Another Shady Pharmaceutical Business Practice: Citizen’s Pathway to Delay Competition

First, a comment regarding yesterday’s post: The Truth About Probiotics: Constipation Version

Some readers took issue with my pessimism with probiotics in terms of their effectiveness for several conditions, their safety and the number needed to treat (NNT). It is noted that the number needed to treat (NNT) with probiotics is better than with many other conditions.  For example, the NNT for benefit with the influenza vaccine, Tamiflu for influenza, and mammography for preventing breast cancer are much worse than the NNT for benefit with probiotics for conditions like NEC, antibiotic-associated diarrhea, Clostridium difficile infection, and ulcerative colitis (with VSL#3). If one looks at multiple posts from this blog, there are plenty of posts supporting the use of probiotics (see some of the links yesterday or search “probiotics” on this blog.  Thus, it is important to not overlook the benefits of probiotics for many conditions and to not take a single study and extrapolate too much.

Now for today’s post -perhaps it will stir as much interest:

I must admit I’m fascinated with the way pharmaceutical companies operate and the creative ways they find to magnify their profits.  In previous posts, I’ve detailed how pharmaceutical companies will try to corner the generic market, increase the cost of liquid medicines, and package drugs in a way to force the purchase of additional vials of medicine among other tactics.  Now, a commentary (R Feldman, C Wang. NEJM 2017; 376: 1499-1501) details how pharmaceutical companies have increasingly used “the citizen-petition process that the Food and Drug Administration (FDA) implemented in the 1970s.”  This process was designed as “a way to voice concerns” by individual citizens.

Yet, this pathway is now being used to delay competition/entrance of generic drugs, mainly with frivolous claims.  In most cases, companies file these claims at the end of the approval process, almost always as a delaying tactic.  Approximately 80% of these actions by competitor drug companies are denied by the FDA.

Ultimately, these actions could be countered with antitrust actions; this, in fact, has occurred with Shire ViroPharma.  On February 7, 2017, the Federal Trade Commission filed an antitrust action “alleging that the company abused regulatory processes by filing 43 submissions with the FDA (including 24 meritless citizen-petition filings within one docket) in an effort to hold off generic competition for its gastrointestinal drug Vancocin (vancomycin).”  However, antitrust actions are typically difficult to pursue and expensive.

My take: I think these tactics (and others) will undermine the relationship of pharmaceutical companies with consumers. While their stock holders may see benefits in the short term, I expect that other stake holders will fight back.  There are several targets in that endeavor, including ending limits on Medicare negotiating for better prices.

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How to Undermine Value Care: Lessons from Pharmaceuticals

A brief commentary (LS Dafny et al. NEJM 2016; 375: 2013-15) helps explain how easy it is to prevent high-value care.  The authors note that one example of encouraging high-value care is to tier drugs in insurance plans.  Insurers can encourage consumers to use drugs that provide high value by providing lower copays (lower tier) and at the same time this allows the insurers some leverage with pharmaceutical manufacturers in negotiating prices of their medications.  Roughly 75% of insurance plans have at least three drug tiers.

The pharmaceutical companies have “counterattacked” by offering “copayment coupons.”  Since insurers still pay ~80% of the costs, even with these coupons, the manufacturers are able to shift spending to higher-priced medications and still make a considerable profit.  The net effect of copayment coupons:

  • “reduce the incentive for drug manufacturers to offer price concessions in exchange for preferred tier placement.”
  • With these coupons, the strategy of charging “insurers the highest price possible while remaining on the formulary” takes hold
  • The number of these “copayment coupons has skyrocketed.” By 2010, approximately half of brand-name drug revenue was derived from drugs with copayment coupons.
  • “We estimate that coupons increase the percentage of prescriptions filled with brand-name formulations by more than 60%.” Among 85 drugs facing generic competition, “between 2007-2010, the 23 drugs with coupons likely was between $700 million to 2.7 billion higher than it would have been” without these coupons.

The authors note that health care providers may ultimately pursue similar pathways to try to get around insurance companies preferred provider panels.  This could occur as insurance companies increasingly try to control costs by demanding steep discounts from providers in exchange for inclusion in more limited networks.

