High-priced specialty drugs: Exposing the flaws in the system

https://theconversation.com/high-priced-specialty-drugs-exposing-the-flaws-in-the-system-129598

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My husband, Andy, has Parkinson’s disease. A year ago, his neurologist recommended a new pill that he was to take at bedtime. We quickly learned that the medication would cost US$1,300 for a one-month supply of 30 pills. In addition, Andy could obtain the drug from only one specialty pharmacy and would have to use mail order.

This was our introduction to specialty drugs.

These medications are becoming increasingly common, though many Americans are unfamiliar with the term. In 2018, the Food and Drug Administration approved 59 new medications, of which 39 are considered specialty drugs.

Specialty drugs are generally high-cost drugs requiring special handling such as refrigeration or injection, though Andy’s did not. They treat complex conditions such as cancer and multiple sclerosis.

Specialty drugs are often available only through specialty pharmacies. In addition to filling prescriptions, these outlets provide educational and support services to patients. For example, they provide refill reminders and help patients learn how to inject their drugs.

In a forthcoming articleprofessor Isaac Buck and I argue that specialty drugs raise significant legal and ethical questions. These merit attention from the public and policymakers.

Specialty drug concerns

First, the term “specialty drug” is somewhat elusive and has no clear definition. In addition, government authorities and medical experts are not the ones who decide whether a medication is designated a specialty drug. Rather, the decision is entirely up to pharmacy benefit managers, or PBMs.

PBMs administer health plans’ drug benefit programs and thereby serve insurers. PBMs have been criticized for driving up health care costs. Drugs that are specialty drugs under one insurance policy are sometimes classified differently in other policies. Furthermore, some specialty drugs are simple pills that do not involve complicated instructions, and thus, it is unclear why they are categorized as specialty drugs.

The second problem is the very high cost of specialty drugs. The average price tag of the more than 300 medications that are considered specialty drugs is approximately $79,000 per year. Almost half of the dollars that Americans pay for medications are spent on specialty drugs. In fact, Medicare spent $32.8 billion on specialty drugs in 2015.

Because of these exorbitant costs, some insurers have created what they call a “specialty tier” in their health plans. In this tier, patients’ cost-sharing responsibilities are higher than they are for medications in other tiers. If your drug is placed in a specialty tier, your coinsurance payment, or the percentage of cost that you pay, may be 25% to 33% of the drug’s price.

This leads to a situation in which you may have the least generous insurance coverage for your most expensive drugs. Under some plans you might pay $10 per month for generic drugs but hundreds of dollars per month for specialty drugs. This can translate into many thousands of dollars in annual out-of-pocket costs, even for consumers with good health insurance. There are no federal regulations in the U.S. that limit drug prices or insurers’ tiering practices.

Conflict of interest and patient choice

A third problem is conflict of interest. PBMs own or co-own the top four specialty pharmacies in the U.S., which are responsible for two-thirds of nationwide specialty drug prescription revenues.

PBMs frequently require patients to purchase their medications from the specific specialty pharmacy that they own. Thus, PBMs have much to gain from designating medications as specialty drugs. Doing so may lead to significant revenues in the form of purchases at PBM-owned specialty pharmacies.

A related problem is the limiting of patient choice. Many specialty pharmacies fill prescriptions only through mail order. Consequently, patients may be restricted to using just one pharmacy and be forced to rely on the mail for delivery.

Some patients enjoy the convenience of home delivery. Others, however, prefer the traditional approach of visiting a drugstore in person. They may worry that the mail will be late, their package will be stolen, or they will be out of town when the drugs arrive. Yet, such patients do not have the option of a brick and mortar pharmacy.

Possible corrective measures

Both political parties have stated that health care costs are a priority for them. However, they have shown a limited appetite for tackling this herculean problem.

The House recently passed a bill that would enable the federal government to negotiate prices with drug manufacturers. Such negotiations could well lower specialty drug prices. The Senate, however, is unlikely to approve the bill, and Congress is unlikely to pass sweeping legislation in a divisive election year.

There has been more success at the federal level in promoting consumer choice. Medicare rules establish that Medicare plans may not force participants to use mail-order pharmacies.

In the meantime, individual states offer useful solutions. For example, some have provided patients with relief in the form of capping out-of-pocket costs. California limits consumers’ expenditures to $250 or $500 for a 30-day supply, depending on the drug type.

At least 15 states also have pharmacy choice statutes. Several ban PBM mandates that prevent patients from freely selecting their preferred qualified pharmacy. Many ban mail-order only requirements.

Some states have recognized that PBMs should not be entirely free to designate medications as specialty drugs. Because such designations can significantly disadvantage patients and may increase patients’ costs, such states have statutory definitions for the term “specialty drug.”

They generally mandate that the drug require special administration, delivery, storage or oversight. Such requirements may justify purchase from a specialty pharmacy. However, drugs without complicated instructions should not be deemed specialty drugs.

One more option that some insurers have already adopted is allowing patients to obtain just a few pills or doses for an initial trial period. Sometimes individuals quickly learn that they cannot tolerate a medication or that it is ineffective. Such “partial fill” programs can spare patients the exorbitant cost of a full 30-day specialty drug supply.

Specialty drugs contribute significantly to the American health care cost crisis. Additional state, or better yet, federal laws should be enacted to constrain PBMs’ authority over specialty drugs. We need further regulation concerning drug classification, pricing, conflicts of interest and patient choice.

 

 

 

If a medicine is too expensive, should a hospital make its own?

https://mosaicscience.com/story/price-essential-orphan-drug-self-compounding-pharmacy-leadiant-amsterdam-umc-ctx-cdca/?

When the price of an essential medicine rose to an unacceptable level, there was only one thing for pharmacist Marleen Kemper to do – start making it herself.

When Marleen Kemper was a child, she watched two of her primary-school classmates get ill. One had a brain tumour, and the other contracted an infection in his gut. Both of them died. Kemper was around ten at the time, and knew that she didn’t want to see another friend perish. She told her parents she wanted to do something that would prevent others dying. She wanted to be a doctor.

