Latest Drugwonks' Blog

Two articles, one in Axios and the other on repeat the drug prices are unsustainable narrative without providing the following facts necessary for balanced reporting:

1.  As drug spending has increased since 1990, the rate of increase in spending on other health services has declined. 

2.    As drug spending as a percent of health care spending has increased, out of pocket drug costs have declined

3.    Increases in drug spending are strongly associated with the introduction of new medicines with significant health benefits. 

3.    The consumption of new medicines is associated with a decline in the rate of spending for other health care services. 

The chart above shows that as new medicines are introduced the rate of spending on other services goes down. 

In sum,  we are spending more on prescription drugs and reducing the rate of spending on other services while out of pocket drug costs (except for a significant minority being exploited by PBMs and plans) has substantially decreased. 

Anti-Claw Law

  • 03.21.2018
  • Peter Pitts
A group of House lawmakers introduced a bill that would prohibit pharmacy benefit managers from using gag clauses to prevent pharmacies from telling consumers that paying cash for a prescription might cost less than a health insurance co-payment. The trade group for pharmacy benefit managers, which can pocket the difference, maintains only "outliers" impose such clauses. Gag clauses are criticized for keeping drug prices high at the pharmacy counter. Last week, a similar bill was introduced in the Senate.
The generic drug lobby, the Alliance for Affordable medicines, has gotten desperate in recent weeks as the chances for including the CREATES Act into a congressional spending bill fade. 

As almost no one knows, the CREATES Act (short for CREATES Act) is supposed to create generic competition by allowing generic drug companies to sue innovator firms if they don’t hand over samples of their products outside of a strict chain of custody the FDA requires to ensure safe drug use under Risk Evaluation and Mitigation Strategy or REMS. 

There is broad agreement that REMS shouldn’t be used to keep generic drugs off the market.  FDA Commissioner Scott Gottlieb has made it easier for generic and brand companies to use the same REMS program to both share samples for testing and for distribution. Gottlieb wants to establish a single shared REMS system.  In facilitating such cooperation, the FDA will “have a stronger basis to issue a waiver that will allow the generic drug makers to go their own way if they have to and develop their own REMS.” 

There is concern that CREATES takes the FDA authority (in fact, it says nothing about the FDA)  to overrule REMS and hands it over to  trial lawyers (who make up what amounts to the R and D budget of most generic firms) and courts.  My partner Peter Pitts explains why REMS reform is necessary but that CREATES only creates more torts, not more competition. (Which might explain in part why CREATES may not be part of the spending bill.)

But instead of debating or addressing these issues, AAM wants to blame one person in particular for CREATES demise: My friend Bob Tufts a myeloma survivor.  AAM is launching a smear campaign against him, claiming via Twitter and to anyone willing to listen, that Bob is taking pharmaceutical money to oppose CREATES.  

Apparently, they have used their connections to the media to support their smear campaign. Yesterday, the Boston Globe’s Washington ‘Bureau’ Chief, Christopher Rowland, took time out from almost everything else that needs coverage to repeat the slurs and assaults that AAM has thrown at Bob and Patients Rising for the past weeks.  In his article,” Everyone wants to kill generic drug loophole — except drug makers and some GOP leaders” Rowland writes:

“The use of myriad groups gives the appearance of a broad-based, grass-roots movement against the bill. An example of the rhetorical strategy came just last week.
“What I worry is that in pursuit of budget cost savings, Congress may jeopardize the safety of life-saving medications patients depend on for treatment,’’ wrote Bob Tufts, a former Major League Baseball pitcher and now a business school professor at Yeshiva University in New York.
His op-ed article appeared in The Hill, an inside-the-Beltway publication. Tufts said he wrote the article after conversations with representatives of the nonprofit group Patients Rising, which discloses direct funding from Amgen, Celgene, Pfizer, and other big drug companies. Tufts, who said he came under attack on Twitter after his article appeared, said he does not receive any money from Patients Rising or industry.”

You might wonder why someone with the awesome responsibility of WASHINGTON BUREAU CHIEF focused his reporting skills on what amounts to a twitter tussle. Or why, in his attention to detail, Rowland left out that the Twitter attack on Tufts was almost exclusively from AAM.  

