Latest Drugwonks' Blog

When it comes to 21st-century medical progress are the Centers for Medicare and Medicaid Services (CMS) an accelerator or anchor for innovation? If the former, how can it do even better? If the latter, how big of a sea change is required?
Blaming CMS for every setback, frustration, or failure is neither factual nor helpful in working across the health care ecosystem to find new attitudes and pathways that can shine light on and address healthcare reimbursement roadblocks. However, for CMS to do a better job, we must advance the public health together as allies rather than adversaries. Don’t fix the blame, fix the problem. 

Problem #1 is regulatory ambiguity. As with many other areas of government policy, peculiar bureaucratic intervention and lack of clarity are causing harm to the entire healthcare ecosystem. Nowhere is this more evident than in the world of therapeutic use of tissue allografts – an exciting and evolving arena of 21st century medicine and one of the many areas of medical products regulated by the FDA. And, as with many other areas of the agency’s jurisdiction, peculiar bureaucratic intervention and lack of clarity are causing harm to patients and costing American jobs. To phrase it less politely, this small case is about a big issue -- whether it’s acceptable for the federal regulation of healthcare in America to be arbitrary and capricious.

The bad news is that, in a recent test case of the powers of the Chevron Deference Doctrine, the United States Court of Appeals for the District of Columbia Circuit thinks otherwise. In its February 14, 2024 decision in the case of Row 1 Inc. D/B/A Regenative Labs v. Xavier Becerra, Secretary of Health and Human Services, the Court affirmed dismissal of Regenative’s case against CMS.

This may seem like a small case of bureaucratic lassitude at best or over-reach at worst. It’s not. This small case is about a big issue -- whether it’s acceptable for the federal regulation of healthcare in America to be arbitrary and capricious where substantive actions are taken sub rosa rather than in view of the public eye, as Congress requires.

The particulars of the case are very geeky. (All the details can be found in the Appellant brief and this recording of the oral arguments held on October 6, 2023.)  The gist of the case is that CMS decided Uncle Sam wasn’t going to pay for a certain class of products, which includes Wharton's Jelly Tissue Allografts (human connective tissue used to repair, replace, or supplement missing, damaged, or non-properly functioning tissues, manufactured by Regenative Labs). The Court agrees. The Court is wrong and Regenative is considering petitioning for certiorari to the Supreme Court.

Why? Because CMS must use various on-the-books rules and guidances promulgated by the Food and Drug Administration. (“Promulgated,” is another one of those $50 words. It means, “formal proclamation or the declaration that a new statutory or administrative law is enacted after its final approval.”). The reason this is important, is that we’re not talking about vague or unwritten regulatory practice. We’re talking about what’s already on the books – literally the letter of the law. And feigning ignorance of the rules does not provide an excuse.

CMS’ approach in the Regenative case seeks to avoid any review at all and creates a two-tiered health system where people with money pay cash and get access to interventions that can help address serious and painful problems while Medicare patients suffer the consequences of arbitrary and capricious decisions by nameless, faceless government bureaucrats. Such behavior must not stand and Regenative should continue to stand up against agency overreach and denial of due process.

Advancing healthcare reimbursement policies through less formal and more regular conversations requires not fewer rules but new ones. And those rules must equally apply to everyone. New approaches require well-considered rules because, as Victor Hugo reminds us, “Where the disposal of time is surrendered merely to the chance of incidence, chaos will soon reign.” And, for patients, it’s a reign of terror.

The Price of Ignorance

  • 12.06.2023
  • Peter Pitts
Back in March, the U.S. Department of Health and Human Services (HHS) and the Department of Commerce (DOC) announced efforts to pursue a whole-of-government approach to review its march-in authority as laid out in the Bayh-Dole Act, which promotes commercialization of research results, maximizes the potential for federally-funded technologies to become products, and serves the broader interest of the American public. HHS created and empowered a new interagency Working Group to develop a framework for implementation of the march-in provision that clearly articulates guiding criteria and processes for making determinations where different factors, including price, may be a consideration in agencies’ assessments.

Yes, you read that right – price -- and now it’s more than a maybe.

According to “unnamed sources” (as reported by Politico), “The Biden administration has determined that it has the authority to seize the patents of certain high-priced medicines, a move that could open the door to a more aggressive federal campaign to slash drug prices.”

The problem, the Bayh/Dole Act doesn’t consider price in its legislative intent for Federal march-in rights. And wishing it were so doesn’t make it so.

