Sean Parker: Health care’s big breakthroughs aren’t going to come out of Google or Amazon

https://www.statnews.com/2018/11/13/sean-parker-health-cares-big-breakthroughs-arent-going-to-come-out-of-google-or-amazon/?utm_source=STAT%20Newsletters&utm_campaign=033f0dac05-MR_COPY_12&utm_medium=email&utm_term=0_8cab1d7961-033f0dac05-150487325

Sean Parker, the tech billionaire and cancer research philanthropist, may be a product of a Silicon Valley tech giant — but he’s skeptical about the impact those companies will have as they increasingly make a play in medicine.

“I just don’t think the innovations that are going to drive this revolution in health care and discovery are going to come out of Amazon or Google,” Parker said Tuesday at an event put on by the Washington Post. “Google has a big group that’s focused on this — they’re really smart, they’re not unsophisticated, they’re not naive — but I don’t think that’s where you’re going to see the big breakthroughs happening.”

Silicon Valley’s tech giants have invested significant resources in health care and science in recent years — and attracted big-name talent.

Amazon, along with JPMorgan and Berkshire Hathaway, has launched a new health care company aimed at developing solutions that could be implemented elsewhere in the U.S. health care system.

Alphabet, Google’s parent company, has been scooping up some of the biggest names in health care. Google just hired David Feinberg, the forward-thinking CEO of the Geisinger health system, the Pennsylvania health plan and hospital system confirmed last week. Dr. Toby Cosgrove, the longtime president and CEO of Cleveland Clinic, joined Google earlier this year. And Dr. Robert Califf, the former commissioner of the Food and Drug Administration, last year joined Verily, Alphabet’s unit working on solutions to disease.

While coders face their own formidable challenges, Parker said, “tech people coming from tech to biology so dramatically underestimate the complexity of the human body. It’s not designed by us. It doesn’t work in ways that make sense.”

Parker, the former president of Facebook, has since become a major funder of research into therapies that seek to fight cancer by harnessing the patient’s own immune system through his foundation Parker Institute for Cancer Immunotherapy, which he founded in 2016. It has funded prominent research scientists across the country, most notably James Allison, one of the recipients of this year’s Nobel Prize in medicine.

 

 

Something Happened to U.S. Drug Costs in the 1990s

International Comparison of Drug Spending

Image result for Something Happened to U.S. Drug Costs in the 1990s

Two decades ago, the costs began rising well beyond that of other nations, and in recent years have shot up again. What can explain it?

There was a time when America approximated other wealthy countries in drug spending. But in the late 1990s, U.S. spending took off. It tripled between 1997 and 2007, according to a study in Health Affairs.

Then a slowdown lasted until about 2013, before spending shot up again. What explains these trends?

By 2015, American annual spending on prescription drugs reached about $1,000 per person and 16.7 percent of overall personal health care spending. The Commonwealth Fund compared that level with that of nine other wealthy nations: Australia, Canada, France, Germany, the Netherlands, Norway, Sweden, Switzerland and Britain.

Among those, Switzerland, second to the United States, was only at $783. Sweden was lowest, at $351. (It should be noted that relative to total health spending, American spending on drugs is consistent with that of other countries, reflecting the fact that we spend a lot more on other care, too.)

Several factors could be at play in America’s spending surge. One is the total amount of prescription drugs used. But Americans do not take a lot more drugs than patients in other countries, as studies document.

In fact, when it comes to drugs primary care doctors typically prescribe — including medications for hypertension, high cholesterol, depression, gastrointestinal conditions and pain — a recent study in the journal Health Policy found that Americans use prescription drugs for 12 percent fewer days per year than their counterparts in other wealthy countries.

Another potential explanation is that Americans take more expensive brand-name drugs than cheaper generics relative to their overseas counterparts. This doesn’t hold up either. We use a greater proportion of generic drugs here than most other countries — 84 percent of prescriptions are generic.

Though Americans take a lower proportion of brand-name drugs, the prices of those drugs are a lot higher than in other countries. For many drugs, U.S. prices are twice those found in Canada, for example.

Prices are a lot higher for brand-name drugs in the United States because we lack the widespread policies to limit drug prices that many other countries have.

“Other countries decline to pay for a drug when the price is too high,” said Rachel Sachs, who studies drug pricing and regulation as an associate professor of law at Washington University in St. Louis. “The United States has been unwilling to do this.”

For example, except in rare cases, Britain will pay for new drugs only when their effectiveness is high relative to their prices. German regulators may decline to reimburse a new drug at rates higher than those paid for older therapies, if they find that it offers no additional benefit. Some other nations base their prices on those charged in Britain, Germany or other countries, Ms. Sachs added.

