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Health and Human Services Secretary Alex Azar will give the keynote at the World Health Care Congress this morning.  In remarks prepared for delivery, Azar focuses on how HHS is “working to transform our healthcare system into one that pays for value. A value-driven healthcare system will look dramatically different from what we have today: Such a system will pay for health and outcomes rather than sickness and procedures. It will deliver better, cheaper healthcare for the people we serve, and it will support the next generation of cures to diseases once considered terminal.”
All of which will be ignored by the critics of the pharmaceutical industry, most of whom are now paid for by the Laura and John Arnold Foundation.  Rather, they will use Azar’s speech as a pretext to flood Twitter with statements about the skyrocketing rate of price increases, how drug companies are making medicines unaffordable and how marginally effective there high priced products really are.
Critics only want to talk about value in terms of how they would set prices and limit access of new medicines based on their measure of how much a life is worth.  Using ICER guidelines, the experts defend hepatitis C drug limits that have cut cure rates from 99 percent to 80 percent or assessments of drugs for cystic fibrosis and treatment resistant high cholesterol that would cut prices by 80 percent but still require patients to pay thousands out of pocket.  As a study I am wrapping up will show:  If they had their way, none of the new medicines introduced since 2000 would be considered valuable at their initial prices.
To be sure, newer drugs are a growing part (46 percent) of total drug spending.  But the critics ignore the reason such novel therapies are a bigger part of treatment for more diseases: they are not just worth it; they are indispensable in making staying healthy more affordable and easier:
Prescription drug spending has reduced the cost of treating disease.  Every dollar spent on new medicines reduces expenditures on costlier and less effective care by $6. 
The more we spend on prescription drugs as a percent of health expenditures to treat or the less we spend on that condition overall.  Nearly 100 percent of health expenditures on polio, measles, pneumonia tuberculosis, HIV, etc., is spent on prescription drugs.  In their absence, the cost of treating each patient with those diseases would be much more if we were spending less on medicines.   Recent studies have found that in the absence of new medicines, health insurance premiums would be on average 15-20 percent higher each year than they are now. 

The newer medicines the healthier we become, the more productive we are and the less expensive health care becomes.  Critics claim that new medicines, especially for cancer, cost more and more yet they do not add much to people living longer and healthier lives.  This ignores the cumulative effect of medicines.  The first and second generation of HIV medicines, measured in isolation, did not seem to increase well-being or life expectancy.  The same goes for new drugs for a wide variety of tumors and rare diseases.  So how do people with HIV live a healthy life with the same life expectancy as someone without the disease?  How has the average life expectancy of someone with cystic fibrosis increased from 20-60 in two decades?  And how has the number of cancer survivors increased from 9.8 million in 2001 to over 16 million in 2017? 
It is true that the sticker price of new drugs has increased, so has the price of lots of things, including other medical procedures and services that prescription drugs have eliminated.  The cost of being hospitalized with breast cancer has increased 200 percent since 2004.   The cost of an allogeneic bone marrow transplant has increased from $750K to $900K between 2008 and 2016.  

At the same time, the out of pocket cost for most medicines has remained the same or declined because 90 percent of our drugs are generic.  

A small percentage of Americans who use new medicines pay more out of pocket each year. But that is largely because health plans and PBMs are collecting rebates while charging the sickest patients a bigger and bigger share of higher retail prices.   The net price of newer medicines has increased less than 2 percent a year since 2013, yet the average out of pocket patient cost has jumped 53 percent due to higher list prices and higher cost sharing.  

Last year I published a study showing that 2 percent of all patients, using 2 percent of prescriptions, paid nearly 25 percent of all out of pocket costs and generated 30 percent -- $39 billion of the nearly $130 billion in rebates.  Critics like to claim that eliminating the out of pocket cost of the newer drugs will do nothing to reign in drug prices.  But they ignore that out of pocket spending has increased by over 50 percent even as the rate of increase in net spending for the most expensive medicines (meaning net of rebates) declined. 

