California bill would require drug makers to report 10 percent price hikes

April 11, 2016 - In the latest effort to push back against drug costs, the California legislature will hold a hearing on Wednesday to review a bill that would require companies to report any move to increase the list price of a medicine by more than 10 percent during any 12-month period. And drug makers would have to justify price hikes for medicines with a list price of more than $10,000 within 30 days of making such a move. Read more

New data: how outrageous hospital markups hike drug spending

April 12, 2016 - As I show below, the reimbursement approaches that commercial payers use permit hospitals to get paid two to three times as much as physician offices—and to inflate drug costs by thousands of dollars per claim. Naturally, the 340B program plays a part in this sordid tale. Read more

A new drug that could save the US billions of dollars just got approved

April 5, 2016 - The US Food and Drug Administration (FDA) just approved a version of Remicade, a drug used to treat autoimmune diseases like Crohn’s disease and rheumatoid arthritis. The drug, developed by Celltrion and which will be co-marketed by Pfizer, goes by the name “Inflectra.” It’s a form of infliximab, but will carry the suffix “-dyyb” to differentiate itself. This is the second “biosimilar” to be approved by the FDA. Read more

Why insulin costs have tripled in the past 10 years

April 5, 2016 - Millions of people with diabetes rely on insulin, a life-saving medication that helps their bodies regulate sugar so that they can live relatively normal lives. But insulin is becoming prohibitively expensive and, according to a new study in JAMA, prices are rising faster than any other diabetes medication in the United States. Read more

New push to keep seniors in home, community-based programs

April 4, 2016 - The federal government is pushing states to keep more low-income seniors out of nursing homes and, instead, enroll them in home and community-based programs. The shift comes as demand for long-term care is rising. By 2050, the number of people older than 85 is expected to triple to more than 18 million. These seniors tend to have the highest disability rate and the greatest need for long-term care. Read more

Ritzman recasts the pharmacy experience

March 28, 2016 - The drug chain has opened “The Pharmacy of the Future,” highlighting pharmacists’ clinical knowledge and services, in Rootstown, Ohio. With a look that is more akin to a doctor’s office than a chain drug outlet, the location is such a departure from conventional prescription counters that Ritzman chief executive officer Eric Graf calls it a “practice” instead of a store. Read more

Is paying a ‘mortgage’ the answer to expensive prescriptions?

March 29, 2016 - A Massachusetts Institute of Technology economist and Harvard oncologist have a proposal to get highly effective but prohibitively expensive drugs into consumers’ hands: health care installment loans. Read more


Continued focus on heroin and prescription opioid drug abuse

On March 10, by a vote of 94-1, the Senate passed the Comprehensive Addiction and Recovery Act (CARA/S. 524). S. 524 would authorize the Attorney General to award grants to address prescription opioid abuse and heroin use and expand availability of medication-assisted treatment. The bill would create treatment programs as alternatives to incarceration and mandate investigations into heroin distribution and unlawful distribution of prescription opioids. The Health and Human Services (HHS) Secretary would be directed to convene a task force to review and update best practices for prescribing pain medication, and the Justice Department would be required to create and expand disposal sites for unwanted prescription medications. S. 524, now moves to the House for consideration. The House companion bill, H.R. 953, was introduced by Rep. Jim Sensenbrenner (R-WI), has 92 cosponsors, and has been referred to three committees: Energy and Commerce, Judiciary, and Education and the Workforce. Given the intense public and congressional interest in the issue, it is expected that this legislation will move in the House.

On March 21, the Senate passed by unanimous consent S. 483, the Ensuring Patient Access and Effective Drug Enforcement Act. On April 12, the House approved S. 483 by unanimous consent. The bill will be sent to President Obama for his signature, who will have 10 days to sign the bill into law. If he does not sign it within that period, it will automatically become law. S. 483 would require the Attorney General to cite a specific violation of the law before revoking or suspending a DEA registration; would allow a registrant to submit a corrective action plan before revocation or suspension proceedings; and would require stakeholders to report on how enforcement activities may be adversely impacting patient access.

