Latest Drugwonks' Blog

(Out of) Pocket Change

  • 09.13.2018
  • Peter Pitts
When it comes to healthcare reform, a key goal is to reduce what patients pay for their medicines. And that means what comes out of their pocket. This is particularly important for seniors and timely, since Congress now has the opportunity to address the so-called “donut hole.”
Because of language in the Bipartisan Budget Act of 2018 (BBA), seniors in the Part D donut hole will soon pay five times more than insurers for the brand medicines they rely on. In 2020, the BBA will increase a patient’s cost-sharing costs by $1250, raising out-of-pocket costs for the most vulnerable seniors. Why? Well, among other things, when Congress passed the BBA in February, it made changes to Medicare Part D that threaten the program’s successful competitive structure -- and leaving seniors mired even deeper in the donut hole.
Now is the time to aggressively address this issue. When people say, “my drugs are too expensive,” what they mean is “my out-of-pocket costs are too high.” Congress can help. And they can help now.     
Congress has the opportunity to make two small fixes that will protect seniors in the Medicare Part D donut hole and save them money on out-of-pocket costs for their medicines.  These fixes would leave seniors with high drug spending better off while stabilizing the program for the long-term. Together these two policy fixes would reduce out-of-pocket costs for seniors with high drug spending them better off and, in 2020, saving them up to 7% on their out-of-pocket costs. 
While these changes closed the donut hole a year early, they went much further by lowering insurers’ payment responsibility to just five percent of costs in the donut hole for brand medications. This undermines Part D’s market-based structure by reducing insurance plans’ stake in the program and therefore reducing their incentive to manage program costs, while also creating a significant imbalance in payment responsibility. 
When Part D was created, it included a catastrophic phase of coverage where seniors’ out-of-pocket costs would be reduced once their total medicine costs reached a certain amount. Each year the amount of spending required to move into the catastrophic phase increases slightly. A measure originally included in the Affordable Care Act temporarily slowed the growth rate of this increase. But now that measure is set to expire at the end of 2019, reverting back to pre-ACA levels overnight. This will result in a sudden increase in out-of-pocket costs for seniors in the donut hole who will have to reach a much higher spending threshold to get into catastrophic coverage.
Congress should take this opportunity to fix the donut hole "cliff" by enacting legislative language that restores balance to payment responsibility. They can act right now to both protect seniors and save them money on out-of-pocket costs.

John Arnold: ICER Can Make PBMs Great Again

  • 08.27.2018
  • Robert Goldberg
Here's the key phrase in John Arnold's article on how to make PBMs great again: "The Laura and John Arnold Foundation has supported the development of value-based pricing through the Institute for Clinical and Economic Review, which can be used by pharmacy benefit managers to select drugs that maximize patient value rather than the size of the rebate. CVS recently announced it would use ICER pricing in establishing its formulary."

Translation: Let a handful of experts decide for millions of Americans about patient access by setting prices based on some abstract estimate of human worth and then enforcing those prices by excluding drugs, step therapy, prior authorization, clinical pathways and cost sharing (albeit at net prices).

Arnold and his foundation cast his effort as an effort to use the best scientific evidence developed by the most expert experts to achieve the greatest good in an era of scarce resources.  Indeed, his investment is part of a long tradition of wealthy individuals funding as Thomas Leonard wrote in "Illiberal Reformers", "scientific experts (who) should be in society’s saddle, determining the “human hierarchy” and appropriate social policies." Indeed, Arnold's entire philanthropic program is based on the belief that a better future would derive from the beneficent activities of expert social engineers (armed with evidence from randomized clinical trials) who would bring to the service of social ideals all the technical resources which research could discover and ingenuity could devise.”

At that time, the progressive solution was eugenics.  And in addition to making the case for experts making decisions about selective breeding and whether or not to spend money on helping the sickest based on randomized controlled trial data.  

And here is the statement of Margaret Sanger, a eugenics proponent: 

"Every single case of inherited defect, every malformed child, every congenitally tainted human being brought into this world is of infinite importance to that poor individual; but it is of scarcely less importance to the rest of us and to all of our children who must pay in one way or another for these biological and racial mistakes." 