It begs the question of why cost sharing for drugs goes up even as it stays the same for other procedures and services that cost more over time.
And most important, it boggles the mind and the conscience, that they only care about controlling drug prices rather than ensuring access to new medicines, the proven source of value in health care, is made affordable.
Count how many times the critics mention these facts.  It will take a minute at most.  By comparison, counting the number of tweets that ignore the value of medical innovation and distort the data, ignore the context or outright lie to do so, could take months.

It may not suit the cognitive mapping of some pols and pundits (or people at ICER), but, in 2017, the net price increase for branded products was lower than the Consumer Price Index.  And, according to IQVIA, the overall US drug spend (including generics) increased just 0.6%.

Consider the facts:

* Prescription medicine spending increased 1.3% between 2015 and 2016
* Overall National Health Expenditure (NHE) increased 4.3% during the same period
* Total NHE spend grew to $3.3 trillion in 2016.  Approximately 10% of total, $329 billion, was spending on prescription drugs

Here’s the headline you won’t see in the New York Times or the Washington Post,

“Prescription Medicine Spending Growth in the U.S. is Less Than the Rate of Inflation.”

Let’s have inclusive and honest debate. As the Japanese say, “Don’t fix the blame. Fix the problem.”
I’ve just returned from Beirut, where I had the privilege of attending the Future Health conference. My panel was titled, “Value Innovation for the Patient, the Healthcare Ecosystem, and the Economy. I was doubly honored that one of my co-panelists was Mr. Ghassan Hasbani, Lebanon’s Deputy Prime Minister and Minister of Health.

Minister Hasbani is revamping the medicines tendering program for Lebanon and one of the key tenets being weighed in the new national decision-making process is value. As His Excellency said from the podium, “It’s not only a cost, it’s an investment.”


And, as with any investment, it’s impossible to understand the cost without proper consideration of the return.

EMA Self-Immolation

  • 04.19.2018
  • Peter Pitts
From the Cutting Off Nose to Spite Face Department …

Industry fears disruption as EU excludes UK from drug approvals

LONDON (Reuters) - A European decision to exclude Britain from the EU’s drug approval system from March 30 2019 - the day after Brexit - has raised alarm among drugmakers, who fear the abrupt change could disrupt medicine supplies to patients.

The move confounds hopes for continued joint cooperation via the European Medicines Agency (EMA), at least during a transition or implementation period until the end of 2020 when the UK will remain closely tied to the European Union.

Prime Minister Theresa May said in a speech on March 2 that London wanted to explore ways to keep Britain a part of EU agencies, such as the EMA.
The highly regulated drugs industry is particularly susceptible to Brexit, given the EU’s centralized system for approving and monitoring medicines. Brexit is already forcing the EMA to relocate from London to Amsterdam.

Now the EMA has appointed experts from other European countries to take over work currently undertaken by Britain’s Medicines and Healthcare products Regulatory Authority (MHRA) from next March.

Since the MHRA assesses around a fifth of EU medicines, drug industry leaders fear this sudden handover will cause disruption.

“Removing key expertise and reallocating work to other agencies who are not yet able to take on the work, and expecting them to increase their capability overnight is an increasingly reckless course of action proposed by the (European) Commission,” said BioIndustry Association CEO Steve Bates.

“In the interests of patients on both sides of the Channel, it is important that the EU retains access to UK expertise in a post Brexit medicines regulatory framework and that regulatory alignment is maintained to ensure continuity of medicines supply.”

Maintaining timely approvals for new drugs is crucial for pharmaceutical and biotechnology companies, which have dozens of experimental medicines due to be assessed by the EU regulator in the next couple of years.

Global drug companies, including UK-based GlaxoSmithKline and AstraZeneca have been vocal in calling for continued close EU-UK ties after Brexit. The issue is also important to many Japanese drugmakers that have made Britain their European base.

The MHRA confirmed it would no longer act as a so-called “rapporteur” for EU drug licensing or safety monitoring, although there has been no decision on long-term relations.