Ready for a Christmas surprise? The Commerce Department plans to issue a new framework spelling out factors that federal agencies should weigh in determining whether to take march-in action against expensive drugs or other individual products that were created with federal help. The price and availability of that product to the public are among the factors the department will recommend that agencies consider.

The White House has scrambled to highlight Biden's health accomplishments in recent days, after former President Donald Trump suggested he would repeal and replace the Affordable Care Act if elected in 2024.

Per Politico, “The Commerce Department and Department of Health and Human Services were already expected to issue their determination on the government's march-in authority in the coming weeks, the people familiar with the matter said. But the announcement was accelerated in the wake of Trump's comments, and officials are expected to cite it as evidence that Biden continues to search for new ways to lower prices.”

Just like the IRA’s price control codicils, this ill-considered effort will put another chill on drug development from those who really drive innovation – the biopharmaceutical industry. Will there be lawsuits arguing this federal power grab? Undoubtedly.

Alas, headlines for hyped and misleading “NIH-funded cures” are far sexier than those for “more money for drug regulation.” Pursuing misguided policies that siphon funding from the groundbreaking medical research happening in the biopharmaceutical industry will have devastating consequences for patients and society. The Working Group's bad advice would result in fewer medicines for patients and lost jobs at a time when our economy can least afford it.

Watch this space for more as the saga continues.
Per reporting in Endpoints News, Medicare beneficiaries paid four times more for prescription drugs than their plan sponsors did in 2021, according to a Government Accountability Office (GAO) report on Medicare Part D drugs.

According to the report, beneficiaries paid $21 billion for prescription drugs in 2021, while plan sponsors only paid about $5.3 billion, according to the study of 79 of the 100 Part D drugs with the most rebates.

The GAO recommends that moving forward, CMS should monitor rebate information to help the agency and Congress determine their impact on formularies and Medicare enrollment.

Plan sponsors raked in $48.6 billion in rebates from manufacturers in 2021, with endocrine metabolic agents, blood modifiers and respiratory agents accounting for about three-fourths of rebates.

GAO explained that across the board, rebates can reduce plan sponsor payments on drugs with a higher gross cost to less than a lower-cost competing drug. This can lower Medicare drug spending since plan sponsor payments are tied to drug costs after rebates.

“However, rebates do not lower individual beneficiary payments for drugs, as these are based on the gross cost of the drug before accounting for rebates,” GAO said. “Thus drugs with higher gross costs generally result in higher beneficiary payments relative to payments for competing drugs with lower gross costs.”

CMS told GAO that evaluating rebate information isn’t necessary because of the agency’s formulary review and noted that CMS is prohibited from interfering with manufacturer and plan sponsor negotiations.

But GAO pushed back on CMS’ explanation, arguing that monitoring rebate information wouldn’t interfere with those negotiations.

“Such monitoring of rebates will be particularly important as the agency implements the provisions of the Inflation Reduction Act of 2022, which will change Part D plan sponsor, beneficiary, and Medicare drug spending responsibility and may affect formulary design and rebates,” GAO said.

An MBA in Regulatory Confusion

  • 07.31.2023
  • Peter Pitts
Welcome to the world of therapeutic use of tissues – an exciting and evolving arena of 21st century medicine and one of the many areas of medical products regulated by the FDA. And, as with many other areas of the agency’s jurisdiction, peculiar bureaucratic intervention and lack of clarity are causing harm to patients and costing American jobs.

Witness the Twilight Zone-like predicament of one company’s bizarre interactions with the FDA. The company is Regenative Labs. They manufacture (among other products) Wharton's Jelly Tissue Allografts. Wharton’s Jelly is human connective tissue used to repair, replace, or supplement missing, damaged, or non-properly functioning tissues.

The FDA’s job is to ensure its manufactured according to the agency’s current Good Tissue Practice (cGTP) guidance. Here’s Clue Number One: Wharton’s Jelly isn’t regulated as a drug, but as a tissue because … that’s what it is. Here’s the detail: As defined in 21 CFR 1271.3(c), “homologous use” means the repair, reconstruction, replacement, or supplementation of a recipient’s cells or tissues with human cells, tissues, and cellular and tissue-based products (HCT/P) that perform the same basic function or functions in the recipient as in the donor. Remember “homologous use,” as it comes into play shortly.