Here's the Steve Pearson, the President of ICER:

 “The opportunity cost of supporting the use of ultra-orphan drugs necessitates that patients with a more common disease, for which a cost-effective treatment is available, are denied treatment.”    To reduce that cost we must restrain “society’s desire to help those weakest among us, especially when their small numbers allow us to see them as unique individuals.” In that way, we can “ensure that an undue burden is not placed on others for the sake of a few.”

ICER is part of an enduring feature of progressivism in its prior and current incarnations.  As Leonard points out, "this last Progressive belief—that modern conditions of industrial capitalism no longer permitted a quaint liberal individualism, but demanded wise government by expert elites— is what we can call technocratic paternalism. The idea is that benignly motivated experts should interpose themselves, in the name of the greater good, to better represent the interests of the industrial poor, for whom many reformers felt contempt as much as pity. "

ICER’s assault on people with rare diseases is rooted in such technocratic paternalism.  As Leonard noted: "Progressives believed that modern conditions required the state to assume control of human reproduction."

Today, as articulated and calculated by ICER, they require expert elites to assume control of the human condition.  And instead of eugenics, ICER and John Arnold want to turn an evidence-based approach to Munchausen syndrome by proxy to control drug costs. 

History is scarred with the accounts of societies and governments that deployed the solutions of expert technologists to empower to apply their wisdom to improve humankind.  We know better and have chosen better. Civilization is enriched when people who are marginalized – or have been eliminated -- because of their medical condition are freed from despair. 


Bloomberg opinion writer Max Nisen believes that CVS should use ICER’s drug pricing recommendations to exclude 
breakthrough drugs, including those for orphan diseases. Would he want his wife or daughter 
to have their access limited by CVS and Aetna (who is being acquired by CVS)? 

 He may not know that ICER is funded by CVS. He may not know that ICER never talks about 
sharing the increased rebates or fees that CVS would pocket if their lower prices are used. He 
may not know that even with the price cuts he thinks ICER should set, patients will still pay 
retail or be forced to try other treatments. He may not know that breakthroughs are 
breakthroughs because they are first in class. And he may not know that the step therapy or 
exclusions ICER also recommends are also based on containing costs, not increasing 
affordability. And he may not know that limiting access to drugs to generate rebates and fees 
comes at the expense of the sickest 2 percent of patients or that limiting access to drugs 
considered by ICER as cost effective is associated with worse outcomes and more spending 

But now he knows and now he should ask himself if G-d forbid he, his wife or children had their 
access to treatment denied by CVS and ICER would he embrace it. If he does, that͛s fine. But 
leave me and everyone else out of an approach that in my opinion violates the spirit of 
Nuremberg code on human experimentation. 

Peter" Bachs" Dying PBM Business Model

  • 08.08.2018
  • Robert Goldberg

Peter Bach recently published an article claiming that PBM rebates are only 4 percent of the total share of list price drug spending.   The fact that he even acknowledges rebates and what Drug Channels calls the gross to net bubble is to be commended since for so long he and others ignore them. 

Bach’s claim that PBMs only extract 4 percent while pharmacies and doctors pocket more — was bought hook, line and sinker by Politico’s Sarah Carlin-Smith.  But his analysis is laughable for two reasons:

1. Bach uses PBM gross profit margins to estimate the industry’s share of the pie revenues.   PBMs count the list price cost of drugs as expenses  in calculating their gross profits.   The 3 largest PBMs only had an operating-profit margin of 4% to 7%, which is 16% below average among S&P 500 companies, according to an article in Bloomberg. But PBMs never take title or own the drugs..  they make money on the pass-through income such as rebates, fees, etc.  Had the PBMs calculated their revenue in the same way other companies do, their margins would dramatically increase, the article alleged. While this tactic may not attract new investors, it can, however, reduce criticism related to the companies’ practices. “It hides a lot. It’s as simple as that,” Ravi Mehrotra, a partner at the MTS Health Partners investment bank, told Bloomberg.