But training is hypercompetitive in the Netherlands, where Kemper was growing up. She didn’t quite have the grades. She liked chemistry, so chose a career in pharmacy instead. She studied for six years, and did a residency for another four. Today, she’s a highly respected hospital pharmacist based at Amsterdam UMC’s Academic Medical Center, a cavernous building crafted out of concrete on the south-east fringe of the Dutch capital.

To understand what happened next, you have to understand several things about Kemper. Two date back to her childhood. One was those early experiences of losing friends to illness, which ensured she’ll do everything she can to make sick people better.

The second is that, though she’s highly accomplished, Kemper is self-admittedly hard-headed, and has always had a rebellious streak. She once dyed her hair black to stand out from the crowd. Sometimes she likes to shock people.

Which leads into the third, more recent trait: a steely determination to do right by her patients, whatever the cost. And the cost can be great. In 2017, when the price of a drug to treat a rare genetic disorder skyrocketed, Kemper wasn’t happy. The result was a dispute that’s still going on today and has spread beyond the four walls of the UMC hospital. It’s spread beyond the city of Amsterdam. And it’s even spread beyond the borders of the Netherlands.

Most of us never have to worry about chenodeoxycholic acid (CDCA), one of the two primary bile acids produced by our livers. But for a tiny fraction of us, a rare genetic trait means we end up short.

Having this gene variant prevents the body from creating sterol 27-hydroxylase, a liver enzyme. Without it, the liver won’t convert enough cholesterol into CDCA. The result is an overabundance of other bile acids and substances, which then get pumped out of the liver and through the body, causing untold damage.

The illness that results is called cerebrotendinous xanthomatosis, or CTX. It can cause cataracts, dementia, neurological problems and seizures, but it can be treated. Since the 1970s, the pharma industry has been able to produce CDCA, and so people who need it can supplement their shortage. The system worked well; the drug was relatively cheap for such a niche illness. A year’s treatment cost around €30,000 per patient.

Until suddenly it didn’t. In 2017, Leadiant Biosciences, which was supplying CDCA to these patients in the EU, raised the price of its version of the drug – known as CDCA Leadiant – to over €150,000 per patient per year.

The price increase soon had an effect. The Netherlands has an insurance-based health system, and in April 2018, Dutch insurers – who had been paying for 50 or so patients across the country to receive the drug – balked at the fivefold increase, refusing to pay. Patients unable to pay themselves would have gone without treatment, so Kemper – whose hospital was one of the treatment centres for CTX – stepped in. Amsterdam UMC would produce the medicine for these patients itself, at cost price.

She was upset, she admits. “Patients have a medical need. If those patients with CTX don’t get their medication, they get neurological implications, they get complications with their cholesterol and dementia, epilepsy… it is an essential medicine.”

Anyone wanting to manufacture a drug must get a marketing authorisation to do so. But Leadiant had become the only game in town, the owner of exclusive rights to manufacture CDCA commercially in the EU.

Yet there was a solution. Under EU rules, pharmacies can make (or ‘compound’) a prescribed drug on a small scale for their patients.

So Kemper began researching where she could find the ingredients to make CDCA. It was difficult: in the pursuit of better margins, vast numbers of manufacturing companies have closed their factories across the world and concentrated their efforts in China, where the costs of producing pharmaceutical ingredients are lower. Just one European company manufactures the ingredients to EU standards.

Kemper approached them, and they declined to supply her the raw material. In the end, she found a Chinese manufacturer instead. She went to the hospital’s executive board and gained approval to manufacture the drug. It cost the pharmacy €28,000 per patient per year – pretty much exactly the same as the price of the drug beforehand.

CDCA wasn’t initially used to treat CTX. Originally it was developed to treat gallstones. This main use of the drug – which from the mid-1970s had been sold in the Netherlands as Chenofalk – became outmoded when the standard procedure to deal with troublesome gallstones became to just cut out the gallbladder entirely.

At the turn of the millennium, Dutch doctors started using Chenofalk off-label to treat CTX – a practice that carried on for several years. At this time, in the mid-2000s, a year’s supply of the drug cost less than €500.

But in 2008, Leadiant acquired the rights to Chenofalk. Then, nine days before Christmas 2014, it succeeded in getting its version of CDCA classified as an “orphan medicine” for treating CTX. That classification gave Leadiant the exclusive right to manufacture its CDCA drug commercially in Europe for the next ten years. Leadiant then took Chenofalk off the market in 2015.

Introduced by EU regulation in the year 2000, orphan drug classification is given to drugs that treat serious illnesses that affect fewer than five in every 10,000 people in the EU. Its purpose is to help companies recoup the costs of developing treatments that would otherwise be unlikely to generate a profit. Without it, the pharma industry wouldn’t be incentivised to seek new drugs for the rarest diseases.

But in this case, CDCA was already known as a CTX treatment, with Chenofalk having been used off-label to treat it for years. Kemper believes that Leadiant is getting the financial benefits of orphan designation, but for a drug that had gone through development and been released to market long ago. “There were publications already in the 1980s,” she says. “There’s no patents, nothing. It’s really bizarre.”

Kemper isn’t the only one concerned about the price rise and CDCA’s orphan drug status. In September 2018, a lobby group, the Dutch Pharmaceutical Accountability Foundation, asked the Dutch competition authority to investigate the price increase. And this spring Test Achats, a nonprofit consumer-protection organisation in neighbouring Belgium, lodged a complaint against Leadiant with the Belgian Competition Authority.

“We noticed that in 2005, the price for the treatment of a patient in one year was around €500. Now it’s more than €150,000,” explains Laura Marcus, legal counsel to Test Achats. “It’s bad for the sick person but also for the Belgian health system, which is paying most of the [cost of the] treatment.”

When a drug company raises the price of its treatment, and a hospital pharmacy decides not to accept the increase but instead endeavours to compound its own version, undercutting the drug company’s price, things tend to get interesting.

In June 2018, Kemper received a phone call from the Dutch health inspectorate. It had received a letter of concern – who it came from, Amsterdam UMC doesn’t know, though the health inspectorate has said it was acting in response to an enforcement request from Leadiant – with a long list of things for the investigators to check.