On March 21, 2022, the FDA undertook a routine inspection of the Regenative Wharton’s Jelly manufacturing facility in Pensacola, Florida.  All FDA-registered facilities like Regenative’s are subject to regular routine inspections. At the end of the inspection, the FDA reported certain observations to the company via a 483 letter each of which the Company addressed and remediated within about 30 days. On October 5, 2022, Regenative Labs asked the FDA for a standard export certificate so they could send Wharton’s Jelly tissue to foreign clients. That standard request was denied and here’s where it gets confusing.

Regenative Labs had previously applied for and received an export certificate for its amniotic membrane patches -- manufactured in the same lab as the Wharton Jelly products. Strangely, the initial ongoing inspectional review was not an issue for the patches; yet it was the agency’s basis for not to issue the export certificate for Wharton’s Jelly. Another example of the FDA’s lack of regulatory reproducibility, costing companies time, money, and agita and patients access and affordability.

Then, in a June 21, 2023 letter, the FDA raised additional issues not related to product quality but product use, stating that the agency had decided to treat Regenative Labs’ Wharton’s Jelly as a drug rather than a tissue product, reinforcing its insistence on using the drug standards of current Good Manufacturing Practice (cGMP) rather than applying the tissue standard for Wharton’s Jelly -- current Good Tissue Practices. Confused yet?  Hang in there.

Remember “homologous use?” Per the FDA, “In applying the homologous use criterion, the FDA will determine what the intended use of the HCT/P is, as reflected by the labeling, advertising, and other indications of a manufacturer’s objective intent, and will then apply the homologous use definition.” Per the agency’s view on how the company was marketing its Wharton’s Jelly product, it was a drug and not a tissue product.

This is weird … and wrong since the what the FDA is claiming is contrary to the instructions for use expressly stated by the company. Regenative Labs materials are clear -- their Wharton Jelly products they are intended for homologous use only and in other marketing efforts, they incorporate the FDA’s definition of homologous use into their materials. The FDA is judge and jury in such matters and facts that contradict their position are often given short shrift.

What does this have to do with an export certificate? Nothing. And here’s Clue Number 2: The FDA doesn’t regulate the practice of medicine – except that’s precisely what it’s doing.

The FDA’s position put Regenative Labs is an awkward position. In fact, the FDA’s reclassification of Wharton’s Jelly from tissue to biological drug would make it impossible for any company manufacturing this tissue in the United States to remain in business -- eliminating a key tool for physicians and patients, further exacerbating the already increasing problem of medical product shortages, eliminating hundreds of high-paying jobs, and stifling corporate incentives to invest in continued product innovation.

The FDA’s treatment of the Regenative Labs Wharton Jelly situation raises many questions, not the least of which is – where’s senior agency management oversight? How does the reclassification of important tissue products to biological drugs happen without more adult supervision? You don’t need a Wharton MBA to recognize the danger of aggressive bureaucracy impacting the availability of Wharton’s Jelly, the viability of Regenative Labs, the loss Americans jobs and, most importantly, patient care.
As with many Baby Boomers, my dad served in the European Theater of Operations during WWII. He told me many times how, just as he was going to be shipped to the Pacific to participate in the invasion of Japan, the atomic bomb ended the war and, in his opinion, saved his life. It’s not a unique story but, as we all know, it’s not so straightforward either. In any case, it’s a tale of science and the wonders … and horrors it can cause simultaneously.

It's also a story of the urgency of dealing with science openly, honestly, and in terms people can understand. That’s why the story of the early days of atomic energy are so relevant today as we battle misinformation and disinformation on science in general and vaccines in particular.

And it’s why I’m extra-proud the New York Times chose to publish my letter in today’s edition. I think that considering science as our “home field advantage” is a far more powerful and positive approach to addressing the public’s diminishing trust in the FDA and the industries it regulates than “battling” people like RFK, Jr. Let’s fight on our own turf.

Here’s my short letter. I hope you enjoy it and hope (even more so) that somewhere my father is smiling.

Oppenheimer’s Lessons on Politics and Science

To the Editor:

Whether it’s harsh truths about atomic power or the merits of vaccines against Covid-19, influenza and childhood illnesses, it’s science — regularly, honestly and clearly explained — that is sanity’s ultimate home-field advantage.

Peter J. Pitts
New York
The writer, a former F.D.A. associate commissioner, is president of the Center for Medicine in the Public Interest and a visiting professor at the University of Paris School of Medicine.