Or why Rowland, in taking a cheap shot at Tufts  did not point out that AAM is second to none in seeking to choke off market-based competition or at least defending its members, many of whom are being sued by the Department of Justice for price fixing

Forty-five states and the Department of Justice are claiming that generic-drug prices are fixed and the alleged collusion may have cost U.S. business and consumers more than $1 billion.

In their complaint, prosecutors say that when pharmacies asked drugmakers for their lowest price, the manufacturers would rig the bidding process.
"The companies would work out in advance who would get the lowest price and then the other competitors may put in what we would call a cover bid," says Michael Cole, who heads the antitrust department at the Connecticut attorney general's office. (Such bids give the appearance of competitive bidding.)
Through subpoenas, Cole's team has assembled millions of texts, emails and phone calls between 2012 and 2015. The prosecutors say the records show executives divvying up customers, setting prices and giving the illusion that generic pharmaceuticals were transacted in an open and fair marketplace.

You would think a Washington Bureau chief, especially one that has time on his hands to cover the twitter account of AAM could devote a little time unpacking the irony of a group that proudly proclaims that its members mission is “to make more medicines more accessible to more people who need them” are being sued for doing just the opposite.  

Rowland makes it seem like the CREATES Act will lead to a flood of affordable drugs.  But it turns out that the generic drugs with the biggest price increases over the past 2-3 years are also medicines that have a REMS in place.   What if all CREATES does is transfer the ability to use REMS to restrict competition from companies that make innovative medicines to companies that are being sued for anticompetitive behavior?  Apparently, that narrative has never entered Rowland’s bureau though it sure sounds like the AAM team sure has. 

For someone who is concerned about fake broad-based support, I find it interesting Rowland has been and is silent about AAMs anti-competitive agenda but finds the time to write a piece against the one guy who appears to be driving the generic lobby crazy.

Bob has invited the AAM to meet for coffee to discuss his views.  Instead, the group continues to attack him.  My guess is that no one there has the guts to meet him face to face.  The same probably goes for the Boston Globe Washington bureau chief who happily piled on my courageous friend from afar. 

CREATES Act a Tort Torte

  • 03.16.2018
  • Peter Pitts
When members of the tort bar start to salivate over a piece of legislation, it’s worthwhile to find out where the red meat resides. In a rush to pass legislation to “lower drug prices” as a budgetary pay-for, lawmakers are pushing two pieces of parallel legislation, the Senate’s Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act and the House’s Fair Access for Safe and Timely (FAST) Generics Act.

 It’s time to take a breath – because neither bill will speed generic drugs to market or lower the cost of medicines for a single American. What they will most certainly provide is a windfall for the trial lawyers.  

Both bills aim to provide a series of new legal provisions that will make it easier for drug companies to introduce generic alternatives, thus spurring competition and bringing down prices. Both are well intentioned. But they are poorly worded and that is a serious matter: Instead of bringing generics to market sooner, these bills could endanger patients’ lives and encourage costly, needless litigation.

To protect consumers, the Food and Drug Administration requires that new drugs undergo a series of clinical trials to prove their safety and effectiveness before entering the market. Generic drugs must also complete clinical trials, but only to prove they’re clinically equivalent to the already-approved brand-name drug. The problem comes when some drugs are so potent, or have such dangerous side effects, that the FDA requires drug companies to develop and abide by specialized safety protocols called “risk evaluation and mitigation strategies,” when selling or dispensing these medicines.

Rather than keep these safety measures, both bills strip the FDA of its watchdog role. Generic manufacturers will be exempt from outlining testing and safety protocols for the FDA to approve. Even if a generic drug maker’s proposed risk evaluation and mitigation strategies are inadequate, the FDA will have no authority to reject or halt the transfer of medicines to the generic company for testing.

The ambiguously worded liability provisions of the two bills further subject innovators to unfair legal risk. The reason is many generic companies, after obtaining brand-name drug samples for testing, ship them to third-party research firms to perform clinical trials. If the third party is negligent with the samples, patients could get hurt. Yet, under the bill’s terms, patients could sue the brand-name drug company, even though it had no control over the testing or safety protocols. The higher legal fees for drug companies will result ultimately in higher costs for everyone else.