Kemper took the news in her stride. She had expected a rocky road. “As a pharmacist, I am a professional and I know what I’m doing, and we have standards for compounding,” she explains. So she wasn’t worried when a team of four inspectorate monitors turned up at the door of her pharmacy in Amsterdam that summer. Two were there to take samples of the raw materials she was using to compound CDCA, and to ensure that all the correct processes were being followed. They rifled through the reams of paperwork and procedures that Kemper had spent hours developing for her staff to follow, while the other two inspectors combed through coverage of the case to ensure that Kemper and her team weren’t advertising their work, which isn’t allowed for medicines that haven’t been given market authorisation.

The lab checked out: its processes were up to standard, and the paperwork was all in order. But in July Kemper got a phone call that floored her: the inspectorate’s analysis of the raw materials her pharmacy was using to compound the CDCA had discovered that they weren’t up to snuff. Two components found in it were above allowed limits.

“As a professional you think: what did I miss? It was very emotional, a bit heavy,” she says. With the board of directors at the hospital, Kemper decided to immediately withdraw the product from patients; the health insurers said they’d step in and cover putting the patients back on the Leadiant version of the drug.

Kemper personally called the 50 or so patients she was providing with the drug. “The first one was hard,” she admits. “I expected they’d be angry or something like that. But no, no one [was]. The patients said: ‘Well, please go on with this job.’”

The Dutch inspectorate has said that Kemper can resume compounding CDCA provided she can find a raw material that doesn’t contain impurities – something Kemper is keeping tight-lipped about.

So, if she can get the materials she needs, Kemper is hopeful to be able to continue compounding CDCA in the future.

But for now, it’s back to square one – paying the full price for CDCA Leadiant.

These events have had wider consequences. What was initially a dispute inside the Netherlands has bled across borders, with Belgian patients with CTX now being affected.

It started with a conversation between the Dutch and Belgian health ministers shortly after Kemper’s production of CDCA was halted, says Thomas De Rijdt, head of pharmacy at University Hospitals Leuven. The Dutch minister wanted to know from his Belgian counterpart why Belgian hospitals were able to make the same drug without any issues.

“For Belgium, we have about ten patients,” De Rijdt says. “So ten patients are helped with the preparations from our hospital and the University Hospital in Antwerp.”

These hospitals had been compounding CDCA capsules for CTX patients for years. Leuven had sourced raw materials that had been tested and approved by a laboratory accredited by the Belgian government. But when the case in the Netherlands started entering conversation at diplomats’ dinners, the Belgian government wanted to double-check that its raw materials were OK.

It ran a second battery of tests – with a different accredited laboratory – which came back with a problem. A single impurity was found. The government ordered a quarantine of the raw material and recalled all the CDCA it had made.

“The patients had to return all their medication,” says De Rijdt. Recalling every capsule of the drug from Belgium, and freezing the work of the only two suppliers in the country, meant that people with CTX were suddenly left without any medicine.

“If you know the disease, you know you can deteriorate very quickly,” says De Rijdt. This was a problem. So, he says, the hospital pharmacists, the National Institute for Health and Disability Insurance, the health minister and the pharmaceutical inspectorate hit upon a solution. For a year, the Belgian government would reimburse the costs of Leadiant’s drug, allowing those patients to still be treated (normally the government only reimburses a portion of a person’s health costs, with the rest being picked up by the patient or insurance). Over the course of that year, the relevant authorities would then work together to adapt the requirements a raw material must comply with – to allow versions of drugs with minor impurities, providing they pose no threat to the patient.

“We have bought time to find a solution with the compounding, because we think by compounding we can save healthcare a lot of money for the same quality of therapy,” says De Rijdt. He hopes to have a solution by the end of 2019.

But in early September, things took another turn. Wouter Beke, the Belgian consumer affairs minister, used his price-regulation powers to bring down the price of CDCA Leadiant to just over €3,600 a month – roughly a quarter of the amount Leadiant was charging. If the drug becomes more cheaply available in Belgium, says De Rijdt, then it could end up being exported and available at a lower price elsewhere.

But exactly how this will pan out remains unclear. In the meantime, Beke has urged the Belgian Competition Authority to prioritise investigating Leadiant, following the complaint lodged by Test Achats.

Debate over what constitutes a fair price for drugs isn’t anything new. Nor is it limited to Europe.

Because of his willingness to play the bad guy in the press (and an odd moment when he bought a Wu-Tang Clan record), Martin Shkreli has attracted more criticism on drug pricing than perhaps anyone else. In 2015, Turing Pharmaceuticals, of which Shkreli was CEO, raised the price of its recently acquired antimalarial drug Daraprim, also used to treat AIDS-related illnesses. A pill went from $13.50 to $750 overnight – a 55-fold increase.

Shkreli’s capitalist tendencies were criticised by almost everyone. This was unlike the situation with CDCA Leadiant – there was no argument that this increase was to cover Daraprim’s development costs – and Shkreli himself was unrepentant: “If there was a company that was selling an Aston Martin at the price of a bicycle, and we buy that company and we ask to charge Toyota prices, I don’t think that that should be a crime,” he told reporters.

But the Daraprim situation was just the highest-profile example of a contest that is going on constantly between big pharmaceutical companies seeking to profit from drugs and medical staff on the frontline who worry that such profit-seeking does damage to patients needing treatment. (For what it’s worth, a competitor to Turing Pharmaceuticals announced soon after that it would produce a compound drug containing the same active ingredient in Daraprim – pyrimethamine – for $1 a pill, rather than the $750 Shkreli wanted to charge.)

One front in this battle has recently opened up in the US. In May, more than 40 states filed an antitrust lawsuit against some of the world’s biggest manufacturers of generic drugs, alleging they that have colluded to fix the price of more than a hundred medicines over a number of years. When prices should go down after a drug’s market exclusivity ended, the antitrust lawsuit claims that many prices have instead shot up – in some cases by more than 1,000 per cent.