2. Moreover, unlike other parts of Bach’ supply chain, PBMs — unlike drug companies -invest litte in fixed assets or R and D.  So the  better benchmark is, as AllianceBernstein concluded  EBITDA (earnings before interest, taxes, depreciation and amortization) and the rate at which gross profit converts to EBITDA. While drug distributors convert 45% of their gross profit to EBITDA, and insurers and pharmacies around 30%, PBMs convert 85%. And the reason for that is the relative lack of fixed assets, which in turn keeps depreciation and amortization low. PBMs, are middlemen without the warehouses or stores of pharmacies and wholesalers. 
 The release of the article coincides with growing skepticism of the PBM business model and the proposed merger of Cigna and Express Scripts(ESI).  Both companies claim this is a merger to make health care more cost-effective and personalized.  The share price Cigna paid to acquire ESI —$96 — reflects the huge impact the cash PBMs generate and which  Bach’s article tries to hide.  But as the PBM model is threatened, it behooves ESI and thepro-PBMM Bach to downplay margins.    

 Carl Icahn is publicly urging Cigna shareholders to reject the ESI acquisition because the PBM business model — built on the spread between list price and what PBMs pocket — is going to be dead: 

“(We believe that Express Scripts is a company with major problems whose business could well fall off a cliff. Given the significant worsening of several major risks since the deal announcement, we are confident in saying that Express Scripts on a standalone basis would likely be worth less than $60. Though there is a not another standalone PBM to compare Express Scripts to, we note that drug distributors McKesson and Amerisource Bergen are down 17% and 16% respectively since the announcement of the Cigna/Express Scripts deal and that the risks are likely greater in the case of Express Scripts. Applying the 9x P/E multiple that pharmacies and drug distributors currently trade at to Express Scripts’ 2019E ex-Anthem earnings of $6.50 would result in a $58.50 standalone stock price. We find it unconscionable to pay over $90 for a company that today would likely be worth less than $60.”

If you had to take investment advice from Bach or Carl, who would you choose? 

It’s the self-inflicted wounds that hurt the most.
From the savvy pen of BioCentury’s Washington Editor, Steve Usdin.
Azar’s political play with drug importation
The drug importation policy announced by Alex Azar last week is a political stunt, aimed at generating headlines at a time when the HHS secretary seems desperate to demonstrate to Donald Trump and the media that he’s fulfilling the president’s pledges to lower drug prices. In fact, as Azar knows, importation will have a negligible effect on access to drugs.

Opening the door to importation as a price control tactic will, however, create precedents that will damage FDA, and consequently hurt biomedical innovators and patients.
The new policy would allow importation of drugs that lack patent protection or exclusivity, and that are produced by one manufacturer.
Azar indicated in a July 19 interview with Fox News that the move was his idea, and that he expects FDA to fall into line behind it. The HHS secretary said he called FDA Commissioner Scott Gottlieb to demand establishment of a working group on importation, telling him: “I insist that you find a pathway to make this happen.”

The record shows both Azar and Gottlieb know that importation won’t move the needle when it comes to drug prices.
Speaking to reporters in May, Azar dismissed drug importation as a “gimmick,” arguing that even if it could be done safely, drug companies would respond by limiting supplies to countries that were exporting to the U.S.
In March 2016, Gottlieb wrote that presidential candidate Trump’s endorsement of importation was “good politics” but that it would “offer consumers little relief.” The cost of ensuring the safety of imported drugs would eat up any savings, he wrote.

During his FDA confirmation hearing in April 2017, Gottlieb reiterated his belief that importation isn’t a feasible tool for lowering drug prices.

Azar’s politically motivated plan will undermine FDA’s well-earned reputation as a non-partisan, science-based regulator.
Azar and Gottlieb didn’t issue any caveats. They never suggested importation could be used to target price hikes taken on off-patent drugs by unscrupulous pharma companies.
The issue isn’t whether FDA can ensure the safety of imported drugs. History shows it can do so to address public health emergencies, on a limited scale and at great cost.
For example, in 2012 the agency facilitated the importation of an unapproved vaccine to combat meningitis outbreaks on college campuses. The next year, FDA found and arranged importation of foreign supplies of injectable drugs used to make total parenteral nutrition after a U.S. manufacturer voluntarily shut down to resolve quality issues. In a blog posting, the agency described the resource-intensive process it went through to ensure the safety of the imported products.
There’s a big difference, however, between taking extraordinary steps to secure drugs needed to combat a public health emergency and claiming importation should be used to puncture a pricing bubble.