Owning PBMs

  • 07.21.2023
  • Peter Pitts
It’s time for employers to wake up and recognize the dangers of Prescription Benefit Managers. In fact, it’s long overdue considering that (at least in theory if not in practice) PBMs are supposed to be working for employers. The reality is quite different.

PBM practices are driving up costs for patient (a large portion of whom as also employees of companies who contract with PBMs to keep their corporate healthcare costs down). And employees are complaining – about higher co-pays, about co-pay accumulators, about non-therapeutic switching, about ever more aggressive prior-authorization. And do you know who else hates these cold and calculated tactics? Healthcare providers.

Another group that’s finally recognized these problems are the human resources departments of the companies that do business with PBMs. Employees unhappy with their healthcare are employees with one foot out the door. Not surprisingly, the Great Resignation is (at least in part) being driven by the higher co-pays, restricted access, and overall “profits over patients” mentality of many employers.

But the blame lies less with employers and more with the dishonest rhetoric of the PBMs themselves. Most decisions about PBM contracts are made by middle management who generally renew their contracts without much debate or negotiation. It’s become a “take it or leave it” situation.

It’s time for HR to wake up and do their jobs. And now there’s a terrific new primer, a real “how to” guide to help them take back control. Created by the National Alliance of Healthcare Purchaser Coalitions,A Playbook for Employers: Addressing Pharmacy Benefit Management Misalignment” is an absolute must-read. It’s a how-to-take-back-control manual for human resource professionals worth their salt.

(“Misalignment" -- such a polite term for such a dire situation. But they don’t call it “killing them with kindness for nothing.)

The playbook’s strategic recommendations for purchasers (aka: "employers") resides in three key buckets, (1) work with partners who work with you, (2) evaluate and manage with a balanced scorecard, and (3) own the relationship.

Own the relationship.

Yup, it’s time for employers to step up before their employees step out. Knowledge is Power.
Nulla mensa sine impensa

Translation: "There is no such thing as a free lunch.”

More to the point, when it comes to pharmaceutical innovation, there is no such thing as a cheap lunch. In other words, there are rarely simple answers to complex questions.

Today the U.S. Senate Committee on Health, Education, Labor and Pensions will be holding a markup on the Pandemic and All-Hazards Preparedness Act (PAHPA) reauthorization that includes a patently absurd patent prize proposal from the Senator from Ben & Jerry’s, Bernie Sanders.

Let’s look at the hard facts versus the silly soundbites.

The “innovation prize model” has been used in the past, for example in the old Soviet Union. It didn’t work. The Soviet experience was characterized by low levels of monetary compensation and poor innovative performance. The US experience isn’t much better. The federal government paid Robert Goddard (the father of American rocket science) $1 million as compensation for his basic liquid rocket patents. A fair price? Not when you consider that during the remaining life of those patents, US expenditures on liquid-propelled rockets amounted to around $10 billion.

This is certainly not what Schumpeter had in mind when he wrote about “spectacular prizes thrown to a small minority of winners.” Creative destruction indeed!

Does Chairman Sanders really want to replace a patent system that has allowed the average American lifespan to increase, over the past 50 years, by almost a full decade with a prize program that has a solid record of complete failure.

As Joe DiMasi (Tufts University) and Henry Grabowski (Duke University) have argued, under a prize program, pharmaceutical innovators would lack the incentive to innovate. To quote DiMasi and Grabowski, “The dynamic benefits created by patents on pharmaceuticals can, and almost surely do, swamp in significance their short-run inefficiencies.”

As DiMasi and Grabowski presciently observed in 2004, “The main beneficiaries in the short-term would be private insurers and public sector purchaser of pharmaceuticals … Governments and insurers are focused myopically on managing health care costs. They are not likely to be strong advocates for funding new drug development that can increase individual quality of life and productivity."

Sound familiar? Correct. Europe. Sound familiar? Correct. Evidence-Based Medicine.

To be sure, there will be other unworkable, ill-considered, and precarious suggestions for ways to “fix” the U.S. health care system. But a prize system may be the worse of them all.

Misguided Bayou

  • 06.06.2023
  • Peter Pitts
Misguided Bayou

The 340B Drug Pricing Program, a US federal government program created in 1992 requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices. The intent of the program is to allow these covered entities to "stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services."

