CMS Abandonment of Outcomes-Based Payment Deal with Novartis is a Missed Opportunity

Earlier this week, Politico broke the news that the Centers for Medicare and Medicaid Services (CMS) had withdrawn its outcomes-based payment deal for Novartis’ CAR-T therapy, Kymriah, without public acknowledgement.

The Food and Drug Administration’s approval of Kymriah in August of last year was accompanied by the announcement of a novel outcomes-based agreement with CMS, in which CMS would pay for Kymriah only if patients had responded to it by the end of the first month. Now, CMS has quietly backed away from that agreement. What does the deal – and its subsequent abandonment – tell us about CMS’ involvement in outcomes-based contracts going forward?

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How to “Lower Drug Prices” Without Lowering Drug Prices

Yesterday, Alex Azar was sworn in as the Secretary for the Department of Health and Human Services. A key question is whether Azar will take action against high drug prices, and if so, what he will do. At his confirmation hearing, Azar stated clearly that “drug prices are too high.” And during Azar’s swearing-in ceremony, the President stated that Azar was “going to get those prescription drug prices way down.” But I’m skeptical that Secretary Azar will do much to address the problem in the near term.

To be clear, I’m skeptical for a host of reasons, none of which are necessarily reflective of Secretary Azar. Much like health care, drug pricing is complicated. HHS should (and will) worry about potential unintended consequences of drug pricing proposals, proceeding cautiously and taking concerns seriously. HHS’ ability to act may be limited without Congressional involvement, and Congress has thus far been unable to act on this issue. Other proposals may take years to develop or implement, leaving patients without relief in the interim.

As a former President of Eli Lilly, Secretary Azar understands the drug pricing system deeply. He’s absolutely right that “there’s not one action that all of a sudden fixes this.” But if Azar is under pressure to deliver drug pricing changes in the short term, I’d expect to see focus in three main areas. Here’s the problem, though: at least two of these would not necessarily lower drug prices individually or drug spending overall. They might well increase overall spending. Importantly, that may not be a bad thing (as I’ll explain). But they won’t hurt the bottom line of the drug companies the President believes are “getting away with murder,” and they may well bolster it. The third area may lower prices – but it wouldn’t be Azar’s accomplishment.

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Be Very, Very Concerned About What Allergan Just Did

Yesterday, it was announced that Allergan had transferred the ownership of the patents on its billion-dollar drug Restasis, used for the treatment of chronic dry eye, to the Saint Regis Mohawk Tribe. The Tribe then exclusively licensed the drug back to Allergan, in exchange for tens of millions of dollars in both licensing and royalty fees. Although it may not sound like it, this transfer is potentially huge news in the drug pricing world. It is also extremely complex, and its full implications have yet to be determined.

Enormous caveat before we begin: I am by no means an expert on tribal sovereign immunity. I may well be wrong here. (In fact, I would very much like to be wrong here.) There is little (any?) case law on sovereign immunity’s impact in the Hatch-Waxman area, and much of what follows is extrapolated from case law on tribal sovereign immunity both in IP and in other contexts, state sovereign immunity in the IP area, and discussions with other law professors. Please let me know if this is your area of expertise and you believe I’ve gotten the analysis wrong!

In short, if repeated and taken to its logical conclusion, this transfer has the potential to prevent most invalidity challenges to drug patents. Would-be generic competitors could not seek to initiate inter partes review (IPR) actions before the Patent and Trademark Office (PTO). They could not bring declaratory judgment actions in federal court. And – both most importantly and most unclear – they could not bring Paragraph IV invalidity counterclaims under Hatch-Waxman, preventing generic companies from independently challenging patents’ invalidity and potentially requiring us all to wait until the very end of patent expiration to experience generic competition.

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It’s Time To Take Responsibility, Senators

Crossposted from the Take Care blog

By Rachel E. Sachs

Yesterday, the Senate took a key procedural vote in service of the Republicans’ never-ending quest to repeal (or at least partially repeal) the ACA. Fifty Republican senators and Vice President Mike Pence voted to proceed to debate on repeal – without knowing the final product they will vote on. As I and others have written before, this is a recipe for disaster when it comes to an area of policy as complex as health care. But I want to write here to emphasize a different aspect of the procedure: the elusive conference committee.

Specifically, a lot of the rhetoric coming from Senate Majority Leader Mitch McConnell and other top Republicans in the days before the vote went something like this: the goal is just to find something that 50 Republican Senators can agree on for now, and after that there will be a conference committee with the House of Representatives to settle on a final bill (examples hereherehere, and here). This tactic should remind health care followers of the rhetoric coming out of the House after they approved their own bill in May – at least some electorally vulnerable Representatives noted that they didn’t actually vote to pass their disastrous bill, they just voted to send it to the Senate, which would then clean it up.

There’s just one problem: the Senate doesn’t have the ability to control whether they go to a conference with the House. If the Senate successfully passes something – whether that be skinny repeal or some other mystery bill still to be determined – the House can simply pass that text into law without making changes.

