Making Medicines Affordable A National Imperative (2018) / Chapter Skim
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3 Factors Influencing Affordability
3 Factors Influencing Affordability
Pages 73-124
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From page 73... ...
• Insurance benefit designs with significant patient cost-sharing provisions. • Inadequate performance of patient assistance programs and other public programs intended to make medicines more affordable for patients.
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From page 74... ...
cost sharing for insured patients is sometimes defined as a fraction of list price. The effects of high list prices are discussed in the following sections, with branded, generic, and other drug products covered separately.
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. Spending for all retail prescription drugs accelerated significantly in 2014 and 2015, before slowing in 2016 (QuintilesIMS, 2017a)
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From page 76... ...
Whether existing or new drug therapies are actually effective in patients is another issue that must be considered.1 Generic Drugs Once branded medications lose their patent exclusivity, generic versions can enter the market with approval from the U.S. Food and Drug Administration (FDA)
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. Multiple producers of generic drugs also help prevent shortages should one firm ceases production.
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. However, questions have arisen about the high list prices of the drugs (Brennan and Shrank, 2014)
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A waiver from the Centers for Medicare & Medicaid Services would also be required to pursue this option because current Medicaid rebate statute requires formulary coverage for all products made by manufacturers that enter into a federal rebate agreement (see later section on federal discount programs)
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Taken together, these findings suggest that the conventional wisdom involving generic drugs in the United States -- that competition among generic manufacturers, facilitated by buying power consolidation among insurers and other purchasers, results in increasing access to safe and effective treatments for chronic disease, offsetting at least to some extent the higher prices of newly launched and existing branded drugs (Aitken et al., 2016; Duggan et al., 2008) -- may be less true now than previous studies suggested.
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From page 81... ...
. The light blue line represents the composite trend of generic drugs ("established basket")
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From page 82... ...
The United States, however, differs from most other nations with respect to the ability of the government to limit the prices of prescription drugs charged by manufacturers. While most other developed nations have governmental mechanisms for negotiating or controlling prescription drug prices, either directly or de facto (WHO, 2015)
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TABLE 3-1 Approaches to Drug Pricing in Other Countries Australia Canada Germany India United Kingdom Federal Joint Canadian Committee or National Pharmaceutical Patented Agency for the Institute National Institute Benefits Medicine Drugs and for Quality and Pharmaceutical for Health National Advisory Prices Review Technologies Efficiency in Pricing and Clinical Organization Committee Board in Health Health Care Authority Excellence Applicability Public payers All payers Public payers All insurers All payers National Health except in Service Quebec (non cancer drugs) Review Comparative Therapeutic Comparative Comparative National List Clinical Criteria effectiveness, innovation; effectiveness, benefit of Essential effectiveness safety, comparative safety, Medicines and cost and cost- pricing with and cost- prepared on the effectiveness effectiveness; respect effectiveness; basis of efficacy, projected to France, patient safety, cost usage and Germany, experiences effectiveness, overall costs to Italy, Sweden, and common the health care the United diseases system Kingdom, and the United States Decision Coverage (yes, Price Coverage Price setting Formulary Coverage no, limited)
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From page 84... ...
Supporters of essential medicines lists argue that they help establish stan dards, common aims, and a baseline for health care delivery. Critics argue that centralized lists limit health care delivery, constrain professional autonomy, in terfere with pharmaceutical markets, and reduce health benefits for patients (Reidenberg and Walley, 2004)
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From page 85... ...
established a mandatory benefit assessment of prescription drugs distributed in that country. The subsequent price negotiation process for new medicines is required to be completed within 1 year of product launch (Ruof et al., 2014)
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Based on these ratings, the company then enters negotiations with the National Association of Statutory Health Insurance Funds to set the reimbursement price. One year after market launch, this reimbursement price replaces the initial list price of the drug.
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. Revenues from the sales of prescription drugs must eventually pay for most of the costs of research and development, among other expenses, and a rise in research and development expenses will generally contribute to rising drug prices.
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On occasion the total cost of drug development has been estimated using aggregate data on annual research and development costs reported by biopharmaceutical companies compared with the annual number of drugs approved by the FDA. Several challenges arise when using these highly aggregated data.
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In summary, the costs of research and development for biopharmaceutical development appear to have steadily increased in real terms over time, although it is difficult to know by exactly how much because estimates vary widely according to the analytical approach and the data sources used in making them. In a market-oriented economy, these increases in research and development costs would, over time, be expected to contribute to rising prescription drug prices.
