PhRMA says the ‘overly burdensome’ final rule fails to address hospital abuse of the program.
The new rule provides drug pricing information to 340B participants through a closed website.
Proponents scoff at drug makers’ claims that more time is needed before the oft-delayed final rule is implemented.
After several delays, hundreds of public comments, a lawsuit, and an eight-year-old Congressional mandate, the federal government on Thursday bumped up the starting date of its 340B drug pricing final rule by six months.
In a notice published this week in the Federal Register, the Department of Health and Human Services said the final rule—which is designed to protect hospitals from being overcharged by drug manufacturers—would take effect on January 1, 2019, instead of July 1, 2019.
The final rule was supposed to take effect on January. 5, 2017, but HHS delayed implementation because it said it was in the midst of “developing new comprehensive policies to address the rising costs of prescription drugs.”
Hospitals got tired of waiting and filed suit, asking a federal judge to order the Trump Administration to launch the final rule on January 1, 2019. The hospitals allege that the delays are causing significant financial harm to the nearly 2,500 hospitals nationwide that participate in the 340B Drug Pricing Program.
In late October, the Trump Administration said it was considering accelerating implementation.
In bumping up the final rule implantation by six months, HHS said it “has determined that the finalization of the 340B ceiling price and civil monetary penalty rule will not interfere with HHS’s development of these comprehensive policies.”
Under the new rule, federal regulators will provide pricing information to 340B hospitals through a closed website, which proponents of the rule say is essential for ceiling price enforcement.
As expected, hospitals praised the action, and drug makers expressed disappointment.
“This rule is good for patients and for essential hospitals, which rely on 340B savings to make affordable drugs and health care services available to vulnerable people and underserved communities,” said America’s Essential Hospitals President and CEO Bruce Siegel, MD.
“It also ends years of delay for much-needed measures to hold drug companies accountable for knowingly overcharging covered entities in the 340B program,” Siegel said.
Maureen Testoni, interim president and CEO of 340B Health, called the announcement “a big step toward stopping drug companies from overcharging 340B hospitals, clinics, and health centers.”
“The next step toward ensuring true 340B drug maker transparency is for the administration to launch its ceiling price website so hospitals, clinics, and health centers can ascertain that they are paying the correct amounts for 340B medications,” Testoni said.
“We are encouraged that HHS says it will release that pricing reporting system shortly and that the department will communicate additional updates through its website,” she said.
PhRMA said it was “disappointed the Administration did not issue new proposals for this rule as it repeatedly stated it would.”
The pharmaceutical industry advocates said HHS “ignored the numerous concerns raised by stakeholders on the proposed ceiling price calculations, offset policy and civil monetary penalty provisions.”
Drug makers allege that hospitals have been scamming the 340B program, and PhRMA said Thursday that the final rule’s “flawed policies are not in line with the 340B statute and fail to address root problems in the 340B program that have enabled private 340B hospitals to generate record profit without commensurate benefit to patients.”
“Not only is the final rule itself overly burdensome in its requirements, but moving up its effective date also leaves manufacturers with very little time to make operational changes to systems and procedures,” PhRMA said.
Testoni scoffed at claims that more time was needed.
“The regulation now will be going into effect more than eight years after Congress mandated it—and only after a lawsuit filed by 340B Health and other hospital organizations to stop repeated administrative delays to the effective date,” Testoni said.
“As today’s final rule notes, these delays have given drug makers ‘more than enough time to prepare for its requirements.'”
Doctors, when surveyed, say they are opposed to the very idea of skewing their prescribing practice in favor of companies giving them money. The problem is, they still take lots of money in the form of honoraria, speaking fees, research grants, and outright gifts from pharmaceutical and medical device companies. Research suggests they can then fail to recognize that they’ve been influenced.
Psychologists George Loewenstein and Don Moore argued in a 2004 paper that while people consciously think about their professional obligations, the other half of a conflict — self-interest — is “automatic, viscerally compelling and often unconscious.” That theme keeps returning in more recent research.
As MD turned ethics professor Sunita Sah of Georgetown University concluded in a review paper, even if doctors don’t recognize what’s going on, those in the pharmaceutical industry understand social psychology and know what works. Reciprocity is a part of human nature, and field studies have shown that doctors change their practices to reciprocate gifts and favors. Those who ultimately lose in this game are the patients, who are at risk of prescriptions that are not entirely in their best interest.
Every once in a while an extreme case leads to a dramatic downfall. That happened recently when a New York Times/ProPublica story revealed that Memorial Sloan Kettering Cancer Center’s chief medical officer Jose Baselga had accepted millions from industry and then written numerous scientific papers without disclosing financial ties to the companies whose products he was studying.