And back in Europe, the consumer organisation Euroconsumers – of which Test Achats is part – is investigating the prices of other drugs beyond CDCA. “We’ve noticed a few problems with a few other drugs,” says Laura Marcus of Test Achats. “It’s often about drugs that are able to cure or deal with rare diseases. For sure, it’s not only CDCA.”

No one doubts that developing drugs costs money. A 2016 paper in the Journal of Health Economics estimated that the average cost of developing a prescription drug to the point of reaching the market is nearly $2.6 billion.

But the lack of hard, openly available statistics on the cost of drug development is something that many people, including Marcus and Marleen Kemper, want to change. “In most of the cases, society is willing to pay some price,” says Kemper, “but now the discussion is: what is an acceptable price?”

Marcus acknowledges that Leadiant has to cover its costs, but she thinks that cannot explain the rise of CDCA to over €150,000 – “the profit cannot be that high”. When I ask her how much profit she thought Leadiant was making from the drug, she admits she doesn’t know. “Of course we don’t have access to those numbers,” she says. “That’s what the Belgian Competition Authority is opening an inquiry for – to know more about the figures and the costs the company has to bear.” However, when the price for CDCA has surged from €500 to over €150,000, “nothing justifies it, because there was no new research, no new nothing,” she says.

Leadiant rejects this. Although CDCA had been authorised in the past, the company says that “the active pharmaceutical ingredient as well as the manufacturing of the finished product needed to be upgraded” to make sure that its version was compliant with current EU standards. These, Leadiant says, are more extensive and significantly more strict today than they were when earlier CDCA drugs were developed.

Leadiant says that its CDCA “is not a ‘copy’ of an old product”. The very fact that it gained orphan drug status proves this, it argues. The company also says that “there was no robust evidence that CDCA was effective in CTX until Leadiant produced the data”. Demonstrating this, it says, required “entirely new studies, creating new data sets” – which make up “the largest ever collection of clinical data for CTX”.

“CDCA Leadiant has been developed and brought to market at substantial cost,” the company says. “Our pricing is justified by our costs and investments.”

But the problem is not just that Leadiant’s drug is so expensive: potential alteratives have disappeared. Willemijn van der Wel, a lawyer working at European law firm AKD, has written about Leadiant’s connection to competitors who previously produced CDCA. After buying the marketing authorisations for other products that contained CDCA, he says, “Leadiant began to withdraw these alternative CDCA products from the market, until only one CDCA medicinal product remained”. Marcus has also queried what has happened to these products that might have been competitors to Leadiant’s. But, she says, it’s not clear what is behind their CDCA monopoly.

Leadiant, though, says that it’s willing to negotiate a lower price for its drug with the Dutch Ministry of Health and Dutch insurance companies. “The only reason an improvement has not been determined yet, is that the insurers have been uninterested or unwilling to enter into any substantive negotiations,” it claims. (Leadiant did not respond to follow-up questions asking for more details of the negotiations, or what level of price reduction the company was offering.) It also emphasises that it has not taken legal action against the UMC hospital for seeking to compound its own CDCA, but that it is “involved in a legal discussion with the Dutch Inspectorate about the interpretation of EU and Dutch medicines law”.

Regardless of the outcome of such discussions, something needs to be done. Having pharmacies self-compound medicines is not a sustainable model – it might reduce incentives for developing drugs for rare conditions.

It also, Leadiant argues, exposes patients to risk. Pharmacies do not have to have their compounding processes checked by the European Medicines Agency or the national regulator. “There is no product control by any independent regulatory authority before or after compounding.”

When it comes to market authorisation and orphan drugs, Leadiant says, “it should not be about small or large scale, but safe scale”.

Marleen Kemper’s husband warned her that taking on Leadiant would be more difficult than she first thought. “He said, ‘With this initiative, don’t be naive’,” she recalls. “The pharmaceutical industry is very powerful, so you really have to have back-up from the [hospital] board” – which she had. More than a year into her attempt to make her own version of the drug, she’s recognising just how deeply dug in both sides are to their positions.

She’s at pains to point out that she’s not against the pharma industry. “What people forget is that the pharmaceutical industry is responsible for a lot of innovation.” But if drug pricing means that patients potentially get left behind? “Then I’m getting angry,” she says.

But righteous anger alone can’t sustain someone over a months-long case involving lawyers and regulators, not least when they’re also raising a family, running part of a pharmacy that’s actively studying hundreds of drugs, and doing their job keeping patients supplied with medicine. At times Kemper has felt frustrated and worn down by the effort of taking on the price rise – but she vows to continue.

“I’ve said that sometimes I’ve thought, well, I’ll stop and quit doing it because it’s too much work, too emotionally draining. But due to the support, I think we’ll go on. I’m patient,” she says. “It has to be solved, for the patients.”

Kemper’s determined that she’s going to provide affordable care for her patients by following the letter of the law. “I’m using the rules,” she says. “I’m not cheating.” Leadiant, she accepts, has used the rules and followed them to serve its own purposes. So she will too.

“I’m allowed to make medication for patients. They don’t like it? So what. I’m following the rules.”

 

 

 

The fight over the future of our most expensive drugs

https://www.axios.com/the-fight-over-the-future-of-our-most-expensive-drugs-034b6e4d-b596-4f48-9b53-6e2c267e01e3.html

An illustration of a hammer and a concrete pill.

The market designed to create competition for biologics — typically our most expensive drugs — has been slow to take off, but some experts say that even its best-case scenario doesn’t do enough to lower drug prices.

Why it matters: While wonks debate the future of biosimilars in policy journals and on editorial pages, the argument is reflected in the political divide over whether enhanced drug competition or price regulation is the best way to address drug prices.

The big picture: Congress created the pathway for biosimilars to come to market knowing that they’d look different than small-molecule generics, and even their most ardent supporters say biosimilars will never achieve the steep discounts that generics do.

  • That’s because biosimilars are much harder to make than normal generics, meaning that drug companies have to charge enough to make their endeavor worthwhile.
  • Nevertheless, the Biosimilars Council says on its website that biosimilars could lead to more than $54 billion in savings over the next decade. A recent analysis by the Pacific Research Institute found that biosimilars could save $7.2 billion a year under the most optimistic modeled scenario.