Additionally, the bills would allow generic drug manufacturers to sue if brand-name manufacturers fail to hand over their drug samples for testing within 31 days, or if the companies do not reach an agreement on shared risk evaluation and mitigation strategies for risky drugs. Fine concepts, but the actual administrative language is ambiguous and subjective wording is music to trial lawyers’ ears.
Over 60 percent of Americans want the government to take action to lower prescription drug prices — and Congress, for once, is listening to voters.

Unfortunately, the legislation before Congress will lead to dangerous unintended consequences. Instead of bringing generics to market sooner, these bills could endanger patients’ lives and encourage costly, needless litigation. Both houses of Congress deserve praise for trying to bring generic medicines to market faster, relieving consumers from high drug prices. Yet good intentions don’t change the fact that the legislation, as currently constructed, is deeply flawed.

Congress could help consumers by reworking the imprecise phraseology to end bad behavior without gutting safeguards for patients or enabling unscrupulous trial lawyers to file costly, pointless suits. Whether it’s the practice of medicine or the development of public healthcare policy two rules apply – first, do no harm and, second, be wary of trial lawyers bearing gifts.

AXIOS: Inside a drug pricing contract
By Bob Herman, March 15, 2018

A contract template used by Express Scripts, the largest pharmacy benefit manager in the U.S., provides a window into how pharmacy benefit managers — middlemen that manage drug coverage for businesses throughout the country — steer negotiations with drug companies to benefit their own financial interests.

Why it matters: These benefit managers have a lot of power over the prescription drug coverage people get through their employers, and they're supposed to negotiate discounts so coverage is cheaper for insurers and employers. If they're not making it cheaper, there's less chance people will get relief from high drug prices.

The details: Axios obtained a 36-page Express Scripts contract template from a source who works in the health care industry. Express Scripts and employers use the document as a starting point to determine how medications are paid for and how pharmacy networks work, but the contract usually is not in the public's view. Since it's a template, there are no hard numbers or terms of any specific agreements.

The big takeaway: There's nothing illegal about these contracts. But the language is clearly written with the PBM's financial interests in mind, and critics say those kinds of provisions can result in lost savings for everyone, especially for small companies and their employees.

Even some of the largest companies think they are protected because they have in-house and outside attorneys vetting contracts, yet that's not necessarily the case.

"That's a little bit like going to Las Vegas and consistently thinking you can beat the house at their own game," said one source who has worked in the industry for many years. "These PBMs have entire departments of lawyers where this is their game."

The other side: Express Scripts, which is in the process of being acquired by Cigna in a $67 billion deal, didn't dispute the contract template was its own. But spokeswoman Jennifer Luddy said in an email the document was "several years old," although some sources said it appeared to be current.
Luddy added that employers are "savvy purchasers of pharmacy benefits" and that these contracts are common: "It is industry standard terminology used by all PBMs, and is well-understood by clients and consultants."

In a follow-up email, Luddy said: "It is clear to us that there are several vocal PBM critics who are eager to provide their biased interpretations of this template contract to serve their own agenda."The details: These are some of the major provisions. The contract was explained in interviews with several people who work in or are familiar with the pharmacy benefit industry, most of whom asked not to be named given the sensitivity of the issue and to speak candidly.


A primary function of a PBM is to negotiate rebates from drug companies. Most of those rebate dollars flow back to employers (not workers). But Express Scripts collects other rebate-like fees from drug companies that it doesn't have to pass along to employers.

The Express Scripts contract explicitly says "rebates do not include things" like "administration fees" from drug manufacturers, "inflation payments" and numerous types of "other pharma revenue."

"There are so many carve-outs of what they consider a rebate that it’s very murky of what’s being kept and what’s being passed through (to clients)," an industry source said.

The contract also says Express Scripts negotiates rebates "on its own behalf and for its own benefit, and not on behalf of sponsor."The brand/generic algorithm

Multiple people said the "proprietary" algorithm is one of the most important definitions, as it gives Express Scripts full authority to determine whether a drug is brand or generic without being transparent.

The algorithm allows Express Scripts to pocket the difference between a brand-drug discount and a generic-drug discount — a major tactic to maximize profits.

"This is why they don't miss earnings," said one person familiar with the industry.