“It is important to note this only applies to the implementation period and there is no decision yet on the future relationship,” a spokesperson said. “The UK’s position on medicines regulation remains clear. We want to retain a close working partnership with the EU.”

The Association of the British Pharmaceutical Industry said it was clearly in the EMA’s interest to continue to draw on the expertise of the MHRA and it urged London and Brussels to come to an early agreement “in the interest of patients and public health”.


  • 04.16.2018
  • Peter Pitts
The FDA finalized guidance on the special protocol assessment, which is the process by which sponsors of drug or biologic applications can meet with the agency to discuss the design and size of clinical or animal studies to determine if they can adequately support marketing approval. The guidance highlights procedures for submitting an SPA request, the content needed to make a request, FDA assessment process, what happens if FDA and the sponsor do not agree on protocols, and when changes can be made to SPA agreements.

Over the past two years the Laura and John Arnold Foundation has spent $56 million grooming a handful of academics, interest groups and media outlets for the job of deciding who gets access to what medicines.   In particular, LJAF gave $3 million to Kaiser Health News to report on pharmaceutical pricing.  As a recent article in STAT revealed, KHN -- whose articles are syndicated widely by the Washington Post, USA Today and other news sources -- has no problem running articles that cite or cover the other groups who received the remaining LJAF $40 million.  And it has no problem doing so with acknowledging that KHN and its sources both get funding from LJAF or that it runs articles that fit the LJAF agenda. 

So why would it break an ethical sweat when producing, "Pre$cription For Power" (Get it?): Investigating the relationships between patient advocacy groups and Big Pharma."  As deliberately misleading hit jobs on patient groups go, this latest KHN piece reaches a new low. 

Here's Kaiser's (mis)leading question: "Patient advocacy groups campaign to raise awareness of diseases, to fund research and to promote policies favorable to their causes on Capitol Hill and at the Food and Drug Administration. But do they represent patients or Big Pharma?"

Note that KHN ignores another important patient group function: providing patients and their families with counseling, referral services and financial support for expenses not covered by insurance.  Also note that most patient advocacy group, including those listed by KHN, have neither the need or resources to "promote policies favorable to their causes on Capitol Hill and at the Food and Drug Administration".

All the better to make the following slimy insinuation: "Some drugmakers gave seven-figure donations to patient advocacy groups whose communities depend on blockbuster medicines made by those companies. This relationship could inhibit patient advocates from calling for lower drug prices, watchdogs say."

So KHN, without any evidence of a quid or a pro quo, alleges that patient groups do not call for lower drug prices or more precisely, do not call for policies to lower drug prices supported by groups funded by the Arnold Foundaiton, 

The goal of is to silence these organizations through collective guilt.  But both the math and methods miss the mark.  Which is typical of much of the Arnold funded material. 

First, nearly 90 percent of the funding that KHN claims is real pharma influence buying goes to paying for the out of pocket costs of medicines charged by PBMs and health plans despite receiving billions in rebates.   LJAF opposes programs that provide patients discount coupons or copay assistance to help patients pay for those medicines that are not favored by PBMs.   So do most of the LJAF funded groups that KHN crowns as "watchdogs."  But you wouldn't know that since KHN has stated it is under no obligation to disclose if their funder is advancing a specific agenda. 

Rather, KHN claims that it "decided to include drug copay assistance groups as patient advocacy groups, based on reporting about these groups. "

Based on what reporting? 

Certainly not KHN reporting.  A google search of Kaiser Health News articles on copay assistance groups reveals a series of articles that are fairly objective and if not favorable at least note that such groups are a necessary workaround to Medicare law and a response to formulary practices. At least until 2017, which is when KHN was using LJAF money to report on drug prices. 

KHN claims that patient assistance groups are really lobbying on behalf of pharma and not calling for price controls because, "some copay groups have faced criminal probes based on allegations that they help drug companies skirt anti-kickback statutes that prohibit copay assistance to Medicare and Medicaid patients, according to investigators with the U.S. Attorney’s Office for the District of Massachusetts and the Justice Department."