He resigned within days. The larger problem remains: Conflict of interest is the norm in medicine. According to a 2007 survey, 94 percent of physicians had some sort of industry ties. And as Sah and other social scientists have shown in their research, this can bias their behavior even as they insist they are above it.
Sense of entitlement is a big factor in physicians’ acceptance of industry money. In one study she co-wrote with Loewenstein, doctors were more likely to agree they would accept industry payments when they were reminded of their sacrifices — years of medical school, debt incurred, sleep deprivation when on call. She compared the attitude to that expressed in the famous commercial for L’Oreal hair products: “I’m worth it.”
In addition to the lure of money, pharma and medical device companies can appeal to physicians’ egos by anointing them “key opinion leaders.” In one of her papers, Sah quotes one such leader, a psychiatrist, saying: “It strokes your narcissism. … The first thing they do is take you to a really nice hotel. And sometimes they pick you up in a limo, and you feel very important, and they have really, really good food.”
In another study, which examined conflict of interest and bias across professions, Sah and Lowenstein showed that people were less likely to offer biased, self-serving advice when they worked with individuals, known by name. In experiments, subjects designated as advisers could guide advisees in a number estimation game — the adviser having access to more information than the advisees. The advisers could benefit from causing advisees to make an overestimate, while the advisees benefited from getting the number right.
When they were giving advice to individuals, advisers were less likely to act selfishly. When dealing with groups, self-interest became a bigger factor, though subjects weren’t aware of the change. They reported afterward that they were unbiased and gave good advice. In interpreting the findings, the researchers suggested that in doctor-patient relationships, empathy might guide decisions. But people have more trouble feeling empathy toward nameless groups, as they would in, say, making clinical guidelines or public health recommendations. Grants for studies also appears to create a bias. Industry-funded studies are more likely than independent ones to show a product is effective, according to a 2017 review.
Disclosure rules are supposed to limit the damage, but other studies show they don’t help much. In a 2005 paper, researchers argued that advisers feel “morally licensed and strategically encouraged” to give even more erroneous or exaggerated advice once a conflict was disclosed. In another paper, Sah and colleagues showed that patients were just as likely to take advice after a conflict-of-interest disclosure. Some thought that if a doctor owned a stake in an imaging center, for example, then he or she must have expertise. Others reported they felt awkward about refusing. After a conflict-of-interest disclosure, she said, “advice can be harder to turn down because it suggests you think the doctor is biased and corrupt.”
The main benefit is that disclosure rules can discourage providers from taking money that creates a conflict in the first place. There is hope, however, that doctors can be more principled than other kinds of advisers. In a recent study, volunteers were asked to play the role of either doctors or financial advisers and were placed in a conflict situation where they could make money at the expense of advisees. Those who were reminded of their responsibility as doctors gave less selfish advice, and those reminded of their role as financial advisers gave more selfish advice. When researchers carried out the same experiment with real doctors and financial advisers, Sah said, they got pretty much the same result.
So maybe doctors are a little special after all, in that they work by professional standards that put patients’ well-being above fancy dinners, prestige and the almighty dollar. But with drug companies and others cleverly playing to doctors’ selfish desires, they may sometimes need a reminder.
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.”
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.
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.
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.
Several hundred hospitals that plan to form their own generic drug company are eyeing making “about 20” pharmaceutical products whose existing versions either cost too much or are in short supply for no good reason, the CEO of one of those hospitals said Thursday.
Dr. Marc Harrison, chief of Utah-based Intermountain Healthcare, during an interview on CNBC’s “Closing Bell,” would not identify the existing drugs that the new company wants to replicate on its own, or have done on a contract basis.
Harrison said, “We think it will be early ’19 before our first drugs come to market.”
And he said the group also is hoping to possibly get additional financing from “philanthropists who are sick of this activity” by drug companies that is “creating shortages and driving prices in an irrational fashion.”
Intermountain is leading the collaboration with several other large hospital groups, Ascension, SSM Health and Trinity Health, in consultation with the U.S. Department of Veterans Affairs, to form a not-for-profit drug company. The groups together represent more than 450 U.S. hospitals.
Harrison said on “Closing Bell” that the project was spurred by feedback by patients who at times were saying “they can’t get ahold of drugs or they’re way too expensive.”
“We’re experiencing that in the hospital as well, and we’ve been thinking about this for a couple of years now,” Harrison said.
“We worked hard to come up with a plan … now is the time to get to work.”
He said that one of the big problems in the pharmaceuticals market today is that some “individuals and groups have gone ahead and gotten sole control over a given drug.”
“They create shortages and drive the prices up, and our patients can’t get ahold of the drugs we need,” Harrison said.