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It is noteworthy that among developed nations, the mar keting of prescription drugs through direct-to-consumer advertising is legal only in the United States and New Zealand (Mackey and Liang, 2013)
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B2B, Radio, 6.0 Outdoor, Cinema $5.2 5.0 $4.3 $3.8 4.0 $3.6 $3.2 3.0 2.0 1.0 0.0 2011 2012 2013 2014 2015 FIGURE 3-4 Spending on direct-to-consumer advertising of prescription drugs, in billions of dollars, by source. NOTE: Digital outlets not included.
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From page 92... ...
examined the potential effects of a moratorium on direct-toconsumer advertising of new prescription drugs and concluded that: • Drug manufacturers would probably expand their marketing to clinicians to substitute for at least some of the banned advertising to consumers. • The number of prescriptions filled would probably decrease for some drugs, but for other drugs the number of prescriptions might be little changed, owing both to the likely substitution of other types of promotions and to other factors that influence a drug's reach in the prescription drug market.
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From page 93... ...
Without the ban, market entrants might have attracted consumers away from the incumbent firms using television and radio advertising. The financial advantage to incumbent firms may explain why the tobacco industry did not challenge the advertising bans (Eckard, 1991)
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From page 94... ...
copayments set by PBMs and health insurance plans, thereby increasing annual insurance premiums for all enrollees in prescription drug plans but reducing the drug cost to the individuals receiving the rebate. A comparison of Figures 2-5 BOX 3-3 Other Forms of Financial Influence in the Biopharmaceutical Sector Patient advocacy organizations have longed played an influential role in shap ing health policy in the United States (Rothman et al., 2011)
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. Analyses have also concluded that copay coupons increase costs for all enrollees in prescription drug insur ance plans (Dafny et al., 2016a; Ross and Kesselheim, 2013)
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The Food, Drug, and Cosmetics Act (FDCA) prohibits the importation of prescription drugs made in the United States by anyone other than the manufacturer -- with the exception of drugs approved by the secretary of the U.S.
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the strategic responses of U.S. drug manufacturers.
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DRUG SHORTAGES In recent years there have been numerous high-profile reports of inadequate supplies of generic drugs that have served as the standard of care for some diseases. For example, shortages have been reported for two critical cancer drugs, Doxil and Methotrexate, a medication used as backbone therapy to treat pediatric cancer (Harris, 2012)
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From page 99... ...
More recently, under the Safety and Innovation Act of 2012, the FDA required drug manufacturers to provide early notification of any manufacturing interruptions or production changes that could lead to a supply disruption or the discontinuation of a product. Subsequently, the FDA improved its efforts to prevent shortages by expediting application reviews and inspections, exercising enforcement discretion in relevant cases, and helping manufacturers respond to quality control issues in drug manufacturing (Chen et al., 2016; GAO, 2016a)
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. Since 1979 the FDA has required drug manufacturers to provide evidence of product stability, by subjecting drugs to various environmental variables such as temperature, humidity, and light, but there are no requirements for long-term testing.
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. As of 2017, 99 percent of covered Benefit Phase: Enrollee Catastrophic Pays 5% Catastrophic Coverage Coverage Plan Pays 15%; Medicare Pays 80% $8,000 Threshold = Brand-Name Drugs $8,071 in $7,000 Enrollee Pays 40% Estimated Total Drug Costs1 Total Drug Spending Plan Pays 10% Coverage $6,000 50% Manufacturer Discount ($4,950 in TrueGap Out-of-Pocket Generic Drugs Spending)
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From page 102... ...
The escalating list prices of many branded drugs, especially specialty drugs and those that lack a competitor, have been a particular challenge in recent years. As a result, even among those with insurance benefits, the out-of-pocket costs for premiums, deductibles, and copays can be substantial, and the design of the coverage and cost sharing can significantly affect the financial burden arising from prescription drug spending.
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. Plan tiers often include preferred, non-preferred, and generic drugs, and each tier of drugs can represent a different level of cost sharing or class of drugs, such as specialty drugs (KFF and Health Research & Educational Trust, 2017)
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In addition to copayments and coinsurance, health plans can apply an additional deductible to drugs that is separate from the general annual deductible. In 2017, 15 percent of workers with prescription drug coverage had to meet a prescription drug–only deductible (KFF and Health Research & Educational Trust, 2017)
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From page 105... ...
.) One way to strengthen financial protections for Medicare beneficiaries with very high drug costs would be to eliminate enrollees' cost sharing above the catastrophic coverage threshold, thereby making the current catastrophic coverage threshold an absolute limit on out-of-pocket spending under Part D
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The application process can be onerous for patients and clinicians, with a high probability of rejection, commonly based on patient income level and insurance coverage. There is little information available to evaluate the impact of patient assistance programs so few studies have examined the proportion of patients served, the extent of aid provided, the criteria for qualifying for aid, and the estimated financial cost to society (Felder et al., 2011)
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Congress created the Medicaid Drug Rebate Program (MDRP) , which went into effect in 1991, resulting from the Omnibus Budget Reconciliation Act of 1990 in an attempt to address the rising cost of prescription drugs in the Medicaid program.