That, by and large, explains why we spend so much more on drugs in the United States than elsewhere. But what drove the change in the 1990s? One part of the explanation is that a record number of new drugs emerged in that decade.

In particular, sales of costly new hypertension and cancer drugs took off in the 1990s. The number of drugs with sales that topped $1 billion increased to 52 in 2006 from six in 1997. The combination of few price controls and rapid growth of brand-name drugs increased American per capita pharmaceutical spending.

“The scientific explosion of the 1970s and 1980s that allowed us to isolate the genetic basis of certain diseases opened a lot of therapeutic areas for new drugs,” said Aaron Kesselheim, an associate professor of medicine at Harvard Medical School.

He pointed to other factors promoting the growth of drug spending in the 1990s, including increased advertising to physicians and consumers. Regulations on drug ads on TV were relaxed, which led to more advertising. More rapid F.D.A. approvals, fueled by new fees collected from pharmaceutical manufactures that began in 1992, also helped push new drugs to market.

In addition, in the 1990s and through the mid-2000s, coverage for drugs (as well as for other health care) expanded through public programs. Expansions of Medicaid and the Children’s Health Insurance Program also coincided with increased drug spending. And Medicare adopted a universal prescription drug benefit in 2006. Studies have found that when the potential market for drugs grows, more drugs enter it.

In 2007, U.S. drug spending growth was the slowest since 1974. The slowdown in the mid-2000s can be explained by fewer F.D.A. approvals of blockbuster drugs. Annual F.D.A. approvals of new drugs fell from about 35 in the late 1990s and early 2000s to about 20 per year in 2005-07.

In addition, the patents of many top-selling drugs (like Lipitor) expired, and as American prescription drug use tipped back toward generics, per capita spending leveled off.

The spike starting in 2014 mirrors that of the 1990s. The arrival of expensive specialty drugs for hepatitis C, cystic fibrosis and other conditions fueled spending growth. Many of the new drugs are based on relatively recent advances in science, like the completion of the human genome project.

“Many of the new agents are biologics,” said Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center. “These drugs have no meaningful competition, and therefore command very high prices.”

A U.S. Department of Health and Human Services issue brief estimated that 30 percent of the rise in drug spending between 2000 and 2014 could be attributed to price increases or greater use of higher-priced drugs. Coverage expansions of the Affordable Care Act also contributed to increased drug spending. In addition, “there has been a lowering of approval standards,” Dr. Bach said. “So more of these new, expensive drugs are making it to market faster.”

“As in the earlier run-up in drug spending, we’re largely uncritical of the price-value trade-off for drugs in the U.S.,” said Michelle Mello, a health law scholar at Stanford. “Though we pay high prices for some drugs of high value, we also pay high prices for drugs of little value. The U.S. stands virtually alone in this.”

If the principal driver of higher American drug spending is higher pricing on new, blockbuster drugs, what does that bode for the future? “I suspect things will get worse before they get better,” Ms. Sachs said. The push for precision medicine — drugs made for smaller populations, including matching to specific genetic characteristics — may make drugs more effective, therefore harder to live without. That’s a recipe for higher prices.

Democratic politicians have tended to be the ones advocating governmental policies to limit drug prices. But recently the Trump administration announced a Medicare drug pricing plan that seems to reflect growing comfort with how drug prices are established overseas, and there’s new optimism the two sides could work together after the results of the midterms. Although the effectiveness of the plan remains unclear, it is clearly a response to public concern about drug prices and spending.

CVS also recently announced it would devise employer drug plans that don’t include drugs with prices out of line with their effectiveness — something more common in other countries but unheard-of in the United States. Even if these efforts don’t take off rapidly, they are early signs that attitudes might be changing.

 

 

 

 

Congress Is Making Quiet Progress on Drug Costs

https://www.commonwealthfund.org/blog/2018/congress-making-quiet-progress-drug-costs?omnicid=EALERT1477719&mid=henrykotula@yahoo.com

Progress on drug costs

While the Trump administration has taken small steps to implement its blueprint to lower prescription drug prices, Congress has recently made quiet progress on some policies that could help lower drug costs for patients.

First, both the Senate and House advanced legislation to ban “gag clauses” that prevent pharmacists from telling patients that they can save money on medications by paying for them out of pocket. Certain prescription benefit managers (PBMs) have used gag clauses as part of their formulary design. While this is not a widespread industry practice, a 2016 survey of community pharmacists found that nearly 60 percent had encountered a gag clause in the previous 10 months. Two bills (S. 2553 and H.R. 6733) would prohibit private Medicare plans from instituting gag clauses. A third, related bill (S. 2554) — passed by the Senate on Monday with overwhelming support — prohibits private health insurance plans from using them. While they enable pharmacists to advise patients on how to spend less at the pharmacy counter, these bans won’t necessarily lower the prices of drugs.

