Tag Archives: Gag Clauses

Congress Is Making Quiet Progress on Drug Costs

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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 Your Pharmacist Can’t Tell You That $20 Prescription Could Cost Only $8

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As consumers face rapidly rising drug costs, states across the country are moving to block “gag clauses” that prohibit pharmacists from telling customers that they could save money by paying cash for prescription drugs rather than using their health insurance.

Many pharmacists have expressed frustration about such provisions in their contracts with the powerful companies that manage drug benefits for insurers and employers. The clauses force the pharmacists to remain silent as, for example, a consumer pays $125 under her insurance plan for an influenza drug that would have cost $100 if purchased with cash.

Much of the difference often goes to the drug benefit managers.

Federal and state officials say they share the pharmacists’ concerns, and they have started taking action. At least five states have adopted laws to make sure pharmacists can inform patients about less costly ways to obtain their medicines, and at least a dozen others are considering legislation to prohibit gag clauses, according to the National Conference of State Legislatures.

Senator Susan Collins, Republican of Maine, said that after meeting recently with a group of pharmacists in her state, she was “outraged” to learn about the gag orders.

“I can’t tell you how frustrated these pharmacists were that they were unable to give that information to their customers, who they knew were struggling to pay a high co-pay,” Ms. Collins said.

Alex M. Azar II, the new secretary of health and human services, who was a top executive at the drugmaker Eli Lilly for nearly 10 years, echoed that concern. “That shouldn’t be happening,” he said.

Pharmacy benefit managers say they hold down costs for consumers by negotiating prices with drug manufacturers and retail drugstores, but their practices have come under intense scrutiny.

The White House Council of Economic Advisers said in a report this month that large pharmacy benefit managers “exercise undue market power” and generate “outsized profits for themselves.”

Steven F. Moore, whose family owns Condo Pharmacy in Plattsburgh, N.Y., said the restrictions on pharmacists’ ability to discuss prices with patients were “incredibly frustrating.”

Mr. Moore offered this example of how the pricing works: A consumer filling a prescription for a drug to treat diabetes or high blood pressure may owe $20 if he uses insurance coverage. By contrast, a consumer paying cash might have to pay $8 to $15.

Mark Merritt, the president and chief executive of the Pharmaceutical Care Management Association, which represents benefit managers, said he agreed that consumers should pay the lower amount.

As for the use of gag clauses, he said: “It’s not condoned by the industry. We don’t defend it. It has occurred on rare occasions, but it’s an outlier practice that we oppose.”

However, Thomas E. Menighan, the chief executive of the American Pharmacists Association, said that such clauses were “not an outlier,” but instead a relatively common practice. Under many contracts, he said, “the pharmacist cannot volunteer the fact that a medicine is less expensive if you pay the cash price and we don’t run it through your health plan.”

A bipartisan measure that took effect in Connecticut this year prohibits the gag clauses. It was introduced by the top Democrat in the Connecticut Senate, Martin M. Looney, and the top Republican, Len Fasano.

“This is information that consumers should have,” Mr. Looney said in an interview, “but that they were denied under the somewhat arbitrary and capricious contracts that pharmacists were required to abide by.”

Mr. Fasano said that consumers were sometimes paying three or four times as much when they used their insurance as they would have paid without it. “That’s price gouging,” he said in an interview.

The legislation, Mr. Fasano said, encountered “a lot of resistance” from large pharmacy benefit managers and some insurance companies.

In North Carolina, a new law says that pharmacists “shall have the right” to provide insured customers with information about their insurance co-payments and less costly alternatives.

A new Georgia law says that a pharmacist may not be penalized for disclosing such information to a customer. Maine has adopted a similar law.

In North Dakota, a new law explicitly bans gag orders. It says that a pharmacy or pharmacist may provide information that “may include the cost and clinical efficacy of a more affordable alternative drug if one is available.”

The North Dakota law also says that a pharmacy benefit manager or insurer may not charge a co-payment that exceeds the actual cost of a medication.

The lobby for drug benefit companies, the Pharmaceutical Care Management Association, has filed suit in federal court to block the North Dakota law, saying it imposes “onerous new restrictions on pharmacy benefit managers.”

Specifically, it says, the North Dakota law could require the disclosure of “proprietary trade secrets,” including information about how drug prices are set. “P.B.M.–pharmacy contracts typically preclude a pharmacy from disclosing to the patient the amount of a reimbursement,” the lawsuit says.

Gov. Asa Hutchinson of Arkansas, a Republican, said this past week that he would call a special session of the State Legislature to authorize the regulation of pharmacy benefit managers by the state’s Insurance Department.

He said he feared that some independent pharmacists receiving “inadequate reimbursement” from the benefit managers might go out of business, reducing patients’ access to care, especially in rural areas.