Wednesday, June 14, 2017

More Ado About Prices

It is almost impossible to read the news today without coming across an article about the high prices of drugs and various approaches to bringing drug prices down. I have discussed the general problem of drug prices in previous posts (Drug Prices and the Pharmaceutical Market, Pharmaceutical Pricing-- The Story That Just Keeps Going, and What the Market Will Bear: Pricing Pressures and Pharmaceutical Value). However, in today’s post I will briefly discuss two very different developments in the drug-pricing story. The first is a resolution aimed at pricing that was recommended for adoption by the American Medical Association (AMA) House of Delegates. The second development is the growing concern over the difficult-to-gauge gap between the list or “retail” price of drugs and the actual amounts paid by different payors.

On the first development, the AMA House of Delegates recently supported the adoption of Resolution 236 Retail Price of Drugs Displayed in Direct-to-Consumer Pharmaceutical Advertising. The text of the resolution as adopted is brief:

Resolution 236 asks that our American Medical Association advocate to the applicable Federal agencies (including the Food and Drug Administration, the Federal Trade Commission, and the Federal Communications Commission) which regulate or influence direct-to-consumer advertising of prescription drugs that such advertising should be
required to state the manufacturer’s suggested retail price of those drugs.

The AMA is a powerful lobbying group, but it raises the question of whether the FTC or the FDA has any authority to require the disclosure of retail prices in direct-to-consumer (DTC) advertising of prescription drugs. My quick response would be no–– neither the FDA nor the FTC has such authority. The FTC’s Division of Advertising Practices “protects consumers from unfair or deceptive advertising and marketing practices that raise health and safety concerns, as well as those that cause economic injury.” Accordingly, from the very beginning of DTC prescription drug ads, the FTC has aimed at ensuring that consumers are not misled or deceived: “In particular, it is important to protect consumers from deceptive information but not to stifle truthful information that could benefit consumers.” There is almost no chance that the FTC would find that an ad is deceptive or misleading because it fails to state the price of the item advertised. Similarly, the FDA’s focus in prescription drug advertising also is on ensuring that the ads are not misleading (and that they do not suggest the product can be used for conditions for which the FDA has not approved the drug). In my recent post on DTC ads A Better Balance Between Accelerated Access And High-Priced New Drugs: A New Conditional Approval Option I made the argument that those ads are generally misleading with respect to the effectiveness of the advertised drugs. So while it is significant that the AMA is continuing to express its concern about prescription drug prices, this particular action by the AMA is not likely to have any effect at all.

The other development I will briefly discuss in this post is the growing awareness of the gap between retail prices (such as those the AMA would like to see disclosed in DTC ads) and the prices actually paid by a variety of payors (the “price gap”). How big is the price gap? QuintilesIMS Institute addressed the question in its Annual Report Medicines Use and Spending in the U.S. (May 2017). The executive summary of the report began with what is truly the bottom line:

Spending on medicines increased by 5.8% to $450Bn in 2016, growing at less than half the rate seen in the last two years, based on invoice prices. After adjusting for estimated rebates and other price concessions by manufacturers, which continued to rise in 2016, net spending was $323Bn, up 4.8% over 2015 levels. When adjusted for these concessions, as well as economic and population growth, medicine spending increased 2.6% in 2016 and has increased by an average of 1.1% per year since 2006, while the balance of medicines being used has shifted strongly to specialty medicines from traditional treatments.

The Report then went on to summarize its findings with respect to year-over-year increases for drugs already in the market:

The average net price for brands already in the market is estimated to have increased by 3.5% in 2016, up from 2.5% in 2015, while remaining significantly lower than prior years. This reflects the heightened competition among manufacturers and more aggressive efforts by health plans and pharmacy benefit managers to limit price growth. Invoice price levels, prior to the impact of concessions, increased 9.2% in 2016…. [emphasis added.]

What are the takeaways from the IMSQuintiles Report? The ridiculous annual increases in retail prices for existing drugs (the 9.2% in the Report) are the attention-grabbing headlines of a number of stories on drug prices, but only the starting point for the price negotiations with payers and pharmacy benefit managers (PBMs). The price gap is a much more complicated part of the drug pricing story, which is closely linked to another major part of the pharmaceutical marketplace, the role of PBMs. Back in March, Bloomberg BNA reported that Senator Wyden (D.Ore) “proposed legislation that would force drug middlemen to disclose secret discounts they receive from manufacturers, a sign of growing scrutiny of the role played by pharmacy benefit managers in high prices.” Wyden’s proposal, S.637 - Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act of 2017 is, as the title suggests, about increasing transparency in prices (for Medicare Part D drugs), which in theory can lead to more negotiating power on the buyer side and lead to lower prices overall. This kind of transparency in the prices actually charged for drugs is very different from the “transparency” that is the subject of a number of state laws seeking to require disclosure of the costs of developing individual drugs. Sarpatwari et al reviewed those initiatives in The New England Journal of Medicine and pointed out the conceptual and practical difficulties with “cost of development” disclosure mandates. My own analysis is that transparency in the actual prices paid, which is the focus of the Wyden proposal would be helpful. Marketplaces require information to work. While much of the information needed for the pharmaceutical marketplace to work is information about the actual effectiveness of a drug, prices paid by other parties is also extremely useful. The problem of rising drug costs is unlikely to be solved by information about prices, but it would at least be a step in the right direction.

