on Congress from Interest Groups

Trump’s Centers for Medicare and Medicaid Services has already proposed a major reimbursement change for Part B drugs (see the March 2019 issue of P&T), basing drug prices on international prices and a competitive acquisition program where hospitals and physicians would have less incentive to buy the highest-priced drugs, which spikes their reimbursement. But importing international drug prices into Medicare has been panned by Express Scripts and other PBMs, who argue that it would destroy the PBMs’ incentive to participate because they would buy drugs from U.S. manufacturers at high prices and have to sell them at low foreign prices. There has been considerable opposition to that from interest groups and drug manufacturers, among others.

Democrats in Congress have endorsed an international pricing index, not just for Part B drugs but for all drugs, paid for by the federal government and private employers. Their Prescription Drug Price Relief Act would peg the price of prescription drugs in the U.S. to the median rate in Canada, the UK, France, Germany, and Japan. If pharmaceutical manufacturers refuse to lower drug prices below that level, the federal government would approve cheaper generic versions of those drugs, regardless of any patents or market exclusivities in place. It is unclear, however, whether that bill will gain any Republican support. Schmid of the AIDS Institute says his group opposes the bill.

The flip side of questionable Republican support for those pricing caps is the questionable Democratic support for Trump-proposed changes to Part D, including new power for pharmacy and therapeutics committees to limit access to drugs. Chief among those changes is a constriction of the current six “protected classes” by allowing the use of step therapy and prior authorization, neither of which can be used in those six categories at present. That initiative, like the Part B initiative, is aimed at the specialty drug category by, for example, forcing cancer patients to try less expensive alternatives before being prescribed the most expensive oncology drugs. The American Society of Clinical Oncologists calls the proposal “misguided.” The six classes are: (1) antidepressants; (2) antipsychotics; (3) anticonvulsants; (4) immunosuppressants for the treatment of transplant rejection; (5) antiretrovirals; and (6) antineoplastics, except in limited circumstances. The Trump administration argued that the protected classes do not allow normal price negotiations and that there is “a strong incentive for the promotion of overutilization, particularly off-label overutilization, of some of these drugs.”

The Obama administration also published a proposed rule in 2014 that would have relieved Part D plans from providing “all or substantially all” of the drugs in the six protected categories. But patient groups complained to Congress and bipartisan pressure forced the Obama administration to cease and desist. Now the Trump administration has picked up the cudgel against the six protected classes.

Patient and physician groups and drug companies are besieging Congress once again. In response, Senators Marco Rubio (R–FL) and Kyrsten Sinema (D–AZ) have circulated a letter to HHS Secretary Alex Azar decrying the changes. They wrote that although they applauded the administration’s commitment to lowering drug prices, “undermining the protected class status of medications could have much larger consequences in the long term.” Representatives Barbara Lee (D–CA) and Will Hurd (R–TX) are readying a similar letter from House members.

Anyone who thinks Democratic control of the House will lead to congressional passage of important drug-pricing legislation oughtn’t bet their 401(k) on that. Although drug companies, PBMs, physician groups, and patient advocacy organizations swear they want to do “something” about high drug prices, they are simultaneously opposing many of the proposals that would reduce those prices the most. One almost can’t blame Congress for being frozen in its tracks.

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

FERC Begins a Likely Skein of Mandatory Rate Cases

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

FERC’s initiation of what amounts to a wholesale review of interstate pipeline rates threatens to shake up the industry and maybe its customers. The commission is in the early stages of reviewing the rates of about 130 pipeline and storage companies to see if they should lower their rates because of the 2017 tax cut enacted by Congress and a couple of other subsequent agency actions.

On Jan. 16, FERC announced the results of the first tranche of 12 reviews and initiated three Section 5 rate cases against two interstate pipelines and one storage company contending their current rates are “unjust and unreasonable.”

Extrapolating those early results means perhaps 30 companies could be subject to Section 5 rate cases, an unprecedented step. One industry observer who works with pipeline companies on rates, and asks not to be identified, says, “This has never happened before.”
He points out that it is possible that while FERC can force companies to lower rates, some companies, rather than subject themselves to a FERC-ordered Section 5 process, might instead voluntarily and peremptorily decide to file a Section 4 rate case.