Yes, but: Some experts are arguing that that’s not enough, and that biosimilars aren’t the best way to control biologic prices.

  • Last week, Memorial Sloan Kettering Cancer Center’s Peter Bach and MIT’s Mark Trusheim published an editorial in the Wall Street Journal arguing that biosimilars don’t produce enough savings and that the resources spent developing them would be better used to bring new, innovative drugs to market.
  • Bach and Trusheim proposed that the government instead regulate the price of older biologics after they’ve been on the market for a certain period of time, which they wrote could save around $50 billion a year.

The other side: Former FDA Commissioner Scott Gottlieb wrote an editorial in the WSJ yesterday in response, arguing that Congress should speed up the use and development of biosimilars instead of regulating prices.

  • “Among other dangers, [price regulation] could trigger shortages of the drugs. It would also discourage investment in manufacturing, as few drugmakers would want to produce complex drugs in perpetuity for little profit,” Gottlieb writes.

The bottom line: This argument isn’t just for the academics. The leading Democratic presidential candidates are also arguing for drug price regulation, a major shift left for the party.

  • “Price regulation may be a tough sell in some quarters, but it’s the best way to keep the promise of America’s extraordinary pharmaceutical industry alive,” Bach and Trusheim write.

 

 

 

Pentagon Sees Security Threat in China’s Drug-Supply Dominance

https://www.bloomberg.com/news/articles/2019-08-05/pentagon-sees-security-threat-in-china-s-drug-supply-dominance

Image result for Pentagon Sees Security Threat in China’s Drug-Supply Dominance

  • Defense Department official says risk ‘cannot be overstated’
  • China is the top maker of active pharmaceutical ingredients

The Trump administration sees the increasing use of Chinese-made active ingredients in drugs taken by U.S. troops and civilians as a national security risk.

China has become the world’s largest supplier of active pharmaceutical ingredients, or API, providing key components to drugmakers worldwide. But a yearlong recall of tainted heart drugs taken by millions of Americans is prompting U.S. national security officials to ask whether China’s growing role in the pharmaceutical supply chain could pose a threat to the health of military personnel.

“The national security risks of increased Chinese dominance of the global API market cannot be overstated,” Christopher Priest, the acting deputy assistant director for health care operations and Tricare for the Defense Health Agency, told a U.S.-China advisory panel last week in Washington.

The Defense Health Agency manages much of the health care of military members, including prescription drugs.

Concerns about the safety and efficacy of Chinese-made drugs are rising at a time of heightened trade tensions between Washington and Beijing. Last week, Trump unveiled plans for new tariffs on Chinese goods; China plans to halt imports of U.S. crops in response. The yuan sank on Monday against the dollar.

The National Security Council is looking into Chinese drug manufactuing and trying to identify the most at-risk medications, Priest told the U.S.-China Economic and Security Review Commission in Washington, without elaborating. The National Security Council declined to comment.

The Defense Health Agency is supposed to use drugs that comply with the Trade Agreements Act, a 1979 law that requires many federal purchases to be made in the U.S. or another compliant country. China isn’t on the approved list, but the agency has waivers for almost 150 drugs they otherwise wouldn’t be able to procure, Priest said. The TAA covers only finished products, not their components.

Many drugs taken by military members and civilians have active ingredients made in China. While drugmakers typically don’t disclose where every molecule in a pill comes from, the recall of contaminated blood-pressure drugs has shown that many of their active components originated in Chinese factories.

Rocket Fuel

Larry Wortzel, a member of the U.S.-China commission and a military retiree, said four of his blood-pressure medications were recalled in three months. Wortzel’s pills, versions of a drug called valsartan, were manufactured in India but had active ingredients from China.

“They were contaminated with rocket fuel,” Wortzel said. “I imagine active people have the same problem. This affects the readiness of our troops.”

The recalled valsartan contained a probable carcinogen known as NDMA, a manufacturing byproduct once used to make rocket fuel and also found in grilled and cured meats.

Priest called the recalls “a never-ending saga” and a “wake-up call.”

The recalls began in July 2018 with valsartan made by China’s Zhejiang Huahai Pharmaceutical Co. The U.S. Food and Drug Administration has largely blamed the company’s manufacturing process for creating the NDMA, which went undetected for as long as four years. Drugmakers in other countries who used similar processes have also had to recall blood-pressure pills.

Some valsartan purchased by the Defense Logistics Agency and later recalled was TAA-compliant, said Patrick Mackin, a spokesman for the DLA. The agency manages the supply chain for the U.S. military, including ensuring pharmaceuticals make their way to military treatment facilities. With valsartan in shortage, according to the FDA, the agency sought a TAA waiver for valsartan on July 15, Mackin said.

A Bloomberg investigation this year detailed doubts among U.S. health officials about the data generic-drug companies, including Zhejiang Huahai and others involved in the valsartan recalls, use to prove their products are safe and effective.

“We wouldn’t have our aircraft carriers and nuclear submarines built in China, and for very important medications, we really should look at what it takes to purchase based on value not just price,” Rosemary Gibson, the author of the book “China Rx,” told the commission. “We want cheap, we can buy cheap. But what’s missing from the whole equation is quality.”

Shortage Fears

Quality isn’t the only concern. Shortages could also arise from attempts by the Chinese to cut off supply, particularly amid the U.S.-China trade standoff.

“If China shut the door on exports, our hospitals would cease to function, so this has tremendous urgency,” Gibson said.

Priest said pharmaceutical companies should be compelled, using the buying power of the entire federal government, to maintain the infrastructure to make drugs without relying on countries like China.

The House Energy and Commerce Committee is investigating the FDA’s ability to police foreign manufacturing. The committee’s leaders asked the agency for more information on the valsartan recall in June, including about a dispute between senior officials and an agency inspector who raised red flags at Zhejiang Huahai more than a year before the NDMA was detected. The panel also asked the Government Accountability Office to look at the FDA’s oversight of foreign drug manufacturing.