This last statement is barely true and mostly bullshit.

Patient assistance programs (PAPs) "provide financial assistance to patients in a variety of forms, including free or discounted products, product coupons, and copayment assistance, to provide assistance to patients with limited financial means. These programs are generally administered through independent charitable organizations or by foundations established by medical product manufacturers. The U.S. Department of Health and Human Services (“HHS”) Office of the Inspector General (“OIG”) has continually acknowledged that properly structured PAPs can provide important “safety net assistance” to patients with limited financial means who cannot afford necessary drugs."

Moreover, the articles KHN links to in defense of defining such groups as advocacy entities mention only one patient assistance organization has been involved in a Justice Dept. investigation of a pharma company.  Not one of the patient assistantance programs listed by KHN has "faced a criminal probe" let alone been caught up in one because of what drug companies do.  Only one group,  Patient Services, Inc., was "contacted in a connection with federal investigation into drugmakers' financial support of non-profits like itself. "   The focus of every investigation is whether or not companies are using charities to cover the cost of their medicines only.  NONE have been accused of violating a federal law because of their participation.   

KHN falsely maligns charities to support their flimsy claim that they are pharma pawns and therefore should be included in the amount it has tracked.  If we accept their argument it turns out that of the $116 million pharma companies have provided,  51 percent or $59 million of that amount goes to 6 patient assistance groups identified by KHN.   And these groups are not allowed to use donations for patient assistance for lobbying. 

As for the other groups blacklisted by KHN,  the average donation to patient organizations is $98400K.   The top 20 recipients receive an average of $1.7 million each.  But nearly all of these groups devote most of their time, money and resources to sponsoring research or providing patients and their families social services and referrals.  Nevertheless, of that top 20 nearly all have taken action or made statements in support of lower drug prices.  For instance, the American Diabetes Association has launched a grass root campaign because, as it notes, "the cost of insulin is increasing at an alarming rate. It's time for change. More than 308,422 people have joined the American Diabetes Association in calling for action."  The American Heart Association has developed a program to identify drugs with the most value per dollar.  The American Cancer Society has continually criticized high drug prices.  The same goes for the Elton John AIDS Fund, the International Myeloma Foundation and the Leukemia and Lymphoma Society.  There are others, but you get the idea.  

To be sure, these groups are not advocating against high drug prices full time.  There are many groups doing so.  Nearly all of them are funded by LJAF.  And every LJAF funded group is involved in developing, advocating, publishing and promoting the LJAF agenda: government price controls,  longer and more expensive clinical trials for new drugs for rare diseaese,  government seizure of pharmaceutical patents and using LJAF funded groups such as ICER to determine which drugs are worth paying for. 

LJAF provides 14 nonprofit or academic institutions $47 million for activities relating to these issues.   

LJAF provides 3 media outlets, HealthNewsReview.Org, Propublica and KHN $8.1 million to report on the activities and quote the experts receiving the $47 million.

LJAF provides one group, Patients for Affordable Drugs about $500k for its nonprofit advocacy of price controls, patent seizures and adoption of ICER guidelines and an estimated $10 million to a PAC that will run TV ads attacking drug prices that is also operated by the same group leading Patients for Affordable Drugs.    

Every one of these LJAF funded groups works full time on advancing and implementing an agenda set by LJAF.   

None of them lift a finger to help a patient in need of financial or emotional support, or fight to help patients get the medicines their doctors think they need.  None spends one dime on research that had lead to breakthroughs as has the Multiple Myeloma Research Foundation, the Cystic Fibrosis Foundation or the National Psoriasis Foundation. 

Ultimately, the KHN piece is part of a sustained effort to silence patient groups and increase the influence of LJAF funded organizations.  