That is exactly what Northern Natural Gas has done. It was one of the two big pipelines slapped with Section 5 cases in January. Northern disputed the FERC’s calculation of its return on equity (DOE) as affected by the 2018 tax cut and filed a motion Jan. 28 asking FERC to terminate the order subjecting Northern to a rate review or, in the alternative, to hold the proceeding in abeyance pending Northern’s filing of its FERC Form No. 2 in April 2019.

This is not the first time that the commission has pursued a Section 5 action against Northern based on erroneous support. “In 2009, FERC initiated a Section 5 against Northern that concluded with a request from customers to terminate the proceeding with no rate change,” said Mark Hewett, president and CEO of BHE Pipeline Group, which includes Northern. The company said from a purely financial perspective, the issuance of a Section 5 action is expected to produce positive results for Northern because the action will accelerate Northern’s filing of a Section 4 rate increase to allow Northern to recover the significant investment required to modernize its pipeline system. BHE is Berkshire Hathaway’s pipeline subsidiary, which also includes Kern River, which agreed to a settlement, based on the tax cut, of a customer-approved plan for an 11% rate credit, according to BHE.

Besides Northern Natural, FERC announced Section 5 cases against Bear Creek Storage Company and Panhandle Eastern Pipe Line Company, LP. FERC is basing its rates review on an analysis of the Form 501-Gs all companies have filed. Carl Fink, an outside attorney for Panhandle, declines to comment on FERC’s action against his client. Panhandle is a 6,009-mile natural gas pipeline that extends from sources of supply in the states of Texas, Kansas and Oklahoma, running through Missouri, Illinois, Indiana and Ohio to its northern termini in Michigan and at the International Boundary between the United States and Canada. Bear Creek is 50-50 jointly owned by Southern Natural Gas Company and Tennessee Gas Pipeline Company, both subsidiaries of Kinder Morgan. Kinder Morgan did not respond to requests for comment.

In each of these initial Section 5 cases, pipeline customers, whether local distribution companies or industrials such as U.S. Steel, are clamoring for FERC to reduce the company’s rates.

Northern is an about 14,700-mile natural gas pipeline that provides natural gas services to markets from Texas to Michigan’s Upper Peninsula. Northern reports that it has over 200 shippers.

In moving forward with a Section 5 rate case, FERC said based on its 501-G, Northern has a 17.3% return on equity (ROE). The commission added that based on that number it is “concerned that Northern’s current rates may be unjust and unreasonable.” If it moves forward, the investigation will look at Northern’s costs and revenues for most of 2018 and for part of 2019.

Northern argues no investigation is necessary, because FERC made mistakes in its ROE calculation. In its Jan. 28 motion, Northern stated its ROE is really 13.7%. “This result is very consistent with Northern’s calculated ROE for 2018 of 13.5%, and considerably below the erroneously calculated ROE of 17.3%,” Northern wrote.

The 12 companies identified on Jan 19 by FERC – the three Section 5 cases plus nine given a pass – account for 12 of the pipelines in Group 1, which has 29 companies. Group 1 companies had the earliest deadline for filing 501-Gs. Group 2 has 30 companies and Group 3 has 66 companies. If three of the first 12 companies examined by FERC were found to have unreasonable rates, that means 30 or more companies out of the 130 total could find themselves in Section 5 territory before all is said and done.

Order No. 849 required all interstate natural gas companies, with cost-based stated rates, that filed a 2017 FERC Form No. 2, or 2-A, to file a FERC Form No. 501-G informational filing. Using the data in the pipelines’ 2017 FERC Form Nos. 2 and 2-A, the form estimates: (1) the percentage reduction in the pipeline’s cost of service resulting from the Tax Cuts and Jobs Act and the Revised Policy Statement, and (2) the pipeline’s current return on equity (ROE) before and after the reduction in corporate income taxes and the elimination of income tax allowances for MLP pipelines.

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