Azar’s politically motivated plan will undermine FDA’s well-earned reputation as a non-partisan, science-based regulator by putting it at the center of political and economic controversies it is ill-equipped to navigate.

Across multiple presidencies, the agency has consistently said it has no authority over prices. But Azar would force FDA to develop a methodology to determine which prices are egregious - inevitably leading it to steer regulatory policy on the basis of public outrage, media attention, or political expediency. 
The alternative is for HHS to tell FDA which drugs would be subject to importation. This would set a precedent at odds with FDA's mandate to operate as an independent agency.
What’s going to happen when President Trump or a future occupant of the White House sees TV programs about a lifesaving new drug with an eye-popping price in the U.S. that is available for less in Italy or Indonesia? How long will it take for the president to pick up the phone and order HHS to arrange for imports from a country with price controls? And in the heat of the moment, will either the White House or HHS stop to ensure that the supply chain is safe, to consider the disincentive to innovation caused by intemperate importation of price controls, or to consider other ways to ensure that American patients have access?
Azar and Gottlieb have described a circumscribed program in their public statements, and reiterated their opposition to large-scale importation. Nuance doesn’t get far in Washington.

No matter how targeted the program is, it will fuel the enthusiasm of activists who are demanding the broad importation practices that Gottlieb and his predecessors have condemned as infeasible and dangerous.
It already has. 
Within hours of Azar’s announcement of the importation policy, Sen. Chuck Grassley (R-Iowa) praised the action as the first step toward opening the borders to prescription drugs from Canada and other countries.
While it will be politically attractive, whacking a pharma bro or two wouldn’t fundamentally change the drug pricing environment.

Given his prior opposition to importation, it seems Azar is motivated by a desire to placate Trump by generating favorable publicity. In fact, his department has been prodding and cajoling reporters for weeks as part of an organized effort to get more favorable coverage of its drug pricing blueprint. 
Although he talks about market forces and promoting competition, Azar also has displayed an enthusiasm for intimidating individual companies and vilifying CEOs. He has amplified Trump’s tweeted threats to pharma companies and celebrated their demonstrations of contrition. 

Tweets and headlines fade quickly. In their relentless search for publicity, Azar and the Trump administration will be reaching for more quick fixes.

Healthcare's High Stakes Exam

  • 07.03.2018
  • Peter Pitts
The Trump Administration’s triad of HHS Secretary Alex Azar, FDA Commissioner Scott Gottlieb and CMS Administrator Seema Verma represents an exciting policy wonk triple play. All three are idea-driven innovators and nowhere is this more vividly on display than in the American Patients First Blueprint to lower drug prices and reduce out-of-pocket costs.

On May 14th, HHS issued a request for information (RFI) on the administration's blueprint, seeking input from stakeholders on a wide range of policy proposals. Responses are due on or before July 16, 2018. This is not an exercise.

The Blueprint is both a directional document of free-market principles and a high-stakes exam for America’s healthcare leadership. Why an exam? Precisely because in it the Administration asks a series of tough, intriguing, challenging and precise questions on a series of interesting potential pathways for reform. It’s not a final exam – but it certainly is a high stakes one for all involved.

The headline message is that incremental change isn’t enough. Dynamic, discontinuous and disruptive ideas are the order of the day. Attention American healthcare leaders: It’s time to lead, follow or get out of the way. And, as the Beltway adage reminds us, “If you’re not at the table, you’re on the menu.”

As America’s best and brightest cogitate on their RFI responses, here are some things to consider:

Drug Manufacturers: Are you ready to facilitate generic drug development by becoming part of the solution, ceasing the shenanigans that prevent quicker development programs? Straightforwardly, are you ready to come to the table to discuss the real problems with the CREATES Act – and solve them?