Second, a lesser-known provision of S. 2554, added by the Senate Committee on Health, Education, Labor and Pensions (HELP), could help lower drug prices by shedding light on patent-settlement agreements between drug manufacturers. Brand-name manufacturers sometimes use these agreements to extend their monopolies and keep drug prices higher by directly and indirectly compensating generic manufacturers for voluntarily delaying generics from coming to market. The Congressional Budget Office has found that setting a standard to rein in these types of settlements would produce $2.4 billion in savings over 10 years.

The HELP committee provision would require manufacturers of biologics (large-molecule drugs) and biosimilars (nearly identical copies of original biologics) to report patent-settlement agreements to the Federal Trade Commission (FTC) — an important step in understanding and preventing abuse of what is sometimes referred to as “pay for delay.”

Pay-for-Delay Stalls Drug Competition, Costing Patients Billions

In 2003, Congress required patent-settlement agreements between brand-name and generic small-molecule drug manufacturers to be filed with the FTC for review after they are made. (Currently most drugs sold are small-molecule drugs, but the biologics market is growing rapidly.) Such agreements effectively delay the sale of lower-cost generic drugs by nearly 17 months longer than agreements without payments, according to a 2010 report by the FTC. These anticompetitive agreements cost taxpayers approximately $3.5 billion each year.

In 2012, the U.S. Supreme Court decided in FTC v. Actavis that a brand-name drug manufacturer’s payment to a generic competitor to settle patent litigation can violate antitrust law. After the Court’s decision, the number of pay-for-delay agreements declined two years in a row. With drug companies now required to report these settlements to the FTC, the agency has been able to act to protect patients from anticompetitive deals that delay cheaper, generic drug products from coming to market. The FTC reviews reported settlements and, if it determines an agreement violates antitrust law, the agency challenges the agreement in the courts.

For example, in 2008 the FTC sued Cephalon, Inc., for paying four generic companies $300 million to delay marketing of their generic versions of Cephalon’s sleep-disorder drug, Provigil, until 2012. In 2015, the FTC reached a settlement with Cephalon’s owner, Teva Pharmaceutical Industries, Ltd., which agreed to ending pay-for-delay agreements for all their U.S. operations. The company also paid $1.2 billion in compensation for Cephalon’s anticompetitive behavior.

FTC Reporting Requirement Does Not Apply to Biologic and Biosimilar Manufacturers

The FTC reporting requirement applies only to small-molecule drugs, however, and not to far more expensive biologics and biosimilars. The potential savings of having biosimilars available for sale are significant: even one biosimilar competing against a brand-name biologic can result in a 35 percent lower price for patients and payers. Without delays in competition with brand-name biologics, biosimilars could save $54 billion to $250 billion over 10 years.

But there are concerns that manufacturers are entering into pay-for-delay agreements to keep prices for these drugs artificially high. Since 2015, when the biosimilar pathway was implemented, the FDA has approved 12 biosimilars, yet only three are currently available to patients — likely because of patent litigation and pay-for-delay agreements.

FTC Review Is Part of the Solution

In his remarks upon releasing the U.S. Food and Drug Administration’s Biosimilars Action Plan in July, FDA commissioner Scott Gottlieb noted the FTC’s key role in monitoring U.S. markets to protect consumers from anticompetitive behaviors, including those of prescription drug manufacturers. He also pointed out the patent litigation tactics manufacturers use to delay biosimilar competition.

As it does for the small-molecule drug market, the FTC can play a proactive role in monitoring what is happening in the biologic and biosimilar markets. At a workshop on drug pricing held last year, acting FTC chair Maureen Ohlhausen said that while her agency has been making progress in eliminating pay-for-delay agreements, it has not seen the last of them. She said they will remain a target. But to move forward, the FTC needs clearer authority to review patent settlements between biologic and biosimilar manufacturers.

With Senate passage of S. 2554 and its FTC reporting provision, Congress has taken an important step in encouraging a robust biosimilar market. (While the House has not passed a similar measure, the Senate bill could be added to a reconciliation of the House and Senate gag clause bills.) Engaging all the relevant market regulators — including the FTC, the U.S. Patent and Trademark Office, the Centers for Medicare and Medicaid Services, and the FDA — will inject needed competition into this nascent market and help lower drug prices for U.S. consumers.