My take: Providing high value care is not the chief concern for private industry. Both the insurance companies and the pharmaceutical companies develop policies and countermoves to further their best interests.

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Jones Bridge Trail

Jones Bridge Trail

 

Drug Waste Costing Billions. Who benefits? Pharmaceutical Companies

From NY Times: Waste in Cancer Drugs Costs $3 Billion a Year

Here’s an excerpt:

The federal Medicare program and private health insurers waste nearly $3 billion every year buying cancer medicines that are thrown out because many drug makers distribute the drugs only in vials that hold too much for most patients, a group of cancer researchers has found…

If drug makers distributed vials containing smaller quantities, nurses could pick the right volume for a patient and minimize waste…according to researchers at Memorial Sloan Kettering Cancer Center, whopublished a study on Tuesday in BMJ…

“Drug companies are quietly making billions forcing little old ladies to buy enough medicine to treat football players, and regulators have completely missed it,” said Dr. Peter B. Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering and a co-author of the study…

Some non-cancer drugs also generate considerable waste, includingRemicade, an arthritis drug sold by Johnson & Johnson for which an estimated $500 million of the drug’s $4.3 billion in annual sales comes from quantities that are thrown away, researchers found.

My take: this is another indictment of our pharmaceutical companies willful neglect of medication costs or cynical manipulation of our healthcare system.

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“The Solution to Drug Prices”

Worth a read: “The Solution to Drug Prices” by Eziel Emanuel

An excerpt:

WE’RE paying too much for prescription drugs….Despite representing about 1 percent of prescriptions in 2014, these types of high-cost drugs accounted for some 32 percent of all spending on pharmaceuticals….

Almost all developed countries… making drugs available at fixed prices …Drug companies would immediately raise two objections: the high risks associated with drug development and, related, the high cost of research and development. But both of these arguments are fatuous…

Also, as outrageous as they are, prices are not the real issue. Value is. What really frustrates people are expensive drugs that do not provide a cure. For instance, Opdivo adds an average of 3.2 months of life to lung cancer patients and costs $150,000 per year for treatment…

Everyone, including drug company executives, believes that high prices cannot continue. Indeed, that is one reason that companies are trying to maximize profits while they can. We must come up with a comprehensive solution now.

Does it really cost $2.6 billion to bring a new drug to market?

A recent editorial (Avorn J. NEJM 2015; 372: 1877-79) helps provide some perspective on a recent unpublished study that “it costs pharmaceutical companies $2.6 billion to develop a new drug.”  (http://csdd.tufts.edu/files/uploads/cost_study_backgrounder.pdf)

Dr. Avorn notes that when this study is published scrutiny over the methods is needed; however, the authors of the study note that their methods are unchanged from a previous 2003 study (NEJM 2015; 372: 1972). Apparently the analysis was based on data from 10 drug makers regarding compounds that they had ‘self-originated.’

Some preliminary criticisms:

  • Nearly half the costs were attributed to the cost of capitol rather than direct spending. This cost indicates that the money being used for drug development was not available for other purposes (“opportunity costs”); however, the capital costs were assessed at a very generous 10.6% per year, compounded.
  • The analysis did not include the large public subsidies provided to pharmaceutical companies in the form of research-and-development tax credits.
  • Pharmaceutical companies remain highly profitable and only spend a small fraction of their revenues on truly innovative research.
  • Many of the drugs brought to market are not “self-originated.”
  • Many drug costs are borne by the public via research at university-affiliated centers with the pharmaceutical companies taking the new discovery the last mile.  “Gilead Sciences did not invent its blockbuster treatment for hepatitis C, sofosbuvir (Sovaldi)…it acquired the product from a small company founded by the drug’s inventor, a faculty member at Emory University, much of whose work on the usefulness of nucleoside viral inhibitors was federally-funded.”

Bottomline: While pharmaceutical companies invest heavily in new drug development, the huge numbers often attributed to research costs may be overestimates; these type of analysis likely underestimate how much taxpayers have paid in subsidizing the foundation for new treatments.