“We as a team will do the opposite,” he said. “We’ll make sure drugs are available in good quantities and reasonable prices.”
Harrison said the members of the consortium will contribute funds to finance the new drug company.
“Over time, the business plan says we’ll get our money back,” he said.
Harrison also said that he expects the new firm to provide just a small fraction of pharmaceutical products that the hospitals have to purchase.
“We expect that the vast majority of drugs we buy will still come in the same channels we have always gotten them,” he said. “We think most pharmacies are doing a great job and drug manufacturers are doing a great job.”
“We’re only interested in those organizations that are creating shortages and driving drug prices up in an irrational fashion,” Harrison said.
For too many Americans with chronic illnesses, such as HIV, arthritis, and hemophilia, insurance companies and their pharmacy benefit managers (PBMs) are erecting access barriers to innovative and life-saving prescription medicines. A new and growing trend—called accumulator adjustment programs—threatens to exacerbate the problem by significantly increasing out-of-pocket spending for patients. On top of it, patients are not even aware of this sudden and very costly change.
Patients with chronic illnesses already jump through hoops to receive their drugs. First, they have to ensure that their medicines are covered by their plan. Then they often have to work through a series of utilization management steps, such as prior authorization and step-therapy.
On top of those hurdles, more and more patients are facing high deductibles for prescription drugs or are being asked to pay a percentage of the cost of a drug, which is called coinsurance, instead of a nominal copayment. Coinsurance and deductibles often require patients to pay cost sharing based on the list price, which does not reflect the rebates that the PBMs receive from the drug companies.
When patients are still satisfying their deductible or are paying high coinsurance, they can face out-of-pocket spending of thousands of dollars to fill one prescription. If they cannot afford these costs, they will leave the pharmacy counter empty-handed and risk becoming sick or getting sicker. Drug manufacturers offer coupons to prevent this and make cost sharing for these drugs affordable. Historically, commercial insurance plans have applied the value of these coupons to a patient’s annual deductible and out-of-pocket maximum; reaching these limits translates into lower out-of-pocket spending for the rest of the year.
Now, however, accumulator adjustment programs are currently being pushed by PBMs, such as Express Scripts and CVS Caremark, to insurers including United Healthcare, Molina, and BlueCross BlueShield of Texas and Illinois, and to large employers such as Walmart, Home Depot, and Allstate. These programs change the calculus for patients by no longer applying the copay coupons to patient deductibles and out-of-pocket maximums. Patients must spend more out of pocket to reach their deductible; sometimes thousands of dollars more. For too many patients, this makes the drugs they depend on unaffordable.
While there has been an ongoing debate between the insurance industry and the drug companies regarding who is responsible for the high cost of some medications, this new practice has nothing to do with the actual cost of the drug. The only thing that has changed is how much the insurance company, employer, or PBM is requiring patients to pay for their drug. And these entities are beginning to implement accumulator adjustment programs without adequately informing beneficiaries, who will be shocked to learn that the cost-sharing assistance they have been relying on no longer applies toward their deductible or out-of-pocket costs.
People living with HIV and hepatitis have long relied on these copay coupons to afford the cost of their medications. The impact on a countless number of peoples’ lives has been profound. But this new practice will increase patient out-of-pocket spending, leaving patients at risk of hitting a “cost cliff” mid-year. This cliff could cause disruptions to patients’ care as medication becomes prohibitively expensive. For people living with HIV, hepatitis, and so many other health conditions, the resulting decision can literally mean life or death.
While some may claim that coupons are being used to incentivize brand-name drugs over generics, the fact is 87 percent of the coupons are for drugs that have no generic equivalent. The 13 percent of branded drugs programs in which generic equivalent products are available accounted for only 0.05 percent of all prescriptions filled.
There is a relatively new drug regimen, known as pre-exposure prophylaxis (or PrEP), that when taken regularly, prevents HIV. Because there is no generic alternative, most patients can’t afford the high coinsurance and rely on manufacturer copay assistance to reach their deductible and lighten the burden. This new practice of no longer applying the copay coupons to patient deductibles and out-of-pocket maximums by the insurance companies and PBMs are making access to this remarkable treatment more difficult and will have a significant impact on our efforts to prevent HIV in the United States.
But it does not have to be like this. The growing practice of not counting copay coupons toward a beneficiary’s deductible most likely stems from PBMs, insurers, and human resources professionals, who sign off on these plans, failing to fully comprehend the impact these programs will have on vulnerable patient populations and the overall health care system.
Patient groups and employees across the country should reach out to their health insurance providers and workplace plan managers to check whether their plan is implementing this new troubling practice. And if they are, people need to speak up and push back. These new insurance practices are not acceptable and bad for the health of our country.