 

Why the Theranos saga and Holmes’ trial is good for innovation

https://medcitynews.com/2018/07/why-the-theranos-saga-and-holmes-trial-is-good-for-innovation/?utm_campaign=MCN%20Daily%20Top%20Stories&utm_source=hs_email&utm_medium=email&utm_content=64636534&_hsenc=p2ANqtz–GFYpmjBxPV9EWXgCH2lvWrwAz-KrCzuIRAXAWzUlbmiF-WPFS-GEeREl-KwL_4dtpBm5ToXhY9MD9DleBiSVfIqcWPA&_hsmi=64636534

The criminal trial of Theranos CEO Elizabeth Holmes will help entrepreneurs see the legal ramifications of hyping and under-delivering presumed medical advances and be ultimately be good for innovation.

“Fake it until you make it” is an oft-repeated phrase among entrepreneurs promising to revolutionize, disrupt or transform.  It can, however, have severe consequences for the healthcare sector when doctors and patients place their trust in the new or evolving venture.  The criminal trial of Elizabeth Holmes, who faces a 20-year prison sentence, will help healthcare entrepreneurs see the legal ramifications of over-promising and under-delivering presumed medical advances.

This trial will generate headlines. More importantly, it will be a teachable moment for all of us trying to innovate our way through a deeply complicated and entrenched healthcare system – especially regarding patient-empowering technology. Holmes, and the company she founded, Theranos, marketed a means to disrupt traditional diagnostic business models where two large companies dominate a $54 billion market.  The idea was to put patients in control of blood testing, using less amounts and creating a faster, lower-cost alternative.   The business model envisioned consumers using Theranos equipment at retail locations including drug stores and supermarkets.  As the marketing phrase goes, that was the “steak,” or substance to her pitch, but there was also “sizzle.”

The young, telegenic, and articulate Holmes became the widely-known public face of the company. Wearing black turtlenecks to draw comparisons to Steve Jobs and calling one of her blood-test devices “Edison” to align herself with the famous inventor, the media could not resist the story.  That part worked: Theranos at one point was valued at $9 billion.  Holmes declared her lab-test device was “the most important thing humanity ever built.”  Much of the narrative she created about Theranos will now be used as evidence in her criminal trial just as it was in a separate Securities and Exchange civil fraud case in March.

Here is something we already know from the federal indictment handed down last month: prosecutors will cite Theranos press releases, media interviews, and promotional materials to support allegations that Holmes knowingly committed criminal fraud.  In one example, the U.S. Attorney’s office for the Northern District of California cites a specific interview in which Holmes told a media outlet that Theranos could run “any combination of tests” from a single small blood sample.  The indictment goes on to list public statements such as one on the company’s website that, “one tiny drop changes everything.”

In the Securities and Exchange Commission civil case, which Holmes settled, media interviews with the business press, which in turn were said to solicit investors, are likewise cited as evidence of financial fraud.  The SEC’s civil complaint states that in 2013, “Holmes and Theranos began publicly touting Theranos’ proprietary analyzers in interviews with the media, notwithstanding Theranos’ use of commercially-available analyzers for patient testing.”  Here too, several interviews with financial media outlets were used as examples including an e-mail exchange between Holmes and a reporter in which she tried to shape the story.   As is widely known, the generally favorable media coverage that accelerated in 2013 abruptly ended.

Her company came under the scrutiny of The Wall Street Journal in 2015 when company whistleblowers went public raising questions about the underlying technology.  This put Holmes and her company on the government’s radar.   The narrative soon changed to actions intended to correct the company’s mistakes. Most notably, Theranos voided or corrected nearly a million blood-test results, calling into question untold numbers of health decisions made between doctors and patients.

Judges and juries take an especially harsh view of potentially harmful impacts on consumers.  The FBI agent who investigated the case described charges of misleading consumers and doctors as endangering “health and lives.”  Likely the most serious charge among the 11 counts Holmes faces is being unable to produce accurate and reliable results for numerous blood tests, including the detection of HIV, despite assertions to the contrary.

Yet Holmes is only the most recent and well-known among many healthcare practitioners who face charges or convictions of fraud.  We can go back to the patent medicine movement in the early 1900’s, where a popular advertising slogan at the time was “a cure for what ails you.”  In the late 1800’s there was actually a real-life snake oil salesman who traveled the country and gave demonstrations with live reptiles on how he made his product.  Such antics with fake medicine led to the passage of the Pure Food and Drug Act in 1906.  So, a century later, why does this keep happening?