Years ago, PBS returned a grant from LJAF underwriting a series on public sector pension reform after it was revealed LJAF was also funding other organizations to advance its agenda.  Back then, it was PBS ultimately determined that the LJAF grant flunked PBS’s “perception test” guidelines (that) prohibit accepting funding for public affairs programs if “there exists a clear and direct connection” between the interests of a proposed funder and the program’s subject matter, even if the funder has no editorial control.

That same sense of decency or journalistic integrity no longer exists at KHN.    Rather, KHN has pimped itself out to silence any groups that might pose a threat to the imagined power of its paymasters.   


Buckeye State Eyes PBM Practices

  • 04.05.2018
  • Peter Pitts
The Ohio Department of Insurance is now requiring insurers and pharmacy benefit managers to remove so-called “gag order” clauses that prevent pharmacists from disclosing to consumers the most affordable prescription drug option. They would also be prohibited from charging customers a higher amount for prescription drugs than what it would otherwise cost without insurance coverage. Pharmacists can face significant penalties if they disclose the difference. A trio of U.S. senators recently introduced a pair of bills to eradicate gag clauses that payers may use to pocket the difference.

"Dragon-Quality" Generics

  • 04.04.2018
  • Peter Pitts
The Chinese government issued an ambitious statement about plans to encourage further research and availability of higher quality generic drugs, according to this statement by the State Council. Toward this end, the government plans to bolster intellectual property protections and antitrust legislation, reform the regulatory approval process, and enhance manufacturing and tracing systems. Generic drugs will also be placed in official procurement lists and in interchangeable lists with innovative drugs.
President Trump is readying proposals to reduce what many people pay for their medicines. Many of his critics complain that instead of reducing out of pocket costs, the President should force companies to cut drug prices. But what if lower drug prices cause people to pay more?  

This is exactly what’s happening when biosimilars -- ‘generic’ versions of biological medicines such as immunotherapy, vacccines, recombinant proteins –hit the market.   

Biologics are used to treat a wide range of diseases, especially cancer and autoimmune conditions. They are effective medicines that cost tens of thousands a year.  And increasingly insurance companies and pharmacy benefit management (PBM) companies such as Express Scripts and CVS (which will both merge with health insurers) are charging people a percentage of the retail price of these drugs, which can amount to thousands of dollars a year.

Both Express Scripts and CVS have asserted replacing biologics with biosimilars would allow them to reduce out of pocket costs. 

Last year, Express Scripts CEO Tim Wentworth said, biosimilars “can help mitigate the impact of high-cost drugs and support broader access as more affordable alternatives for patients.”  Similarly, CVS stated that using biosimilars will make” prescription drugs more 
more affordable and accessible for our patients and clients.”

Last year a study from health consulting firm Avalere found that 81 percent of plans report they are covering a biosimilar product.  Nearly all companies said that the lower cost of biosimilars spurred that decision.  So far so good.  

But biosimilars use has lagged. For example, Inflectra and Renflexis two biosimilars of Remicade, a biologic used to treat people with rheumatoid arthritis, Crohn's disease and ulcerative colitis, were launched in 2016 and 2017 at a lower price than Remicade.  The average price of both products declined further in 2018.  Yet Remicade’s selling price has increased 6-9 percent during that time and the product actually maintained market share. 

Indeed, a recent Drugchannels blog dryly notes, “Remicade benefited from favorable payer coverage. Investment research firm Sanford C. Bernstein & Co. studied the top 40 commercial formularies. It found that for 36% of covered lives analyzed, Inflectra is either not covered or providers are required to use Remicade first. Inflectra was preferred over Remicade for only 2% of the covered lives.”  (The biosimilar imbalance is even greater in Medicare Part D plans where 90 percent of Medicare Part D plans do not cover Inflectra or Renflexis.) 

PBMs and insurers are, in fact, choosing the cover drugs with the lowest net price for them. Most of that time, price ‘cuts’ materialize the form of cash rebates and other fees PBMs drug companies fork over in exchange for getting plans to cover their products. 