Pharmacy Benefit Managers: Are you ready to stop putting profits in front of patients? Will you pass along more of your double-digit discounts to patients in the forms of lower co-pays and co-insurance? Will you stop using restrictive formularies, co-pay accumulators, and prior authorization to pad your own pocket? Are you willing to accept fiduciary responsibility for your actions? If not – better get ready for Uncle Sam to take away your anti-kickback exemption.

Administrator Verma: Are you prepared to grant more states waivers for more aggressive reform pilot programs? How can you insert more market-based forces into Part B while retaining existing price transparency?  How can you help to drive more competitive benefit design options both inside and outside of government programs?

Commissioner Gottlieb: FDA’s senior leadership is saying all the right things. Legislation has given the agency broader authority to do more things in new ways. How can you convince, cajole and empower line review staff to get with the program?

Secretary Azar: You’ve accused insurers of “keeping customers in the dark.” How can you use both your authority and bully pulpit to help propel more sunlight (the best disinfectant) into this and other systemic issues that are trying to hide in the shadows of industry lobbyists? How soon can we eradicate the Gag Rule and set pharmacists free to help patients lower their out-of-pocket costs?

Congress: Unfortunately, the less you understand about the healthcare ecosystem, the more simplistic, politically popular sound bite-driven solutions seem like the order of the day. Drug importation, patent expropriation and  “single payer” for example, are bad ideas that many in both Houses (and state legislatures) support even though they have been shown, time and again to be not just non-starters but replete with dangerous unintended consequences. Rather than looking for people to blame and punish, how about looking for ways to solve the problem?

And when it comes to the 340B imbroglio, how about a more realistic definition of a "patient?"

Yes, the exam questions are difficult, time is short and the stakes are high. But with sound national leadership, a more open-kimono ecosystem and continued political pressure to develop disruptive solutions that deliver lower costs for patients while enhancing innovation, we can expect more than a passing grade. We can expect real progress.
According to an editorial in the New York Times, “For several years the F.D.A. has been lowering the standards  by which it decides whether new medications are safe and useful.” Balderdash.

Is the FDA approving drugs too fast or not fast enough? Are they demanding too much data or not enough? There isn’t any dearth of commentary supporting either proposition. There is, however, no evidence to support the sound bite that the FDA is approving “everything,” or that every product that requests an expedited pathway receives it, or that “all” those that do receive an expedited pathway designation get approved, or that every product that does reach the market via an expedited approval is in some way more dangerous than other medicines. Some particulars:

* An analysis of every product (364) requesting a Breakthrough Therapy designation (from July 2012 – June 2016) shows that CDER granted 133 (37%) of those requests, denied 182 (50%), and the sponsor withdrew their request 49 times (13%) before the agency made a decision. Hardly a regulatory carte blanche.

* In 2013, the first full year of the Breakthrough Designation, the FDA approved 3 new drugs, 14 in 2014, and 9 in 2015. Hardly an onslaught of new medicines.

* Among 22 drugs with 24 indications granted accelerated approval by the FDA in 2009-2013, efficacy was often confirmed in post-approval trials a minimum of 3 years after approval, although confirmatory trials and preapproval trials had similar design elements, including reliance on surrogate measures as outcomes.Unsafe? Not effective? “Dangerous? A new “wild west” FDA? No.

New ways of understanding and interpreting how data evolves over time, upends the traditional frame of regulatory stasis and opens up the opportunity to embrace a more 21st century approach to the regulation of healthcare technologies.
Louisiana is leading the nation in smart drug pricing transparency legislation. Last year, as in many other states, the issue was pharmaceutical manufacturer pricing. But many have learned that, by focusing on just one part of the ecosystem, partial transparency results in unhelpful opaqueness.
Bravo to the Bayou State for understanding that real pricing transparency requires real transparency by all concerned. Consider two pieces of legislation that just passed both houses of the Louisiana legislature by unanimous votes:

Senate Bill 283 calls for PBMs to make their rebate data (in aggregate form) available on a public website. Bill 283 requires that pharmacy benefit managers  “provide for internet publication of formularies; to provide for transparency reporting; to provide for certain reportable aggregate data; to provide for internet publication of the transparency report; to provide for definitions; to provide for the duties of the commissioner of insurance relative thereto; to provide for confidentiality; and to provide for related matters.”