One recurring theme leading to healthcare fraud is what medical scholars have labeled “eminence-based” medicine.  Simply put, this is an over-reliance on personality and stature from the individual believed to have authority on a particular medical subject.  The term is a play on the words “evidence-based” medicine, where facts are supposed to be used to evaluate medical advances.

Some lessons are already being learned. Early stage and start-up blood-testing companies are emphasizing peer-reviewed data and clinical trials.  One telling insight from an entrepreneur, as reported in Marketwatch, describes Theranos as a “big crater in the industry.”  The founder of privately-held Athelas, a blood-testing firm, said Theranos, if executed correctly, “would make a massive impact in a really old, archaic industry.”

Faking it until you make it may work to a certain point and allow entrepreneurs a limited degree of latitude among investors as they develop technical approaches to support business models.  As an entrepreneur myself, I am well aware of the need to convincingly show the promise of an invention – even before it is fully finished. However, it becomes financial fraud — potentially criminal activity — when you are not honest about the risk.  Medical and consumer fraud, when patients are sucked into the hype and subsequently misled, becomes exponentially more serious. Neither is acceptable. The bottom line: Holmes’ trial will offer insight leading to less hype and more high-quality innovation.

 

 

 

Forty Years of Winning Friends and Influencing People

https://www.chcf.org/blog/forty-years-of-winning-friends-and-influencing-people/

An interview with former US Representative Henry Waxman of California.

Of the more than 12,000 Americans who have served in Congress since it convened in 1789, few have had careers as fruitful as Henry Waxman’s. Representing west Los Angeles and its surrounding areas for 40 years, Waxman, 78, left a remarkable imprint on US health policy. His manifold accomplishments were capped by the passage of the Affordable Care Act (ACA) in 2010. A son of south-central Los Angeles, he worked at his father’s grocery store, earned a law degree at the University of California, Los Angeles, and in 1968 won a seat in the State Assembly. He was elected to the US House in 1974 in an era when bipartisanship was ordinary and health care had yet to become an overwhelming economic and political force in American life. Waxman was known in Congress for his persistence at wearing down opposition. Republican Senator Alan Simpson of Wyoming famously called him “tougher than a boiled owl” after negotiating the landmark Clean Air Act amendments of 1990. Waxman led efforts to ban smoking in public places and to require nutrition labels on food products. I talked with him recently about his experiences, the future of health policy, and the changing language of health reform. The transcript has been lightly edited for length and clarity.

Q: In 1974, when Los Angeles voters first sent you to Washington, health policy wasn’t the ticket to political influence. You are a lawyer, not a doctor. What drew you to health care?

A: When I was first elected to the California State Assembly in 1968, I believed that if I specialized in a policy area I would have more impact than if I tried to be an expert on everything. Health policy fit my district in Los Angeles, and I could see that government needed to be involved in a whole range of decisions, from health care services to biomedical research to public health. I was chairman of the Assembly Committee on Health. I was elected to Congress in 1974 in a Democratic wave election. I wanted to get on a health policy committee, which was Energy and Commerce. Democrats picked up so many seats and there were so many committee vacancies that year that it was easy to claim one, and I got on that committee. Within four years there was a vacancy for chair of the health and environment subcommittee, and I stepped up to that. It gave me a lot more impact.

Q: What role do you think health care will play in the upcoming elections?

A: If the Democrats do as well as I expect and hope, it will be more because of what Trump was doing in the health area than anything else. Even though people value health care services and insurance, the idea that the president and the GOP wanted to take away health insurance and reduce benefits for people who needed it — that was something they didn’t expect and were angry about.

Q: Is it feasible to provide health coverage to everyone?

A: I have always felt we needed access to universal health coverage. It wasn’t until we got the ACA under Obama that we were able to narrow the gap of the uninsured — those who couldn’t get insurance through their jobs, who weren’t eligible for Medicare and Medicaid, who had preexisting conditions, or who couldn’t afford the premiums. The ACA helped people have access to an individual health policy by eliminating insurance company discrimination and giving a subsidy to those who couldn’t afford coverage. It wasn’t a perfect bill, but it was important. The idea that Republicans would come along and bring back preexisting conditions as a reason to deny people coverage is what drove enough GOP senators to stop the GOP repeal bill from going forward last year. We’ll see what they do by way of executive orders or through the courts to try to frustrate people’s ability to buy insurance.

The Republican ACA repeal bill last year was a real shock because they also wanted to repeal the Medicaid program and allow states to cut funds for people in nursing homes, people with disabilities, and low-income patients who rely so heavily on that program. And they had proposals to hurt Medicare that House Speaker Paul Ryan had been advancing. The American people do not want to deny others insurance coverage and access to health services.