On March 22, the Food and Drug Administration (FDA) announced safety labeling changes for all immediate-release opioid pain medications, including requiring a new boxed warning about the serious risks of misuse, abuse, addiction, overdose and death associated with these drugs. FDA also issued a draft guidance intended to support the development of generic versions of abuse-deterrent opioids.

On March 29, speaking at the National Rx Drug Abuse & Heroin Summit convened in Atlanta, President Obama called America's fight against prescription drug and heroin abuse “under-resourced” and noted the country needs an “an all-hands-on-deck approach.” As part of the Summit, President Obama announced new regulations adjusting patient limits on medication-assisted treatments, the immediate release of funding for expanded medication treatment services, and rulemaking on increasing Medicaid access to mental health and substance abuse services.

On April 30, the Drug Enforcement Administration (DEA) will hold its 11th National Prescription Drug Take-Back Day. According to the Administration, more than 5.5 million pounds of medication have been collected over the last ten Take Back Days.

Centers for Medicare & Medicaid Services (CMS) proposes Part B Drug-Pay Demonstration Program

On March 8, 2016, CMS released a proposed rule on implementation of a new two-phase Medicare Part B Drug Payment Model to test whether alternative payment approaches would lead to a reduction in Medicare expenditures, while preserving or enhancing quality of care. Comments are due by May 9, 2016. For a copy of the Proposed Rule, please click here

Medicare Part B generally covers drugs furnished incident to a physician’s services, drugs administered via a covered item of durable medical equipment (DME), or certain other drugs specified by statute. In most cases, payment is based on the average sales price (ASP) plus six percent, such that more expensive drugs receive a higher add-on payment amount than less expensive drugs. Under the first phase of the Model, CMS would test an alternative ASP add-on approach, paying ASP plus two-and-a-half percent, plus a flat fee alternative add-on amount of $16.80, which would be updated at the beginning of each year by the consumer price index for medical care for the most recent twelve-month period. CMS is soliciting comments on whether it should also test an additional approach, such as an ASP plus a tiered percentage add-on amount.    

In the second phase of the Model, CMS would test the application of a group of value-based purchasing tools used by commercial and Medicare Part D plans, such as value-based pricing strategies and clinical decision support tools. With respect to the value-based pricing strategies, CMS is proposing to include one or more of the following tools: reference pricing, indications-based pricing, outcomes-based risk sharing arrangements and discounting or eliminating patient coinsurance amounts. CMS would implement these tools in a limited manner, applying these strategies to a specific group of drugs identified by HCPCS code. CMS is soliciting comments on creating value-based purchasing arrangements directly with manufacturers and taking an episode-based or bundled pricing approach, as well as the applicability of the Part B Drug Competitive Acquisition Program.   

Model participants would be determined by geographic location, and participation would be mandatory for the providers and suppliers (including physicians) who furnish Part B drugs that are included in the Model if the provider or supplier is located (or services are billed) in the geographic areas selected for inclusion in the Model. CMS proposes that the Model run for five years, with the first phase of the Model beginning in the fall of 2016 (no earlier than 60 days after the rule is finalized), and second phase beginning no sooner than January 1, 2017. In statements made since issuance of the proposed rule,  CMS officials have indicated that they are considering excluding from the Part B drug price demonstration program physician practices that are part of the Oncology Care Model. 

CMS accidentally posted a notice to Medicare contractors about the demonstration program before it was finalized, and this proposed demonstration has generated significant concern from more than 300 representatives from the pharmaceutical lobby, health plans, patient groups, and providers. Urging Congress to ask CMS to withdraw this proposal, these groups express concern over the impact on patients with medically complex conditions, such as cancer, hypertension, rheumatoid arthritis, and immunodeficiency diseases, as such patients often try multiple treatments before finding the right one and need quick access to medications. On the other side, AARP came out in strong support of the demonstration program as a means to address an unsustainable escalation in spending on prescription drugs. 

The plan has drawn a strong rebuke from Congress. Senate Finance Committee Chairman Orrin Hatch (R-UT), House Ways & Means Committee Chairman Kevin Brady (R-TX), and House Energy & Commerce Committee Chairman Fred Upton (R-MI) have called the proposed demonstration program an “experiment on seniors” leading to varying levels of care depending on where patients live. The Chairmen stated that such changes should be made with far greater transparency and input from stakeholders, noting that they would pursue aggressive oversight of CMS. 