“Shame on us for not paying attention to something so critical and assuming, which has been the orthodoxy for a long time, that the industry would regulate itself,” Benjamin Shobert, senior associate for international health at The National Bureau of Asian Research, told the commission.

 

 

 

Kaiser Permanente, American Cancer Society join blood test startup’s $160M funding round

https://www.beckershospitalreview.com/healthcare-information-technology/kaiser-permanente-american-cancer-society-join-blood-test-startup-s-160m-funding-round.html?oly_enc_id=2893H2397267F7G

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South San Francisco-based biotech company Freenome announced the close of a $160 million funding round, with participation from Kaiser Permanente Ventures, the American Cancer Society’s BrightEdge Ventures and Alphabet’s GV and Verily Life Sciences.

The Series B financing will be used to further develop Freenome’s blood test for early cancer detection. The startup uses an artificial intelligence-powered multiomics platform to analyze routine blood draws for often-missed biomarkers of early-stage cancer. Development of the platform has so far centered on use in detecting colorectal cancer.

Beyond further refinement of the platform, Freenome will also conduct a validation study to be submitted to the FDA and CMS for review and, eventually, expand the test to detect other forms of cancer and disease, according to CEO Gabe Otte.

 

There Is No Single, Best Policy for Drug Prices

There Is No Single, Best Policy for Drug Prices

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A majority of Americans prefer greater regulation of prescription drug prices, meaning government intervention to lower them.

But don’t count on a single policy to address a nuanced problem.

“All low-priced drugs are alike; all high-priced drugs are high priced in their own way,” Craig Garthwaite, a health economist from Northwestern University’s Kellogg School of Management, wrote with a colleague.

Outside of a few government programs — like Medicaid and the Veterans Health Administration — low-priced drugs are alike in that competition is the sole source of downward pressure on prices. When many generic versions of a brand-name drug enter the market, competition can push their prices 80 percent below the brand price, or sometimes even more.

In contrast, high-priced drugs lack competition for various reasons, “not all of which imply our goal should be to reduce prices,” Mr. Garthwaite said.

 

 

 

Mixing medicine and money: Why the rise of health system VCs is raising ethical concerns

https://www.healthcaredive.com/news/mixing-medicine-money-hospital-vc-funding-device-ethical-concerns/549392/

Industry-leading nonprofit health systems like Ascension, Providence St. Joseph and Cedars-Sinai have launched affiliated venture capital firms with increasingly more cash to fund start-ups. But the mixture of medicine and financial investment presents the potential for ethical pitfalls.

Deals involving at least one healthcare provider-linked corporate VC fund totaled roughly $1.3 billion last year, a record high nearly triple the amount recorded five years prior, according to data provided to Healthcare Dive by PitchBook, a financial data firm.

Health systems defend their corporate VCs, noting a separation of clinical and investment decisions along with general policies designed to prevent improper influence. Yet the potential for conflicts of interest looms, ethicists said in interviews — particularly when a health system’s hospitals adopt products from companies staked with funds via the affiliated VC.

“If you have a venture program that is really gearing up with some serious investments and they are going to use those devices in their own institution, I would say that’s a matter of concern,” said Jeffrey Flier, dean of Harvard Medical School from 2007 to 2016, in an interview.

“That doesn’t mean it would be done dishonestly, it just means that maybe they should promote doing it elsewhere, not in their own institution.”

A mixture of medicine and finance

The case of Gauss Surgical, a private medical device startup, illustrates how some of these questions can play out in practice.

Corporate VCs affiliated with nine hospital systems have invested in the company since its founding in 2011. A majority of those VC funds were launched in the past five years. A tenth system, Memorial Hermann Health System, invested directly in Gauss. All 10 systems also use — to varying extent — Gauss’ flagship Triton device in clinical practice.

A software platform designed to process images, Triton is used to quantify blood loss, typically during childbirth. Studies have shown standard practices, such as visually estimating or weighing bloody materials, to be inaccurate, leaving an opening for an improvement.

Between the 10 health systems invested in Gauss, 16 of their hospitals use Triton, according to Gauss. Overall, more than 50 U.S. hospitals use the device today, the Los Altos, California-based startup said.

Those running the funds invested in Gauss acknowledge the need for full disclosure to avoid any real or perceived conflicts of interest, particularly when their hospitals are using the device.

“It’s fair to ask why nonprofit systems have venture funds,” said Darren Dworkin, managing director of Summation Health Ventures, a joint VC arm for Cedars-Sinai and MemorialCare that launched in 2014 and has invested in Gauss.

Still, Dworkin, also Cedars’ chief information officer, argued the fund helps fill an investment gap for businesses like Gauss with promising ideas that might not otherwise have received financial backing.

“If there was perfect liquidity in the capital markets for all great ideas, maybe the case can be made that focus can be in other areas,” the exec said in an interview.

Timeline of investments in Gauss

Along with adoption — some hospitals routinely use the device in newborn delivery — has come controversy, however.

At one of those hospitals, St. Joseph Hospital in Orange County, California, an investment by the parent system’s VC fund led to objections from some healthcare staff over the adoption of Triton. The hospital is owned by Providence St. Joseph, which invested in Gauss through its VC arm, Providence Ventures.

Last April, 10 physicians working at the hospital signed onto a letter sent to Scott Rusk, the hospital’s chief medical officer, airing doubts over whether Triton improved patient outcomes, and questioning if its use was influenced by the chain’s financial investment in Gauss.

“We suspect that their use has been mandated by the health system due to investments made by the Providence Venture Capital Fund, and that the insistence that they be used has more to do with ensuring a return on investments than with improving patient care,” the doctors wrote, according to a copy of the letter obtained by Healthcare Dive.

In a statement to Healthcare Dive, Providence St. Joseph said clinical adoption decisions are made exclusively by clinical and operational leadership review, and are not influenced by Providence Ventures. After that review, hospitals in the system decide on their own whether or not to use such products.

“There was no directive from PSJH or Providence Ventures to use the device,” the chain stated on the Orange County hospital. “The decision was made to fund and adopt the Gauss solution at the local hospital level.”

Only three of the system’s 51 hospitals use Triton today, the organization said, and the Orange County hospital made the decision to start using the device before the merger creating Providence St. Joseph completed in July 2016.