Q: Bipartisanship has gone out of style. Can it be revived?

A: It doesn’t look very likely now, but I built my legislative career on the idea that there could be bipartisan consensus to move forward on legislation. All the big bills had bipartisan support. The only bill that got through on a strictly partisan basis was the Obamacare legislation, and I regretted that. The Republicans just wanted to denigrate it and scare people into believing the ACA would provide for death panels, hurt people, take away their insurance, and keep them from getting access to care. None of that was true.

Q: A growing number of Democrats want to establish a single-payer health care system for the state. Do you agree with them?

A: A lot of people mistake the phrase “single payer” with universal health coverage. While I share the passion of people who want to cover everybody, single payer is not a panacea. My goal is universal health coverage. The Republican attempt last year to repeal the ACA and send 32 million Americans into the ranks of the uninsured was an albatross around their necks.

But the Democrats could turn this winning issue into a loser if some make a single-payer bill such as Medicare for All into a litmus test. I cosponsored single-payer legislation in Congress with Senator Ted Kennedy, and I always sought to bring the nation closer to universal coverage. I authored laws to bring Medicaid to more children and to establish the Children’s Health Insurance Program, and I led the fight to enact the ACA. These bills were very important. If we passed something like a single-payer bill, which would be extremely hard to do, we would be passing up opportunities to make progress. A lot of people who want a Medicare for All bill don’t realize that those of us on Medicare have to pay for supplemental insurance, because Medicare doesn’t cover everything. Medicare doesn’t generally cover certain services like nursing home care, so to get help you have to impoverish yourself to qualify for Medicaid.

One organization is sending out letters telling voters to support a single-payer bill and you won’t have to pay anything anymore. We can’t afford something like that. Democrats can embrace a boundless vision for a health care future without being trapped by a rigid model of how to get there. We should increase the number of people with comprehensive health insurance and focus on lowering costs. People with Medicare don’t want to give it up. People have health insurance on the job.

I would rather expand on what we have and build it out to cover everybody.

People don’t seem to remember that Democrats could barely muster the votes for the ACA when we had 60 votes in the Senate and a 255–179 majority in the House. Even if we recapture Congress and the presidency, I don’t think we would get a Medicare for All bill passed. It would require such a high tax increase that people would be absolutely shocked.

Q: What would be the national impact of California adopting a universal coverage plan?

A: Californian progress would be a model for the rest of the country, and we would be doing what’s right for the people of California who don’t have access to coverage. I think California is a trendsetter — for good and for bad. Proposition 13 and term limits started in California and spread to other states, and I think they have been a disservice. We’ve also done a lot of good things in California, and the rest of the country follows those things as well.

People who try to marginalize California do so at their own risk. People around the country look at California as a leader. California embraced the ACA, expanded Medicaid, and has been moving forward on making sure our public health care system is reforming itself to represent the needs for population health care and to ensure that uninsured low-income patients get access to decent, good-quality health care.

Q: More states are adopting work requirements in Medicaid. Do you think that will become the standard nationwide?

A: Work requirements are inconsistent with the Medicaid law. We’re talking about making people go to work to get health care when they’re sick. I just don’t think it makes sense. The courts may throw it out, and if not, at some point there will be a reaction against it, and it will be repealed by a future Congress.

Q: Some see parallels between the conduct of tobacco companies and opioid makers. Do you think “Big Pharma” will be held to account like “Big Tobacco?”

A: In the difficult fight against big tobacco, one of the lessons we learned was that even an extremely powerful group like the tobacco industry could be beaten if you keep pushing back. Even though there was overwhelming public support for regulation of tobacco, it took until 2009 before we could enact tobacco regulation by giving the Food and Drug Administration (FDA) authority to act. In the meantime, there were lawsuits by states to recover money they spent under Medicaid programs to cope with the harm from smoking. With opioids, there will be more and more lawsuits against distributors and manufacturers whose actions resulted in deaths of people from opioid addiction. Congress now is grappling with many bills to help people who are addicted, to prevent addiction from spreading further, and to restrict the ability to get the drug product. I’m optimistic we can come to terms with this crisis.

Q: What have you been doing since retiring from Congress?

A: I wanted to stay in the DC area near my son, Michael Waxman, and his family. He had a traditional public relations firm and he asked me to join him. In the health area, we represent Planned Parenthood in California, public hospitals in California, community health centers at the national level, and hospitals that get 340b drug discounts because they serve many low-income patients. We have foundation grants to work on problems of high pharmaceutical prices, and foundation grants to have a program to make sure women know about the whole range of health services available to them for free under the ACA. I enjoy working with my son and pursuing causes I would have pursued as a member of Congress.