National Community Pharmacists Association (NCPA) asks CMS to address Maximum Allowable Cost (MAC) pricing

On April 7, NCPA wrote to CMS, expressing “our concerns and those of our members regarding the non-compliance of multiple Part D plans and PBMs regarding the usage of drug pricing standards that are used to reimburse Medicare pharmacies that clearly do not reflect ‘the market price of acquiring the drug’ – in direct violation of federal statute.” NCPA notes that thus far in 2016, multiple Part D plans and PBMs have been using MAC pricing far below reasonable market prices for drugs, and therefore pharmacies are dispensing medications to seniors and incurring significant financial losses. NCPA urged CMS to take action to address the problem.

CMS delays effective date for “5i AMP” Provision in Medicaid outpatient drug final rule 

On March 31, CMS announced it was delaying the April 1, 2016 effective date for manufacturers to calculate the average manufacturer price (“AMP”) for the so-called “5i-drugs” – i.e., inhalation, infusion, instilled, implanted or injectable drugs – to July 1, 2016. The provision is part of the final rule with comment period that CMS released January 21, 2016, which implements the Medicaid pricing and reimbursement provisions of the Affordable Care Act and related legislation.  

According to CMS, it had come to the agency’s attention that drug manufacturers might need additional time to complete system modifications to ensure all necessary changes would be operational by the April 1, 2016 effective date, particularly with respect to incorporating and operationalizing the changes in the final rule into their business policies, procedures and systems for the 5i AMP calculation. Manufacturers still must report monthly and quarterly AMPs, timely, as of the original April 1, 2016 effective date, but may do so using reasonable assumptions. Once manufacturers have completed the system modifications necessary to calculate the AMPs for 5i drugs, then they will be responsible for recalculating and restating their monthly and quarterly AMPs back to April 1, 2016.   

CMS plans to release a frequently asked questions document as well as operational guidance to address questions received since CMS published the final rule.

Office use compounding

On March 22, Representative Buddy Carter (R-GA) wrote to HHS Secretary Burwell, asking when FDA will issue guidance to clarify that traditional compounding pharmacies, regulated by the State Boards of Pharmacy, are exempt from federal oversight when participating in office-use compounding. Secretary Burwell had earlier in the month testified before a House congressional hearing, in response to a question from Representative Carter, that since neither guidance nor a rule exists on office-use compounding, there is nothing to prevent the practice. This response seemed to contradict FDA’s prior positions, that traditional compounders must obtain patient-specific prescriptions.  Representative Carter noted in his letter that FDA’s statements have caused many states to take action limiting office-use compounding. Representative Carter expressed his concern that FDA’s posture to 503A pharmacies has placed an undue burden on these pharmacies, as well as the patients they serve. 

Representative Carter’s questions to Secretary Burwell are similar to congressional report language accompanying the FDA appropriations bill, which directed FDA to issue guidance stating that compounding pharmacists can continue to engage in office-use compounding before the receipt of a patient-specific prescription. Branded and generic drug industry groups, including the Biotechnology Innovation Organization, the Generic Pharmaceutical Association, and the Pharmaceutical Research and Manufacturers of America, have weighed in with House and Senate appropriators, urging that this language be removed from the next year’s FDA funding bill. These stakeholders contend that quality standards appropriate for traditional pharmacies are not appropriate for operations at a larger scale.

Drug pricing issues

The Senate Aging Committee is continuing its bipartisan congressional investigation into generic drug pricing, launched last November.  As a result of their investigation, Chairman Collins and Ranking Member McCaskill introduced S. 2615, the Increasing Competition in Pharmaceuticals Act, on March 1. Their bill aims to lower drug prices by requiring FDA to promptly review certain generic drug applications in order to increase market competition.  The bill would offer priority review vouchers to sponsors of generics in this expedited drug approval track.  In addition, S. 2615 would require a Government Accountability Office investigation of the REMS program and whether it results in blocking generic competition. 