Even cutting prices doesn’t matter.  Inflectra launched at a 15 percent lower price than Remicade.  Renflexis launched at 25 percent and Pfizer counter by cutting Inflectra’s price by 35 percent.  Doctors don’t like switching biologics so most of the people using biosimilars are likely to be new patients.  But rather than letting products compete on price, PBMs used the competition to extract even bigger rebates in exchange for giving Remicade an even more favorable position relative do biosimilars.  Remicade’s list price increased but the net price to PBMs actually fell:  Nearly 90 percent of the price hike went to pay rebates. 

PBMs correctly point out that as a result of the competition, average prices and price increases have come down.  But they haven’t been used to lower out of pocket costs for biologics.  Remicade sales are about $5 billion a year and generate more rebates than most other medicines.  Instead, health plans, employers, and PBMs have maximized revenue from the biosimilar-biologic spread by making many patients wait longer or pay more for medicines other than Remicade. 

For example, many PBMs and health plans require patients to pay the same out of pocket cost or more for a biosimilar as they do for Remicade. Additionally, many plans require patients have to try the rebate rich drug before getting access to a medicine that may be less expensive or more effective.  And incredibly, often some plans don’t cover biosimilars at all depending upon the deal they cut.  Express Scripts covers biosimilars with the same out of pocket share as Remicade. CVS and United Health/Optum don’t cover Inflectra or Renflexis at all. 

Hopefully, the administration will eliminate barriers to affordable access to the medicines that work best for each individual.  Requiring that rebates eliminate out of pocket costs is a start. Many people will respond well to biosimilars.  That frees up money for people who need different medicines.  Combining net price competition with delivering the right treatment to each patient will increase well-being and save money.  For now, lower drug prices mean higher drug costs for patients. More biosimilars will generate more rebate dollars, not better access or better care.  
Newly ex VA Secretary David Shulkin, a dedicated and effective advocate for veterans, was forced out of his job, ostensibly because of a misuse of travel money.  This a flimsy reason for firing someone.  In other administrations, a Secretary’s use of department resources for first class travel or to promote a political candidate (that was found to have violated the Hatch Act), with no consequence.   

So, why was really Dr. Shulkin fired?

As he noted in a recent NY Times op-ed,  “advocates within the administration for privatizing V.A. health services… saw me as an obstacle to privatization who had to be removed. That is because I am convinced that privatization is a political issue aimed at rewarding select people and companies with profits, even if it undermines care for veterans.”

Dr. Shulkin had taken concrete steps towards expanding veteran access to private health services.   Specifically, he had to upgrade the VA’s electronic medical records system and create a culture of accountability that was sorely lacking.  And then there was the de facto rationing that plagues the VA health delivery system:  When he became secretary the hepatitis C cure rate was 70 percent.  That’s because the VA PBM following ICER recommendations withheld cures from HCV patients until they had advanced forms of the disease.  Within a year, the cure rate was up to 90 percent.  

Ironically, while Shulkin’s tenure was being questioned by privatization advocates, he was also being undermined by VA bureaucrats who opposed his actions on privatizing services as well as his holding agency and hospital directors directly accountable for meeting quality and customer service benchmarks.   

It is perfectly understandable when someone is replaced for political or strategic reasons.  Great baseball managers are fired all the time and resurface elsewhere.  The same goes for people in senior management.   But why orchestrate a campaign of personal destruction while doing so?

Ben Wattenberg, who was one of America’s go to political commentator until his untimely death in 2015, once told me that “Washington is a carnivorous town.”    He meant that the political establishment enjoys cannibalizing other people and devote much of their time and effort on doing so.  Nothing personal mind you.  

Shulkin wondered aloud: It shouldn’t be this hard to serve your country.   Unfortunately, it seems it will become even harder in the years ahead.  So, while I am disappointed that Dr. Shulkin is no longer running the VA, I am happy knowing that he will continue to make an impact in a position that appreciates his passion for patient care and his talents.  And I am happier still that he and his family will enjoy Passover together, freed from innuendoes and character assassinations.  

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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