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In large part due to the market entry of very expensive hepatitis C drugs, Medicaid expended $57 billion on prescription drugs in 2015, compared to $42 billion in the previous year (Health Affairs, 2017a)
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Drugs included in the 340B program generally consist of outpatient prescription drugs and drugs administered by clinicians in an outpatient setting, excluding vaccines. HRSA administers the 340B program and is responsible for the oversight of various stakeholders, including covered entities and pharmaceutical companies.
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Patient deductibles and coinsurance payments associated with prescription drugs reflect the reimbursement set by the insurer to the pharmacy or the clinic; these are unaffected by 340B discounts. Debate about the program has intensified recently, due in part to the large number and the significant diversity of providers receiving the discounts and their safety net roles (GAO, 2011; OIG, 2011; von Oehsen et al., 2012)
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. The report noted that covered entities using contract pharmacies do not always offer the discounted 340B price Medicare inpatient days attributable to patients eligible for both Medicare Part A and the Supplemental Security Income plus the percentage of total inpatient days attributable to patients eligible for Medicaid but not Medicare Part A
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From page 112... ...
Under current statute, eligible patients are defined as those who receive regular medical care at covered entities or who participate in an AIDS drug-purchasing assistance program and who are not insured by Medicaid, although there are some exceptions. Duplicate discounts occur when a covered entity receives the 340B discount and the state receives a Medicaid drug rebate, also from the drug's manufacturer, on the same unit. While manufacturers can audit covered entities for suspected unauthorized use of 340B drugs, covered entities do not have any audit authority and they must petition HRSA to investigate manufacturers or turn to the judicial system when purported violations in 340B pricing occur; therefore, another focus of these efforts has been to strengthen oversight of possible manufacturer overcharges.
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From page 113... ...
, which are intended to increase access of affected patients to the medications, and these firms may also receive modest FDA grant support to investigate treatments for rare diseases. The regulatory review process for orphan drugs is expedited, and clinical trials can enroll smaller numbers of patients than would otherwise be acceptable in registration trials.
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. These factors tend to substantially reduce the development costs for orphan drugs compared with what traditional drugs cost to develop (HHS, 2016)
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. The investigators found that another 80 drugs had received multiple orphan designations and that, overall, approximately one-third of all orphan drug approvals either had been for repurposed drugs already marketed or had received multiple orphan drug designations (and hence multiple program benefits)
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. But the challenge is not a simple one: developing an awareness of prices is complicated by the existence of multiple formularies, differences in list prices, and differences in individual patients' insurance plans.
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If the provider must check a box in order to designate "generic substitution is permitted," more prescriptions are filled with branded medications. Conversely, if the prescriber must check a box saying "dispense as written," then more prescriptions are filled with generic drugs (Helmons et al., 2014)
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. The report recommended that clinicians not accept industry payments, and that industry (including pharmaceutical companies)
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From page 119... ...
. While legal concerns have been raised about the commercial speech rights of drug manufacturers to promote their products, a key legal issue is whether laws that restrict some corporate speech act to advance the public's interest (Kesselheim and Avorn, 2008)
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. Thus, under buy and bill, medical providers face incentives to use expensive prescription drugs, often in combination, whenever indicated (Howard et al., 2015)
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From page 121... ...
, manufacturers know that expensive new cancer drugs will not be denied coverage by payers on the basis of cost, so they have no incentive to set prices to meet any costeffectiveness standard. CMS posts a new average sales price every quarter based on information submitted by drug manufacturers 6 months earlier.
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From page 122... ...
Finding 3-4: When branded drugs go off patent and a generic sup plier enters the market, prices for those medications usually decline; with two or more generic suppliers, the market prices generally decline significantly. Finding 3-5: Mergers between companies that produce both branded and generic drugs treating the same condition can, in absence of other competition, have anti-competitive effects that often result in undesir able price increases.
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From page 123... ...
Finding 3-13: Direct-to-consumer advertising of prescription drugs has increased substantially over time and can adversely influence consumer choices. Finding 3-14: While copay coupons provided by pharmaceutical com panies can expand patient access to high-cost medications, they also increase the percentage of prescriptions that are filled with branded drugs, increase overall drug spending, and drive up individuals' insur ance premiums.
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From page 124... ...
Finding 3-18: In order for both consumers and clinicians to make well-informed decisions regarding prescription drug therapies, reli able and objective information is needed -- including information on potential clinical outcomes, the comparable effectiveness of alternative treatments, and out-of-pocket and overall costs to the patients. Some but not all of this information is available today; particularly lacking is information regarding costs.
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