But the fund isn’t entirely walled off from the rest of the system, as its leader also serves as a C-suite executive for the health system. Aaron Martin is the managing general partner at Providence Ventures as well as an executive vice president and chief digital officer for the broader PSJH system.

In response to the letter, Gauss stated it is “statistically impossible for a single practitioner or small group of practitioners to personally observe the impact of a monitoring device on patient outcomes across an entire population,” noting hemorrhage is a low-volume, high-risk event.

Testing Triton

The Food and Drug Administration cleared the device in 2014 as an adjunct to blood loss estimation techniques based on two clinical studies, respectively testing 46 patients and 50 patients, as well as a series of non-clinical studies.

Still, several doctors and one nonprofit group question Triton’s proven clinical value.

“It’s in its infancy,” said Abdulla Al-Khan, a doctor at New Jersey’s Hackensack University Medical Center, which has been testing the device since 2015. “Is it 100% reliable? I don’t think so. Is it perhaps better than a physician’s guesstimation of blood loss? Yes, probably.”

Al-Khan, who is the hospital’s director for its Division of Maternal-Fetal Medicine & Surgery and the Center for Abnormal Placentation, said earlier Triton studies “clearly had their limitations,” and plans to soon begin a study comparing all methods of blood loss estimation.

Daniel Katz, director of obstetric anesthesiology research at Mount Sinai, said in an interview arranged by Gauss that Triton’s clinical value has been well-demonstrated, giving healthcare providers a standard way to measure and keep track of blood loss. While Mount Sinai has an equity investment in Gauss through its corporate VC arm, Katz said he has not received any compensation from Gauss.

In a statement, Gauss said it “believes Triton has proven clinical value,” supported by “robust accuracy data,” particularly highlighting research done following its 2014 FDA clearance.

“Subsequent studies, published in peer-reviewed, academic journals, have demonstrated superiority compared with alternative means to measure blood loss and significantly improved clinical outcomes following adoption of Triton,” the company stated.

Gauss also noted a hospital pays a fee per annual subscription for the software as a service, no matter how often the product is used. It said adoption of the product is independent and goes through the hospital’s regular procurement process in instances where the health system has invested in the company.

The company did not make its CEO Siddarth Satish available for a phone interview.

However, the ECRI Institute, an independent organization that analyzes new technologies for providers, payers and government agencies, reviewed at Healthcare Dive’s request the body of evidence supporting Triton and concluded the device’s clinical value was far from established.

Diane Robertson, the institute’s director of health technology assessment, said the studies done have been small and low quality, noting limitations on trial design for controls, blinding and randomization.

“There isn’t any moderate quality or higher quality evidence on clinical outcomes improvement in patients with how this device is used,” she said.

In response to ECRI’s assessment, Gauss stated that a randomized, controlled trial would be “ineffective, impractical and potentially unethical.” The company further defended Triton’s studies, saying they showed it was more accurate than other estimation methods and is widely supported by leading physicians and experts.

A broader issue

Triton’s adoption spurs broader questions for nonprofit systems that have established VC arms.

About a decade ago, deals involving hospital-affiliated VCs were few, mustering less than $50 million in total value in 2008 and 2009 combined, according to PitchBook. Activity has steadily risen, surpassing $500 million in annual value in 2014 and reaching nearly $1.3 billion in 2018.

Little analysis has come with that money. Several ethicists told Healthcare Dive they were unaware of any published or ongoing studies examining hospital-affiliated VCs and the unique questions such funds pose for medical technology adoption.

“That is an issue of institutional conflicts of interest, which is, frankly, completely unsolved in general in healthcare,” said Steven Joffe, a bioethicist at the University of Pennsylvania. “We don’t have clear-cut mechanisms to make sure institutional conflicts of interest are navigated well.”

Most of the hospital systems invested in Gauss via corporate VCs said they take conflicts of interest seriously and have policies in place to prevent such influence.

For instance, Mount Sinai, which launched its VC back in 2008, has a board of people not affiliated with the health system to analyze the investments and clinical use, a spokesperson said.

According to ethics experts, such an independent review is a critical step to mitigate the potential for decisions to be made, which could compromise a hospital’s patient-driven mission.

But even the appearance of conflict can bring risks to an organization. In the case of St. Joseph in Orange County, uncertainty over the relationship between the hospital’s use of Triton and Providence St. Joseph’s investment in Gauss through its venture arm was enough to motivate physicians to speak out.

One has to be very careful not to mix a medical practice with financial gain of an industry,” said Al-Khan, the doctor at Hackensack, which does not have such a VC arm.

The funds, though, appear to be here to stay.

In early 2019, Providence Ventures, which backed Gauss, literally doubled down, announcing its fund will expand from $150 million to $300 million. The fund targets companies just like Gauss: early-stage healthcare companies specializing in IT, medical devices and technology-enabled services.

 

Trump craves big action on drug prices to take to the campaign trail

https://www.washingtonpost.com/news/powerpost/paloma/the-health-202/2019/07/03/the-health-202-trump-craves-big-action-on-drug-prices-to-take-to-the-campaign-trail/5d1b9aa21ad2e552a21d5228/?utm_term=.e49cb9f99e60

Image result for high drug prices

There may be a modest slowdown this year in the growth of drug prices, but it’s nowhere near the seismic shift President Trump has called for. And that seems to be irking the president to no end.

Much of the president’s frustration has been borne by Health and Human Services Secretary Alex Azar, a former drug executive who until very recently pushed back on proposals to allow the importation of lower-cost drugs from Canada and give the government the tools to directly negotiate lower drug prices in the Medicare program, my Washington Post colleagues Yasmeen Abutaleb, Josh Dawsey and Laurie McGinley report.

But now, under intense pressure, Azar has reversed his long-standing opposition to at least one of those ideas: drug importation, an idea typically embraced by Democrats and dismissed by Republicans and the drug industry.

“Inspired by the president’s passion, Secretary Azar has been pushing FDA to go even bigger and broader on importation,” a senior administration official told my colleagues, although the official declined to detail specific policy changes.