Translation – show us the money.

The second piece of legislation, Senate Bill 282, requires PBM reporting of “Excess Consumer Cost Burden.” According the bill, this means “an amount charged to an enrollee for a covered prescription drug that is greater than the amount that an enrollee’s health insurance issuer pays, or would pay absent the enrollee cost sharing, after accounting for rebates, or where an enrollee is subject to a paid for as medical care under any hospital or medical service policy or certificate, hospital or medical service plan contract, preferred provider organization, or health insurance organization offered by a health insurance issuer.”

In other words – show us the money – and how it impacts the price patients’ pay at the pharmacy.

As more legislators recognize the value of ecosystem transparency, these two pieces of legislation are likely models of what other states will propose. This is also in keeping with Secretary Azar’s call for PBMs to pass along 30% of their rebates to Medicare and Medicaid patients in the form of lower co-pays, deductibles, and co-insurance. No one understands better than the people of Louisiana that it’s “the price at the pump” that matters most to the average Joe.

To paraphrase the Kingfish, former Louisiana Governor Huey Long, PBMs are going to get real transparency - and they aren't going to like it.
In the wake of the President’s speech on drug pricing organizations and individuals funded by the Laura and John Arnold Foundation have been campaigning to establish the Institute for Clinical and Economic Review – another Arnold funded enterprise –  as the ultimate and undisputed authority for determining the price and value of new medicines.  

An article written by Austin Frakt, a blogger, and director of  the Partnered Evidence-Based Policy Resource Center at the V.A. Boston Healthcare System tries to make just that case. 

Frakt, the latest expert put on the Arnold foundation payroll wrote that ICER is the light and salvation to the drug pricing issue: 

“It is hard to generate enough reliable cost-effectiveness information to give insurers the leverage to say “no” to unreasonably expensive drugs….

The nonprofit and privately financed Institute for Clinical and Economic Review  has proposed a way to solve that problem. Largely funded by the Laura and John Arnold Foundation, it is an independent organization that weighs the benefits of medical technologies against their prices.

For each new drug that comes to market, the organization conducts a clinical and economic analysis that’s available to the public. It then suggests to payers and manufacturers a price range that’s aligned with benefits and budgets.

There’s evidence that the exercise is helping insurers cut better deals. For example, Dupixent, the first cure for eczema, was expected to launch last year at a price of $60,000 per year of treatment. At a cost this high, many insurers would have imposed onerous cost-sharing requirements on patients before covering it.

Instead, Dupixent manufacturers Regeneron Pharmaceuticals Inc. and Sanofi sought a value-based price from ICER before setting the list price for the drug. Then, during negotiations with payers, the companies argued that the outside assessment established a fair price that warranted lower cost sharing and fewer barriers for patient access.

A similar story arose with Praluent, for high cholesterol. Regeneron and Sanofi struck a deal with the pharmacy benefits manager Express Scripts to reduce Praluent’s price to one that ICER believed aligned better with benefits. In exchange, patients will get easier access to the drug.”

Frakt ignores how ICER’s suggestions on pricing and limiting access to save money were used to deny and limit access to hepatitis C drugs, recommendations that drove cure rates down from 99 percent to 75 percent in some health plans.   It claimed that new medicines for multiple myeloma were not valuable at ANY price.  On top of all that, ICER claims that spending more than about $1 billion a year on one drug would threaten the financial stability of a health plan.  Which means that even if we had a cure for HCV or Alzheimer’s we would have to limit access once that $1 billion mark was hit. 

Frakt is either misleading or uninformed about access to Dupixent.  The Dupixent ‘deal’ was made with Express Scripts.  The claim that patients have faster access to the drug is bogus: Express Scripts requires Medicare patients to fail first on two other drugs in order to get Dupixent.  