 

 

 

It’s the Monopolies, Stupid!

http://www.commonwealthfund.org/publications/blog/2018/may/drug-monopolies-pricing?omnicid=EALERT1410094&mid=henrykotula@yahoo.com

Image result for pharmaceutical monopoly

At the core of the nation’s drug pricing problem is one fundamental fact: Drug companies enjoy government-sanctioned and -enforced monopolies over the supply of many drugs.

These monopolies result from patents awarded under federal law for novel molecules. Patents allow manufacturers to prevent competitors from selling the same drug for 20 years from the time the patent is filed. Given that the process of gaining regulatory approval to market their new drug takes time, research suggests new drugs have, on average, 12 to 13 years of market exclusivity.

Once new drugs are approved by the Food and Drug Administration, the monopolies assured by patents enable pharmaceutical companies to charge any price they choose. They generally pick prices that not only cover their development costs, but also generate profits that exceed those of most other industries: for example, the average profit margin for the 25 largest software companies (which are cited as having the same high R&D investment and low production and distribution costs as pharmaceutical companies) was 13.4 percent in 2015, while the average profit margin for the 25 largest drug companies was 20.1 percent in 2015. Drugmakers are also free to raise prices whenever they want at rates they alone determine.

The existence of patents does not totally prevent competition. Often, other companies introduce drugs that are distinct enough to justify their own separate patents and accomplish the same therapeutic goal. This results in competition that lowers drug prices, but often by not enough to make the medications affordable for many patients. In addition, the makers of patented drugs — for example, Mylan’s EpiPen and the weight-loss drug Suprenza — have developed effective mechanisms to extend the lives of their patents beyond 20 years. These approaches include making minor modifications in the formulations or packaging of drugs that have no clinical significance, as well as paying potential generic competitors not to introduce generic drugs.

That said, patents eventually expire, at which point generic drug companies can manufacture the drug and sell it at a much lower price. But even generic drug competition has been weakened recently by generic drug market monopolies, as these manufacturers have bought up their competition. As a result, the prices of old and familiar drugs have risen dramatically. The price of the cardiac drug isuprel has increased more than sixfold between 2013 and 2015, and the price of the antibiotic doxycycline has soared 90-fold over the same period.

As long as drug companies (or a small group) hold monopoly (or oligopoly) power over potent new therapies, there is no free market solution to lowering drug prices. Only a countervailing nonmarket force of equal strength can bring those prices down. Other western industrial countries, recognizing this, authorize their governments to step in and moderate drug prices for the benefit of their citizenry. Some set prices by fiat, while other negotiate with drug companies. In the latter case, the negotiations are sometimes guided by comparative effectiveness analysis that estimates the value of new drugs to patients. Of course, drug companies are free to walk away from such deals, but they generally choose not to, presumably because they still make money from those sales.

Drug companies say their monopoly earnings are necessary to sustain the research and development that produce new drugs. In effect they are saying that they need to be able to charge the very high prices we now see for patented drugs so they can innovate. This raises the questions of how much money society should allocate toward pharmaceutical innovation and who should decide. Setting those questions aside for the moment, we should be very clear about one thing: As long as pharmaceutical companies have uncontested market power to set prices for many patented and generic drugs, those prices will remain a huge problem for Americans and their elected representatives.

How to Make a Dent in Crazy-High Drug Prices

https://www.bloomberg.com/view/articles/2018-05-11/high-drug-prices-can-be-lowered-without-government-controls

 

Some of the most expensive medicines are among the least effective. Why does that make sense?

There’s no good reason to pay a lot for prescription drugs that don’t work well. But that’s what lots of Americans are doing.

Some drug prices far outweigh any reasonable measure of the drug’s benefit. This is frequently the case for new cancer therapies. For example, the cancer drug Erbitux costs about $10,000 per month and extends life by an average of about three months when used to treat patients with recurrent or metastatic squamous-cell carcinoma of the head and neck. And the launch price of new cancer drugs is going up 12 percent a year even though the drugs aren’t getting commensurately better. In one recent estimate, the cost of extending a cancer patient’s life by one year is increasing by $8,500 every year.

Some drugs for non-cancer conditions are also unreasonably expensive. The cystic fibrosis drugs Kalydeco, Orkambi and Symdeko each cost almost $1 million for each year of extended life in reasonably good health. (Though there is debate on this point, spending more than about $200,000 per year of life extension is generally considered pricey by health-care economists.)

The mismatch of drug prices and benefits results from a peculiar confluence of American health-care practices, reinforced by American health-care politics. Though political leaders, including President Donald Trump, frequently rail against high drug prices, there has been no meaningful government action on the issue, something that could change with the president’s promised announcement on the issue.