House Oversight and Government Reform Chairman Jason Chaffetz (R-UT) also charged at a drug pricing hearing in February that FDA had failed in its statutory responsibilities to eliminate the generic drug backlog and ensure competition to prevent companies from hiking the price of drugs in a monopoly market. The FDA witness responded that the agency was working to clear the backlog but cited deficient generic drug applications and the innovator’s use of Risk Evaluation and Mitigation Strategies (REMS) programs as inhibiting generic competition. 

On March 11, responding to congressional concerns, FDA announced it had updated its manual of policies and procedures and would now expedite reviews of generic drug applications for drugs only produced by one manufacturer. FDA was already prioritizing certain generic product submissions, including drugs that could help mitigate or resolve a drug shortage and drugs related to public health emergencies; the new manual added the category of products for which there is only one approved drug and for which there are no patents or exclusivities. 

Senate Aging Committee Chairman Susan Collins (R-ME) and Ranking Member Claire McCaskill (D-MO) continued their work with a March 17 hearing focusing on the business models of Turing Pharmaceuticals and Retrophin. Chairman Collins blasted company executives for a business model that targeted older brand name drugs where there is no generic competitor, where the drug is the gold standard for the condition it treats, so there cannot be a substitute, where the drug serves a small patient population meaning less incentive for competition, and where the drug is provided in closed distribution with a specialty pharmacy that keeps generic companies from competing. 

MedPAC approves draft Part D drug pricing recommendations

The Medicare Payment Advisory Commission, or MedPAC, is a nonpartisan independent congressional agency that provides guidance to Congress on the administration of the Medicare program. In March, MedPAC discussed a package of recommendations to address the Part D reinsurance program and unanimously approved these recommendations on April 7.  

The reinsurance program was included in the launch of the Part D program as a means of enticing insurers to participate, and it provides a mechanism for Medicare to cover costs above a certain level when drug plans underestimate how much their customers will spend on medications in a year. In the first year of the Part D program, this reinsurance covered $6.0 billion, or about 14 percent of the program’s cost. Estimates for 2016 are that reinsurance will cover $36 billion, or more than one-third of Part D’s $98 billion annual cost. 

Specifically, MedPAC provided three categories of recommendations:

Category 1:

  • Lower Medicare's individual reinsurance subsidy from 80 percent to 20 percent, while maintaining Medicare's overall 74.5 percent subsidy of basic benefits.
  • Exclude manufacturers’ discounts in the coverage gap from enrollees’ true out-of-pocket spending.
  • Eliminate enrollee cost sharing above the out-of-pocket threshold.

Category 2:

  • Modify low-income subsidy copayments for Medicare beneficiaries with incomes at or below 135 percent of poverty to encourage the use of generic drugs, preferred multi-source drugs, or biosimilars when available in selected therapeutic classes.
  • Direct the Secretary to reduce or eliminate cost sharing for generic drugs, preferred multi-source drugs, and biosimilars.
  • Direct the Secretary to determine appropriate therapeutic classifications for the purposes of implementing this policy and review the therapeutic classes at least every three years.

Category 3: 

  • Remove antidepressants and immunosuppressants for transplant rejection from the classes of clinical concern.
  • Streamline the process for mid-year formulary changes.
  • Require prescribers to provide supporting statements with more clinical rigor when applying for exceptions.
  • Permit plan sponsors to use certain tools to manage specialty drug benefits.

These recommendations have drawn concern from a broad spectrum of more than 250 stakeholder organizations, which are pressing MedPAC to reject some of these proposals and focus instead on improving the Part D appeals process. The Pharmaceutical Research and Manufacturers of America expressed their concerns that many of the proposals on this list would shift costs to vulnerable patients and jeopardize access to medicines. Beneficiary groups and patient advocates asked MedPAC to reject any recommendations to change copays for Low-Income Subsidy beneficiaries. While beneficiary groups such as the Medicare Rights Center support reducing generic copays to nothing, they are concerned about increasing brand copays, as beneficiaries taking multiple medications for several conditions have an increased likelihood of taking one or more branded medications. The National Alliance on Mental Illness and the Medicare Access for Patients Rx urge MedPAC not to eliminate protected class status for antidepressants and immunosuppressants, noting that this idea was strongly rejected by lawmakers and patient groups two years ago. 

A final report to Congress detailing these recommendations will be published in June 2016.