Related blog post: The Difficulty with Drug Development | gutsandgrowth

 

Why U.S. Consumers Pay More For Medications

The NY Times has highlighted the high cost of medical care in the U.S. in a series of articles.  While only affecting about 10% of the total U.S. health cost, the wide variation in the cost of medicines between the U.S. and other countries leaves the U.S. consumer feeling ‘ripped-off.’

Here’s the link:  bit.ly/17p8kKR (from Jay Bookman) and here’s an excerpt:

Pulmicort, a steroid inhaler, generally retails for over $175 in the United States, while pharmacists in Britain buy the identical product for about $20 and dispense it free of charge to asthma patients. Albuterol, one of the oldest asthma medicines, typically costs $50 to $100 per inhaler in the United States, but it was less than $15 a decade ago, before it was repatented.

“The one that really blew my mind was the nasal spray,” said Robin Levi, Hannah and Abby’s mother, referring to her $80 co-payment for Rhinocort Aqua, a prescription drug that was selling for more than $250 a month in Oakland pharmacies last year but costs under $7 in Europe, where it is available over the counter…

Unlike other countries, where the government directly or indirectly sets an allowed national wholesale price for each drug, the United States leaves prices to market competition among pharmaceutical companies, including generic drug makers. But competition is often a mirage in today’s health care arena — a surprising number of lifesaving drugs are made by only one manufacturer — and businesses often successfully blunt market forces….

On the same topic, in Forbes: forbes.com/sites/peterubel/2013/10/15/-expensive-new-drugs/ …

In the U.S., the FDA must deem a drug safe and effective before allowing it on the market.  But at that point, there are no economic barriers to the use of those medications.  By contrast, drugs in the United Kingdom must go through economic analyses by a unit known as NICE—United Kingdom’s National Institute for Health and Clinical Excellence.  Being safe and effective is not enough to pass muster with NICE.  The drug must also be cost effective. …

Should we demand proof of cost effectiveness before allowing drugs on the market?  Or before agreeing to pay for them in Medicare and Medicaid?  Doing so would undoubtedly reduce healthcare expenses.  With medical spending threatening our fiscal future, it makes no sense that Medicare is prevented by law from considering the cost of care when making coverage decisions.  You heard that right—forbidden by law!

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Should Physicians Dispense Drug Coupons? | gutsandgrowth

Should Physicians Dispense Drug Coupons?

This is a good question.  Before you answer, consider some of the following information from a recent commentary (NEJM 2013; 369: 1188-89):

  • “Commercial drug-insurance…have tiered pharmaceutical formularies..requiring small patient copayments…for inexpensive generic drugs and higher copayments…for brand-name drugs. Manufacturers use coupons…so that…the out-of-pocket costs are the same as those for generic drugs.”
  • “Coupons were used for approximately 100 million dispensed prescriptions in 2010 –about 11% of prescriptions for brand-name drugs.”
  • The authors performed analysis ‘by manually abstracting information on each coupon advertised in March 2013 at http://www.internetdrugcoupons.com.”  They found that with 62% of coupons there were lower-cost therapeutic alternatives available.  58% had generic alternatives and 8% had less-expensive brand-name therapeutic equivalents (some drugs had both generic alternatives and less-expensive brand competitors).

The arguments against coupons:

  1. “On a population level, drug coupons undermine the tiered-formulary system that commercial insurers have implemented to limit prescription-drug spending.”  Insurers must still pay the higher cost of the brand-name drug.  This leads to higher insurance coverage rates for all patients.
  2. Some have argued that these coupons should be disallowed as illegal kickbacks by subverting the cost-sharing arrangements in patients’ insurance contracts.
  3. The costs for these medications for the patient usually are more in the long run as these coupon offers are often limited to 6-12 months.

Bottomline: when there are lower cost therapeutic alternatives, drug coupon programs increase long-term costs and undermine efforts for patients to have ‘skin in the game.’

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Can the FDA prohibit free speech? | gutsandgrowth