Unfortunately, according to 340B and the Warped Rhetoric of Healthcare Compassion, a report by the Center for Medicine in the Public Interest (CMPI), a majority of 340B entities in Louisiana spend less than the national average on charity care. And amazingly, as many states limit the 340B program, the Louisiana Legislature is looking to expand the program with House Bill 548.

According to the CMPI report, 72% of private nonprofit hospitals had a fair share deficit, meaning they spent less on charity care and community investment than they received in tax breaks. The combined fair share deficit for private nonprofit hospitals was $17 billion, with individual hospital deficits ranging from a few thousand dollars to $261 million.

House Bill 548 bill is now headed to Governor Edwards’ desk for his consideration. If he looks at the facts rather than the rhetoric, his decision should be easy. Veto.

Louisiana communities of color, rural communities, and other vulnerable communities are not seeing the benefits. According to the Journal of the American Medical Association, 340B contract pharmacy growth is happening primarily in wealthy white neighborhoods, while the share of 340B pharmacies in Black and Latino communities has been on the decline.

The facts speak for themselves. Under current law, providers in Louisiana are under no obligation to reserve the discounts of such drugs for needy patients or even report what they do with the savings they obtain through 340B. Eligible hospitals, known as “covered entities,” can obtain all 340B medications from a drugmaker at the discounted 340B price and then bill privately insured patients — and even uninsured patients — for the drug’s full list price, helping themselves to the difference as pure profit.

Rather than caving into special interests, the Louisiana legislature should insist on greater oversight and accountability to the 340B program to ensure that hospitals and not-for-profit pharmacies are passing medication savings on to the Pelican State’s most needy patients.

340B (Smart)

  • 01.14.2023
  • Peter Pitts
A new Xcenda analysis finds that 359 (2%) of all 340B grantees were identified as a hospital or billed as a hospital in 2022, 1,656 (8%) as a hospital or hospital system, and 4,218 (13%) as connected to a grantee or affiliated with one.
Given the size of the 340B program, the study implies that billions of dollars are flowing through hospitals that have relationships with grantees. If 340B reforms focus narrowly on hospitals, these sales could increase as hospitals seek new affiliations to work around the reforms. This suggests that any reforms to the 340B drug pricing program should apply equally to all covered entities.
In order to protect and assure the legislative intent of the 340B program, we must have an evidence-based dialogue on the 340B program to ensure all stakeholder relationships within the program are evaluated as part of ongoing policy discussions. 
In the Winter 2020 edition of Update Magazine I discussed remdesivir (Veklury), Gilead’s FDA-approved therapy for patients with serious manifestations of COVID-19. Specifically, I took issue with the WHO’s Solidarity study showing that nearly 3,000 people receiving remdesivir were not more likely to survive infection with SARS-CoV-2 than those receiving only standard of care. The WHO preliminary findings seem to be in direct contrast to the findings of the Adaptive COVID-19 Treatment Trial 1 (ACTT-1). Who should we believe? What do the conflicting results mean?

On January 5th, there was a roundtable held at the French National Assembly where they discussed final Solidarity results (even though the WHO hasn’t released the full study yet). As you can see and hear for yourself, remdesivir does have a statistically significant mortality benefit for oxygenated patients. Confirmation can be found at the 1:52 mark.

As I mentioned in my Update Magazine article, if you dig into WHO’s data on mortality, you find an interesting and important outcome. WHO’s preprint manuscript contained a meta-analysis of existing studies of remdesivir. The preprint reported a 99% confidence interval, rather than a 95% confidence interval, in the subtotal of the largest population: non-ventilated patients. This is unusual, given that a similar meta-analysis on steroids for COVID-19 used a 95% confidence interval across all studies and for subtotals. That meta-analysis was authored by the WHO Rapid Evidence Appraisal for COVID-19 Therapies (REACT) Working Group.
If we apply the same meta-analytic approach for remdesivir that WHO used for steroids, an important finding becomes immediately clear. Across all studies, among COVID-19 patients not on ventilators, there is a statistically significant 20% (RR=0.80, 95% CI: 0.67, 0.95) reduction in mortality with remdesivir treatment compared to control. Note that the vast majority of patients (3,309 of 3,818, or 87%) receiving remdesivir (Table 1) were not ventilated. Keeping a fifth of those people alive (despite the limitations of the study) seems like a pretty big deal. One would think that WHO would want to shout this from the medieval Geneva rooftops.

For now, we’ll have to settle for confirmation at the 1:52 mark.

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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