Payment schedules

The "MAC list" and "maximum reimbursement amount" also permit Express Scripts to pay for drugs in a way that is "most advantageous to them," according to a source.

For example, using these different lists of drug costs, Express Scripts can charge its employer clients $15 for a particular medication but pay the pharmacy just $1 for the same medication — and keep the extra money for itself.Financial disclosures and auditing

The last two pages rehash some of the initial definitions, but also reiterate how Express Scripts can collect almost any type of revenue it wants and "may realize positive margin" — code for reaping big profits and not having to share with employers.

Employers can choose to have their agreements audited, but they have to get Express Scripts' approval on what auditor is used.

And sometimes they don't get it. Hayes, a pharmacy benefit consultant who agreed to review the document and speak on the record, said Express Scripts has not allowed her firm to conduct audits.
Per this article in the Chicago Tribune, llinois lawmakers are considering a bill that would guard non-medical switching in the middle of a plan year. The proposed bill would prohibit commercial health insurers from modifying coverage of a drug during the plan year if it has previously approved the drug for a medical condition.

Santa Claws

  • 03.14.2018
  • Peter Pitts
If drug manufacturers are giving such large discounts for brand name medicines to Pharmacy Benefit Managers (PBMs); while prices of commonly used generics keep going down, why aren’t co-pays going down and why, in some circumstances, are they going up – even for generic medicines?

In short, where’s the money going?

The answer, according to a new study just published in the Journal of the American Medical Association, Frequency and Magnitude of Co-payments Exceeding Prescription Drug Costs, is … from the purses of patients into the pockets of the PBMs.

Per the JAMA article:

Pharmacies collect patients’ co-payments and pass them to PBMs, who reimburse the pharmacy a negotiated rate to cover drug costs, dispensing fees, and any markup. Overpayments occur when the co-payment exceeds the negotiated reimbursement.

The scheme is called “claw-backs.”


However, drug co-payments sometimes exceed costs, with the insurer or pharmacy benefit manager (PBM) keeping the difference. Furthermore, some pharmacists are contractually prevented from alerting patients when their co-payment exceeds the drug’s cash price. Although some have argued that the practice is uncommon, a 2016 survey of independent pharmacists indicates otherwise.

No, you read that correctly, PBMs lock-in these claw-backs, going so far as to contractually gag pharmacists who want to help patients lower their drug costs.

Some of the study highlights include:

* Among 9.5 million claims, 2.2 million (22.94%) involved overpayments.

(That means that almost 1 out of 4 prescriptions involved a patient copayment that exceeded the average reimbursement paid by the insurer. The vernacular for this is – stealing.)

* The most commonly prescribed drug, hydrocodone/acetaminophen, involved an overpayment on 36.15% of claims.

(Could this explain why PBMs make time-consuming prior-authorization for abuse-deterrent opioids and non-opioid pain alternatives such common practice?)

* Overpayments were common in this data set, affecting 23% of all prescriptions, and 28% of generic prescriptions.

(Price gouging on generics! Shameful.)

* In 2013, total overpayments by patients amounted to $135 million in the sample studied

The authors conclude:

Cost-related nonadherence is common and associated with increased medical services use and negative health outcomes. By raising patient costs at the point of sale, overpayments may exacerbate these effects. To lower patient expenses, legislation addressing overpayments and gag clauses warrants further investigation.

There is a yawning divide between regulatory science and digital development. Digiratti view regulators as stodgy while regulators view digital developers as trigger-happy. There is an unproductive cognitive disconnect.

When we consider the integration of new and exciting digital technologies (ingestible, implantable, portable, app-based, diagnostic, etc.), it's likely that technologists are far more likely to be excited about the possibilities rather than considerate of the risks. The same cannot necessarily be said of regulators/reviewers who reside within a culture of proof and predicate. Technologists inhabit a planet of errors and upgrades. There is no "Beta" approval pathway for the FDA.

For the FDA, risk exists to be minimized while for digital developers risk is an opportunity. Fortunately, there is common ground – and it isn't the technology. It's the public health need for which the technology presents a safe and effective (within the FDA definition of that duality) solution. Interestingly, it's the drug developer who must now play the role of “learned intermediary” between regulator and technologist -- a new and uncomfortable role. But the pay-off is worth the effort for sponsor, regulator and public health advocate -- better patient outcomes through more evolved 21st century technology integration.