It’s been a little more than a year since Trump promised Americans, in a speech from the Rose Garden, he would slash the price of prescription drugs in the United States. In that time, his administration has proposed some bold new regulations that could help move the needle, but only one has so far been finalized — a new requirement that went into effect this month for drugmakers to list prices in television ads.

While Azar has championed a proposal to eliminate the secretive rebates drug manufacturers pay to insurers, opposition to the idea from Domestic Policy Council head Joe Grogan is hamstringing the effort, my colleagues report. Grogan dislikes its estimated $180 billion price tag and doesn’t view the measure as central to the administration’s drug-pricing effort, they write.

There’s another proposal under review at the Office of Management and Budget to tie some Medicare drug prices to those paid by other countries, but it’s opposed by key Senate Republicans and the drug industry.

A senior administration official downplayed talk of tension between Azar and Grogan, saying the two, along with White House legislative affairs director Eric Ueland, speak three times a week about what is happening on Capitol Hill.

And on Monday, the New York Post published a joint op-ed by Azar and Grogan praising a recent executive order from Trump aimed at more transparency around the prices negotiated between hospitals and insurers.

“President Trump has promised a better vision: a health care system that treats you like a person, not a number,” Azar and Grogan write. “He wants to hold providers and Big Pharma accountable to transparency and reasonable prices.”

Meanwhile, drugmakers have continued hiking prices, albeit a bit more slowly on average. List prices for branded drugs grew 3.3 percent in this year’s first quarter, compared with 6.3 percent in the first quarter of 2018, according to SSR Health pharmaceutical analysts. Bernstein analysts told Politico that drug prices jumped 10.5 percent over the past six months, less than over the same period last year but still four times the rate of inflation.

Trump has frequently referenced some encouraging data from the consumer price index, where the index for prescription drugs fell by 0.6 percent for the 12 months ending in December, according to the Bureau of Labor Statistics. The index also dropped in January, February, March and May — a string of monthly declines not seen since 1973, my Post fact-checking colleagues recently noted.

Yet these data are a far cry from the drastic price reductions Trump would love to tout on the campaign trail as he seeks reelection in 2020.

“By all accounts, drug prices are a fixation for Trump, who frequently sends advisers news clippings and summons them to the White House to rant about the issue,” Yasmeen, Josh and Laurie write. “The guy likes to make money, and he thinks they make too much money,” said one former senior administration official.

A senior administration official told my colleagues there was frustration at a lack of executive branch tools to lower drug prices and that some of Trump’s ideas were ambitious but unworkable.

“Disagreements over how to proceed have created a policy free-for-all as different advisers — and the president himself — pursue what appear to be ad hoc and sometimes dueling approaches,” they write. “Trump entertains proposals usually pushed by progressive Democrats one moment and free-market GOP ideas the next.”

 

The drug pricing debate is stuck in the past

https://www.axios.com/drug-pricing-debate-stuck-in-past-10ba315e-0ddf-4013-8c5a-f8ee89c2f530.html

Illustration of falling pills and coins

There’s a scientific and economic revolution happening in medicine, and the political debate over drug prices isn’t keeping up. Not only are policymakers struggling to agree on solutions, they’re mostly talking about yesterday’s problems.

Why it matters: Medical innovation is already hurtling toward a new era of highly specialized drugs — some are even tailor-made for each individual patient. They may be more effective than anything we’ve seen before, and also more expensive. But the drug-pricing debate is more focused on decades-old parts of the system.

The big picture: “We haven’t really contemplated how we’re going to absorb some of these things,” Food and Drug Administration Scott Gottlieb said. “These are good problems to have…but they are policy challenges.”

Where it stands: Congress is mainly squabbling over proposals to reduce prices by boosting competition — by making it easier to start developing generics, or by changing patent protections that help pharmaceutical companies keep their rivals at bay.

Yes, but: Those regulatory tools were designed for a world in which pharmaceutical companies develop relatively simple drugs and try to market them to a big group of people. But science is rapidly moving away from that world.

  • Gene therapy, for example, is the new wave in cancer treatment. It helps patients’ own immune systems fight off cancer — which means each dose is custom-made for each patient. It’s a highly promising approach, but treatment can come with a price tag north of $1 million once all is said and done.
  • The old dichotomy of a brand-name pill followed by a generic version of that pill doesn’t really hold up for custom-made drugs.
  • So tools that try to promote competition simply may not work as well. “I don’t think they’re solutions for gene therapies because I think you’re ultimately going to have to figure out ways to capitalize those costs,” Gottlieb said.

Even without being custom-made, many new drugs are still trying to treat smaller groups of patients — like people with the same specific genetic mutation.

  • “Generic entry might not prove to be as successful for addressing this problem as it has historically been, and I think it’s because we fundamentally have shifted into these other types of products where competition is just more challenging,” Vanderbilt’s Stacie Dusetzina said.

Most of these new drugs belong to a class known as biologics. They’re more complex than the drugs we’re used to, and therefore have the potential to be more precise in the way they interact with your body.

  • “The way drugs are produced and made now is quite different from the way they were produced and made in the early ‘80s, and that’s both because…you have a lot of these drugs being made for small populations, and for biologics the science is so much more complicated,” said Rachel Sachs, a professor at Washington University.
  • Biologics don’t have traditional generic versions; the equivalent are products known as “biosimilars.”
  • The Affordable Care Act created a pathway for the FDA to approve biosimilars, but that market has been slow to take off, and at least in the early going, biosimilars often don’t offer the same steep discounts as traditional generics.

Promoting competition isn’t the only idea in the world, but more muscular price controls are much more controversial.

  • Most of these new, complex drugs are administered at a doctor’s office, not picked up from a pharmacy. The Trump administration has proposed tying Medicare’s payments for that class of drugs to the lower prices that other countries pay, and Democrats support direct Medicare price negotiations.

The bottom line: “One version of ten years from now will have very limited competition in certain types of markets, either because the market has eroded it to be that way or because the drugs that are coming out will by definition have limited competition,” said Rena Conti, a professor at Boston University.