“Patient meets both of the following criteria: a. Patient has used at least one medium-, medium-high, high-, and/or super-high-potency prescription topical corticosteroid for at least 28 consecutive days OR patient has atopic dermatitis affecting ONLY the face, eyes/eyelids, skin folds, and/or genitalia and has tried tacrolimus ointment for at least 28 consecutive days AND b. Inadequate efficacy was demonstrated with these previously tried topical prescription therapies, according to the prescribing physician. “

He also claims that ICER research would make more medicines widely available because health plans don’t do any cost-effectiveness analysis of their own to make such patient-focused decisions. Yet as search of Dupixent on Formulary Lookup reveals that only 5 percent of commercial health plans given the drug preferred access.  None allow immediate access.  Instead, patients have to fail first on 2-3 other drugs.  Nearly 70 percent of Medicare Part D PBMs don't even cover the drug. 

Frakt also fall flat in describing the health bounty flowing from ICER’s evaluation of new anti-cholesterol medicines called PCSK9s (one called Repatha, made by Amgen and another called Praluent, made by Regeneron) that are much more effective than statins alone in reducing cholesterol levels and the heart disease caused by the condition.

The list price for the drugs was – is - $14000.  ICER said it was only worth about $5000 and that to make it available to every patient who could benefit, the price should be $2000.  

These recommendations were used by PBMs for force deeper rebates in exchange for excluding competitor drugs from their formulary as well as reduce the PBM and health plan spending on new drugs. In the case of Repatha and Praluent, such practices have cut the market for Repatha and Praluent by two thirds.   

As Frakt noted, Express Scripts recently cut a deal with Regeneron to eliminate step therapy and prior authorization for  Praluent in exchange for more rebates.  ICER produced a new assessment that Express Scripts claimed led to this deal.  In fact, ICER essentially restated the findings in its first report: that a small subgroup of patients should get the drug if drug companies cut the price to about $5000.  

This value-based pricing process increased rebates and led to a lower net price. But it did NOT result in eliminating cost sharing.  Patients – the handful that will get the drug – will still pay $100 a month for the drug.  Second, Express Scripts is limiting access to its infusion centers, meaning more profit.  Third, as part of the deal, Express Scripts no longer covers Repatha, Amgen’s PCSK9.  Patients will have to pay full price or reapply to get Repatha. 

The fact is, net prices alone will not guarantee affordable access.  PBMs will still use step therapy, prior authorization, and cost sharing to maximize rebates and keep drug costs using ICER prices as a bargaining chip.

The president has made it clear that drug companies will have to find another way to get new and expensive medicines to patients.   But those prices must be based, not on the secret and ideologically driven deliberations of a group like ICER or the kind of backroom deals that lead to the Repatha ripoff.  

The job of deciding the value of any medicine will have to be democratized.  If drug and device companies don’t take the money they now spend on rebates, patient assistance programs, and copay cards and invest in demonstrating the differential value of their products to doctors, health plans and most importantly, patients, groups like ICER will gain more control over access.   Which means, contrary to Frakt’s flakking for ICER, most patients will have less access to new medicines and pay more for them.  

It's the healthcare ecosystem, stupid

  • 05.15.2018
  • Peter Pitts
Per Paul Krugman's op-ed, Just Saying Yes to Drug Companies -- anyone who was paying attention to President Trump's press conference or has read the White House Blueprint should understand that drug pricing is an ecosystem that includes manufacturers and multiple intermediaries. Games are being played and patients are (generally) the losers.

Why not a single word from Dr. Krugman about the very questionable practices of, for example, Prescription Benefit Managers? PBMs receive large rebates (aka, "kick-backs") and, rather than passing along the savings to patients, they pocket hundreds of millions of dollars. President Trump and HHS Secretary Alex Azar made it very clear they will demand that these rebates be used to "lower the price at the pump" -- lower co-pays for patients when they get their drugs at the pharmacy.

When people say, "My drugs are too expensive," what they mean is "My co-pay" or "My deductible" is too expensive. Shame on Dr. Krugman for perpetuating the myth that drug prices are a one-dimensional issue. And shame on him for ignoring the many solid recommendations made by the President and his healthcare team. As the Yiddish proverb goes, "A half truth is a whole lie." It's the ecosystem, stupid.

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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