Let’s go to my new favorite source, which is Riddick’s Senate Procedures, named after Senate Parliamentarian Emeritus Floyd M. Riddick. (NB: If you think I should have titled this blog post “The Chronicles of Riddick-ulous,” please drop me an email.) Riddick’s, last revised in 1992 is an encyclopedic treatise containing all Senate Procedures, and it has some thoughts about conference committees. And, because it is now 2017, there are also two terrific CRS reports from 2015 (here and here) detailing conference committee procedures.

So what do Riddick’s/the CRS reports provide for, here? In short, it’s not up to the Senate whether they go to conference with the House. It’s up to the House. The House could just pass the bill passed by the Senate, as is. Or it could agree to go to a conference with the Senate, further delaying the repeal process and requiring an additional vote in each chamber.

Don’t believe the spin from Senators who tell you that theirs is just a vote to go to conference. They don’t control that. This may be their final vote – they should act like it, and own the consequences.

This post originally appeared on the Take Care blog on July 26, 2017.  

How to Destabilize Insurance Markets Without Really Trying

Cross-posted from the Take Care blog

On Thursday, Senate Majority Leader Mitch McConnell released the latest draft of his effort to repeal the Affordable Care Act (ACA). As of last night, it appears that this version of the bill is dead, with four Senators declaring that they won’t vote to move it forward. But provisions of this bill are worth talking about, both for what they reveal about health insurance and for what they reveal about the process by which the Senate is considering ACA repeal.  The latest draft contains a number of new provisions, but two caught my eye: (1) Senator Ted Cruz’s attempt to bifurcate the individual insurance market and (2) a clause about membership in a health care sharing ministry as satisfying the requirement of “continuous creditable coverage.”

The Cruz amendment has received a large amount of coverage both in the popular press and by more specialized policy outlets. But there has been little attention to the clause about health care sharing ministries. Fortunately, I wrote a 5,000 word book chapter on the ministries as part of an academic conference in 2015 (here I am presenting on the topic, if you’re really interested). Read More

New Drug Pricing Bill from Democrats Balances Innovation, Access

By Rachel Sachs

Yesterday, a group of 20 Democrats in both the House and Senate introduced the Improving Access to Affordable Prescription Drugs Act, a 129-page bill designed to lower drug costs while increasing innovation and promoting transparency.  The bill aims to accomplish a number of different goals, and in this post I’ll go through the different functions it serves and consider some notable provisions.  For those who are interested, here’s a provision-by-provision summary.  This is going to be a very long post, so I apologize in advance.

On the whole, I think there’s a lot to like in this bill, particularly in its promotion of innovation and in the way in which it seeks to curtail bad actors within the industry.  However, I don’t agree with all of its provisions (as you’ll see) and I view some of its proposals as kludge-y solutions to kludge-y problems our complex system has created.  I’m not yet sure whether I see that as a bad thing, to be clear – it works to create meaningful change within a system that was cobbled together over decades, mostly accidentally.  But it isn’t the platonic ideal of a value-based pricing system, or anything similar.

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PhRMA, Marathon Is Why You Can’t Have Nice Things

By Rachel Sachs

Yesterday, the FDA approved a steroid, deflazacort, for the treatment of Duchenne Muscular Dystrophy (DMD).  DMD is a rare, heartbreaking, and ultimately fatal genetic disease with few if any real treatments, and the steroid may be helpful to patients.  Deflazacort’s sponsor, Marathon, has offered the drug at a list price of $89,000 per year.  High, but actually much lower than the typical prices charged for new orphan drugs, which can easily run to $300,000 or more per year.

Here’s the big problem: deflazacort isn’t really a new drug.  As the Wall Street Journal and Endpoints have pointed out, the drug is approved in many other countries, and its list price is about $1,000-$1,600 in Canada and the UK.  Patients have been importing the drug and accessing it since the 1990s.  Now, patients will pay many times those prices for the same product they had already been purchasing.

But the drug had not previously been approved in the United States, and surely Marathon conducted new clinical trials to demonstrate the drug’s benefit?  Not clearly.  Marathon mostly relied on clinical trial data from the 1990s that had not been fully analyzed.  In return, Marathon gets 1) a seven-year market exclusivity period for the drug (as required by the Orphan Drug Act) and 2) a valuable priority review voucher (as required by law for rare pediatric diseases).

This is not acceptable.  Full stop.  It is the worst sort of gaming that other companies have engaged in over the years.  And at a time when the drug industry is under fire for its high prices, PhRMA cannot afford to have its members (of which Marathon is one) acting this way.  If PhRMA and patient groups funded by pharmaceutical companies are serious about drug pricing, here are three things they should do/encourage right now:

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The 21st Century Cures Act: One of Many Reasons Why Today’s Executive Order Is Misguided

By Rachel Sachs

Today, President Trump signed an executive order (EO) whose purpose is ostensibly to reduce the regulatory burden imposed by the government on many different types of industries.  The EO envisions achieving this goal through an incredibly sophisticated strategy: “for every one new regulation issued, at least two prior regulations be identified for elimination.”  Not how burdensome any particular regulation is, or how old it is, or how broad it is – just how many regulations there are.