Monday, June 12, 2017

U.S. Supreme Court Issues Opinion in Sandoz v. Amgen: A Big Win for Sandoz and Other Biosimilar Applicants.

The U.S. Supreme Court released its much-anticipated ruling today in the battle between Sandoz and Amgen over Amgen’s biosimilar version of Sandoz’s Neupogen (filgrastim).  Justice Thomas’s opinion for a unanimous Court was an almost total victory for Amgen. Justice Breyer issued a very brief one-page opinion concurring in the decision but expressing his view that in future cases deference should be given to the FDA’s reasonable interpretation of the Biologics Price Competition and Innovation Act of 2009 (the Act).

There were two major issues decided by the Court today. The first was whether or not Sandoz fulfilled the 180-day notice requirement of the Act when it delivered its original 180-day notice of its intent to market a biosimilar filgrastim at the time of filing its application with the FDA. The second major issue decided was whether the Act’s elaborate provisions providing for exchanges of information (the “patent dance”) is mandatory. In the patent dance the specifying the biosimilar applicant can provide its manufacturing information to the reference drug sponsor followed the reference drug sponsor’s provision of  lists of patents it claims are infringed by the biosimilar applicant

The answer to both these questions favored Sandoz. The original 180-day notice of intent to market that Sandoz provided at the time of filing its original application with the FDA was sufficient.  No subsequent, second such notice was required. The relevant language of the opinion on that clause is:

The Federal Circuit held that an applicant’s biosimilar must already be “licensed” at the time the applicant gives notice. 794 F. 3d, at 1358.
We disagree. The applicant must give “notice” at least 180 days “before the date of the first commercial marketing.”

The provision of manufacturing information by the biosimilar applicant and patent lists by the reference drug sponsor is not mandatory. The remedy for the biosimilar applicant’s failure to provide the information  that the Act provides is that the filing of the biosimilar application is an act of infringement enabling the reference drug sponsor to file suit. Here is the relevant language of that portion of the opinion.

Clause (ii) of §271(e)(2)(C), in contrast, defines artificial infringement in the situation where an applicant fails to disclose its application and manufacturing information altogether and the parties never prepare the §262(l)(3) lists. That clause provides that the submission of the application represents an act of artificial infringement with respect to any patent that could have been included on the lists.

The Court did, however, leave a very small opening for Amgen to snatch victory from the jaws of defeat. While Amgen was not entitled to an automatic injunction under the biosimilar Act, on remand the U.S. District Court must determine (again, from Justice Thomas’s opinion):

whether California law would treat noncompliance with §262(l)(2)(A) as “unlawful.” If the answer is yes, then the court should proceed to determine whether the BPCIA pre-empts any additional remedy available under state law for an applicant’s failure to comply with §262(l)(2)(A) (and whether Sandoz has forfeited any pre-emption defense, see 794 F. 3d, at 1360, n. 5). The court is also of course free to address the pre-emption question first by assuming that a remedy under state law exists.

I would predict the District Court will not issue an injunction based on California law and Amgen’s only recourse is to continue with its infringement suit.

Tuesday, June 6, 2017

Good News for Sickle-Cell Patients, But How Will Emmaus Make Money? A Look at the Business Side of Pharmaceutical Policy

 Last week’s most interesting story was that a the FDA Oncologic Drug Advisory Committee voted 10-3 to recommend that the FDA approve Emmaus Medical’s L-Glutamine for the treatment of Sickle Cell Disease.  The Phase III Clinical Trial showed that patients receiving L-Glutamine had a clinically significant reduction in the number of Sickle Cell Crises over the course of the 48-week trial. There were also positive results on other measures of the drug’s benefit, while the safety issues were relatively minor. So this is good news for Sickle Cell Disease patients. There are few therapeutic options for this serious disease and the likely approval of another meaningful treatment may make a real difference in their lives. 

BUT, this is one of the most unusual drug development studies I have seen. While other Orphan Drug makers have taken older compounds through development and relied on the 7 years of Orphan Drug exclusivity to return a profit on their investment, L-Glutamine is not just an older compound. Unlike repurposed older drugs, it is widely available and used as a dietary supplement. So while Emmaus is to be commended for undertaking the costly and risky process of establishing the effectiveness of L-Glutamine for Sickle Cell Disease and will be the only manufacturer allowed to label L-Glutamine for treating Sickle Cell Disease, they will not be the only manufacturer selling L-Glutamine in bulk quantities sufficient to treat Sickle Cell Disease. A quick search online revealed numerous online sellers.  For example, one online seller is offering 250 grams of L-Glutamine (advertised as pharmaceutical-grade) for $9.95.  Since the Emmaus studies dosed patients at between 20 to 60 grams a day, depending on body weight, the 250 grams being sold online would be last between 4 to 12.5 days.  Even assuming that most patients require 60 grams per day, the price for 1800 grams online would be a bit more than $60 per month.  I have not yet seen an announcement of Emmaus’ intended pricing for their product post-approval, however, their current pricing for the same drug, approved for short bowel syndrome, would be over $2000 per month at the higher dose.  While the Rx form is likely to be covered by insurance, it still seems quite possible that a significant market share could be lost to patients simply buying L-Glutamine online. That would still be good for patients, but not very good for Emmaus’ bottom line. It will be very interesting to follow Emmaus’ sales over the next few years to see whether taking a dietary supplement through the FDA approval process can actually work for companies as well as patients.