The U.S. health-care system relies heavily on insurance companies. They help determine drug prices by deciding what they’ll cover and how. When faced with requests to pay extremely high prices for new drugs that don’t have good substitutes, they have only two choices: decline to cover the drug, or impose high cost-sharing and other restrictions on patients. Both approaches reduce patients’ access to the drug as well as the drug manufacturer’s potential profit.

There’s no formal mechanism to determine whether a drug manufacturer should accept a lower price for a larger market, which would in turn encourage insurers to cover the drug for more patients.

That’s because Americans have been reluctant to weigh the cost of a lifesaving drug against its practical benefits, as if doing so would become an unseemly exercise in putting a price on human life. Unlike speed limits, industrial-safety rules and other measures that trade off safety and cost — a 20-mile-an-hour speed limit on interstate highways would save many lives, after all — medical technology is thought to be exempt from cost-benefit calculation.

Now that’s beginning to change. Drug manufacturers and payers are starting to consider — and in a few cases, implement — innovative contracts that ground drug prices in the value those drugs provide. But not all such arrangements are as good as they seem.

Approved by the U.S. Food and Drug Administration in 2017, Amgen Inc.’s Repatha was the first of a new class of biologic drugs intended to reduce heart attacks and strokes. After accounting for the discounts that insurers obtain in negotiations with drug manufacturers, Repatha’s price was about $9,000 per yearnearly twice the average health-insurance premium for a working-age adult. But Amgen cut a deal with the insurer Harvard Pilgrim to rebate the price paid for the drug for any patient that had a heart attack or stroke while using it.

This deal sounds great — why pay for a drug if it doesn’t work? — but there’s less to it than meets the eye. About 7 percent of patients taking the drug are expected to have a heart attack or stroke, so Amgen won’t be on the hook for many rebates. The net effect of the outcomes-based contract is the equivalent to, at most, a few hundred dollars in price reduction. Amgen was probably convinced that this level of discount was worth the good publicity it got from the deal, but it’s peanuts relative to the $9,000 price tag.

This is typical of other contracts that attempt to link payment to the benefits provided. A survey of them in the Journal of Health Politics, Policy and Law pointed to another reason drug manufacturers may be reluctant to reduce prices to private insurers: regulations require Medicaid programs to receive discounts at least as large as those afforded to private insurers.

But the biggest problem is that it’s hard to generate enough reliable cost-effectiveness information to give insurers the leverage to say “no” to unreasonably expensive drugs. Any insurer that tries will open itself up to attack from pharmaceutical manufacturers and patient-advocacy organizations. By statute, Medicare cannot consider costs when it makes coverage decisions, so it has no incentive to lead in this area. Any insurer that does the work on its own to make cost-effectiveness part of its coverage decisions would be generating information at its own expense that another insurer could copy for free.

The nonprofit and privately financed Institute for Clinical and Economic Review 1 has proposed a way to solve that problem. Largely funded by the Laura and John Arnold Foundation, 2 it is an independent organization that weighs the benefits of medical technologies against their prices.

For each new drug that comes to market, the organization conducts a clinical and economic analysis that’s available to the public. It then suggests to payers and manufacturers a price range that’s aligned with benefits and budgets.

There’s evidence that the exercise is helping insurers cut better deals. For example, Dupixent, the first cure for eczema, was expected to launch last year at a price of $60,000 per year of treatment. At a cost this high, many insurers would have imposed onerous cost-sharing requirements on patients before covering it.

Instead, Dupixent manufacturers Regeneron Pharmaceuticals Inc. and Sanofi sought a value-based price from ICER before setting the list price for the drug. Then, during negotiations with payers, the companies argued that the outside assessment established a fair price that warranted lower cost sharing and fewer barriers for patient access.

A similar story arose with Praluent, for high cholesterol. Regeneron and Sanofi struck a deal with the pharmacy benefits manager Express Scripts to reduce Praluent’s price to one that ICER believed aligned better with benefits. In exchange, patients will get easier access to the drug.

By providing cost-effectiveness analysis to the market, ICER is not facilitating what many patient advocates and drug manufacturers fear — reducing access to lifesaving treatments. Instead, it is helping to expand it through voluntary exchange in a market, not government price control.

Bringing information to the market that demonstrates that proposed launch prices are way out of line may shame drug manufacturers into coming to the bargaining table. Working with payers to remove barriers to access in exchange for lower prices helps seal the deal. It’s a carrot and stick approach that addresses the worst drug-pricing excesses. Finally.