Consider Adherence/Compliance, a public health problem of brobdingnagian proportion nowhere more acutely felt than in patients with schizophrenia. That's why products that address new and innovative solutions (such as Abilify MyCite, a pill with a sensor that digitally tracks if patients with schizophrenia  have ingested their medication) are so exciting to developer, regulator and patient alike. It's a real world example that should provide momentum for continued development beyond this one therapeutic area.

As real world data becomes available, the FDA will hopefully feel increasingly comfortable expediting similar programs (specifically) and programs with more innovative uses of digital technologies (more broadly).

Positive signals from the FDA will send potent messages to developers that further investment in such clinical programs is worth the investment risk. And positive signals emanating from “the patient voice” will be crucial.

Cratering CREATES

  • 03.09.2018
  • Peter Pitts
The Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act will not be included in the pending omnibus budget bill, according to BioCentury, citing lobbyists. Although the bill has bipartisan support and is aligned with Trump administration policies, a combination of lobbying muscle and political calculation have scuttled efforts to have it included in the omnibus bill. The bill seeks to prevent brand-name drug makers from using Risk Evaluation and Mitigation Strategy programs to avoid selling samples that are needed to develop generic versions and block generic competition.

Gottlieb call out "Kabuki Pricing"

  • 03.08.2018
  • Peter Pitts
FDA's Gottlieb blames industry 'Kabuki drug pricing' for high costs

WASHINGTON (Reuters) - U.S. Food and Drug Administration chief, Scott Gottlieb, criticized pharmacy benefit managers, health insurers and drugmakers on Wednesday for “Kabuki drug-pricing constructs” that profit the industry at the expense of consumers.

The comments, made at a conference organized by a leading U.S. health insurer lobbying group, stoked speculation over what steps the administration of U.S. President Donald Trump may take to rein in lofty prescription drug costs.

“Patients shouldn’t face exorbitant out-of-pocket costs, and pay money where the primary purpose is to help subsidize rebates paid to a long list of supply chain intermediaries,” Gottlieb said at the meeting of America’s Health Insurance Plans (AHIP). “Sick people aren’t supposed to be subsidizing the healthy.”

The remarks surprised meeting participants and spurred new accusations between leading members of the drug supply chain. Shares of top pharmacy benefits managers CVS Health Corp and Express Scripts Holding Co fell 1.4 percent and 2.4 percent, respectively.

He criticized the health industry for failing to promote access to so-called biosimilar versions of drugs, and for pricing practices that harm consumers.

Biosimilars are copies of original drugs that are supposed to be as effective but cheaper. Kabuki is a form of Japanese theater characterized by dramatization and elaborate costumes.

Gottlieb said practices in the healthcare industry “obscure profit taking across the supply chain that drives up costs” and discourage competition.

As FDA commissioner, Gottlieb has prioritized approving more generic drugs to help lower prices, allowing more than 1,000 copycat drugs into the market last year, he said.

Still, while the agency has approved nine biosimilar therapies to date, only three have reached the market, Gottlieb said. The rest have been mired in legal challenges brought by drugmakers such as AbbVie Inc to protect its multibillion-dollar rheumatoid arthritis treatment Humira.

Trump has vowed repeatedly that his administration will take more steps to lower drug costs, and included some potential actions in a proposed budget made public last month that Congress is not likely to accept.

Other regulatory actions could come directly from Health and Human Services Secretary Alex Azar, a former drug company executive, and through the department’s Centers for Medicare and Medicaid Services. Azar is scheduled to deliver remarks at the AHIP conference on Thursday.

Gottlieb noted that the top three pharmacy benefit managers - CVS, UnitedHealth Group Inc and Express Scripts - control more than two-thirds of their market. The top three wholesalers - AmerisourceBergen Corp, Cardinal Health Inc and McKesson Corp - control more than 80 percent; and the top five pharmacies more than 50 percent, he said.

AHIP responded by saying drug manufacturers were to blame for the high cost of prescription medicines. The Pharmaceutical Care Management Association, which represents pharmacy benefit managers, also said it was unfair to place blame on payers who cannot control the prices drugmakers set.

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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