The next question, of course, is what the EO means by “regulation.”  It clearly includes traditional APA notice-and-comment rulemaking (the EO specifically calls out situations when an agency “publicly proposes for notice and comment” a regulation).  More generally, the EO does provide a definition: “For purposes of this order the term “regulation” or “rule” means an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or to describe the procedure or practice requirements of an agency.”

This sounds to me as if it includes guidance documents, which are used extensively by many agencies to set and implement policy. To be sure, it is not always clear what counts as a guidance document, and it is not always clear whether agencies are attempting to use guidance to circumvent the notice-and-comment rulemaking process.  But by many common definitions of guidance documents (including those put forth in executive orders by the Bush Administration, for instance), the term “regulation” as defined in this EO would seem to include guidance documents.  As with other EOs issued in the past week, this one could have benefited from more clarity, but I think the better reading of the EO is that it does cover guidance.

There are many reasons why this strategy in general is a bad one, but I’ll focus on just one: the need to develop policy as a result of particular statutes.  Take the 21st Century Cures Act.  Whatever your view of its merits, it passed with overwhelming bipartisan support in the last weeks of President Obama’s administration.  It also imposes enormous new obligations on HHS and the FDA to make all kinds of policy judgments going forward.  It rarely requires the creation of a traditional notice-and-comment rulemaking (see sections 4002 and 4003 for examples), but often speaks in terms of “establish[ing] a program” or “establish[ing] a draft framework,” much of which could be done through guidance.

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Let’s All Worry About The Effects of Patent Injunctions Against Drug Manufacturers

By Rachel Sachs

Yesterday, a federal district judge made an important ruling in the ongoing patent dispute between Amgen’s cholesterol-lowering drug Repatha and Sanofi and Regeneron’s drug, Praluent.  Early in 2016, Amgen’s patents covering the products had been found both valid and infringed, and now Judge Sue Robinson has granted Amgen’s request for an injunction against Sanofi and Regeneron, blocking the two companies from selling Praluent.  (The injunction takes effect in 30 days, giving the companies time to appeal.)

This is very strange.  Let’s be clear: Judge Robinson looked at a situation involving two competing, chemically distinct (though similar) drugs for the same condition and opted to kick one of them off the market, putting Amgen in a monopoly position and taking some number of patients off of the drug they’ve been taking.  As far as Pharma Policy Twitter (h/t Forbes’ always-excellent Matthew Herper) can tell, an injunction of this type happens about once a decade – in 2008 with Amgen and Hoffman-LaRoche regarding an EPO product, and in 1996 with Novo Nordisk and Genentech over hGH products.  (Please send along other examples, if you have them!)

A number of commentators have already weighed in on Judge Robinson’s order, with Professor Jake Sherkow providing a particularly thoughtful tweetstorm on the subject. I largely agree with Professor Sherkow’s analysis, but I want to emphasize two aspects of the case that have not yet received sufficient attention: the first is the decision to ask for the injunction, and the second is the practical effect the injunction will have on patients, on the market, and on the gathering of information about PCSK9 products going forward.

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What is the Right Number of Unsafe, Ineffective Drugs for the FDA to Approve?

By Rachel Sachs

Later today, the Senate will begin voting on the 21st Century Cures Act, which passed the House overwhelmingly last week. I’ve blogged repeatedly about the Act (most recently here), and many academics and commentators are rightfully worried about the Act’s efforts to lower FDA approval standards in different ways. I write here to put some of these concerns more plainly (and more bluntly), by asking a simple question: what is the right number of unsafe or ineffective drugs for the FDA to approve? I would like to hear the Act’s supporters answer this question. Below, I offer some thoughts of my own on how we should think about and evaluate this question.

More generally, when we think about FDA approval of new pharmaceuticals, we have to consider how the FDA should balance Type I and Type II errors. You may think the FDA ought to focus on minimizing the number of unsafe or ineffective drugs that it approves (minimizing Type I errors). After all, we don’t want the FDA putting its stamp of approval on drugs that harm patients or that don’t work. Over time, this would lead to an erosion of public trust in the FDA as a tool for consumer protection. More generally, this is the entire reason we’ve given the FDA its powers to begin with. Scandals involving unsafe or ineffective drugs prompted Congress to give the FDA more, greater powers over the years, in large part to prevent such products coming to market in the first instance.

Instead, you may think that the FDA should focus on minimizing the number of safe, effective drugs it fails to approve (minimizing Type II errors). In other words, it is worse for the FDA to deny patients access to a drug that is safe and effective than it is for the FDA to approve a drug that later turns out to be unsafe or ineffective. On this view, the FDA should still perform some screening against drugs with significant safety signals or against drugs with no plausible mechanism of action, and perhaps should require post-market surveillance studies, but the FDA ought to be enabling sick patients to access drugs more quickly. This view of the FDA’s role places greater responsibility on insurers, physicians, and patients to gather, process, and act on information about a drug’s safety and efficacy.

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