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Your Weekly Reminder That FDA Approval and Insurance Coverage Are Often Linked

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By Rachel Sachs

In recent days, it seems like the din of voices arguing that the FDA should approve pharmaceuticals more speedily and on less evidence has grown louder.  It is a central theme of the 21st Century Cures Act, which the House may vote on today and which I seemingly will never finish blogging about (most recent post here, with links to previous ones).  It is the premise that underlies other legislation recently introduced into Congress.  And it was the topic of a Wall Street Journal opinion piece just last week.  In the view of these critics, sure, the FDA has some role to play in ensuring safety and some basic level of effectiveness.  But the current standard for demonstrating effectiveness is, in their view, much too strict.  Instead, we ought to approve drugs more quickly and allow insurance companies and physicians to decide which products have enough supporting evidence to merit reimbursement.

Here’s the problem: that is not the way we’ve set up the system.  FDA approval is often linked to insurance coverage.  Medicaid must cover essentially all FDA-approved drugs, and Medicare similarly has limited ability to decline to cover FDA-approved drugs.  Even private insurers are generally required to cover at least some prescription drugs, although in some cases this may be on a more limited basis.  Take Exondys, a drug that recently won accelerated approval from the FDA for the treatment of a small number of patients with Duchenne Muscular Dystrophy (I’ve blogged about Exondys here).  Because Exondys was approved based on a surrogate endpoint and not actual evidence of clinical improvement (Exondys’ label actually says that “[a] clinical benefit of Exondys 51 has not been established”), it would seem to be a poster child for these arguments about the FDA.  Allow insurers to cover it or not as they choose, since we don’t yet know if it works.  Yet many insurers are legally required to pay the $300,000 a year on average the company is charging for the drug.

I’ll put it another way.  If we lower the FDA’s approval standards and do nothing to coverage requirements, we will all almost certainly end up paying more money for drugs that don’t work.  The pronoun “we” here is important: because an enormous amount of these expenditures will come through Medicare and Medicaid, which are funded by all of us as taxpayers, it costs all of us financially when ineffective or unsafe drugs are approved by the FDA.  Many people who argue for a decrease in FDA standards also believe that we spend too much through Medicare and Medicaid, yet they don’t seem to put these two pieces of the argument together.

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The Newest 21st Century Cures Draft Moderates, But Doesn’t Eliminate, Controversy

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By Rachel Sachs

Earlier this evening, the House of Representatives released the most recent draft of the 21st Century Cures Act. This is the fifth time I’ve blogged about the Act (prior posts here, here, here, and here), which has ballooned from a 200-page discussion draft in April 2015 to a 996-page draft version today. (The House has a 44-page summary here for those with more limited time.) To be fair, the Act now contains a whole set of provisions around mental health, substance abuse, and child and family services which were not originally part of the Act. The 21st Century Cures Act is the biggest Christmas tree bill I’ve ever had occasion to read.

There will be an enormous amount of commentary on different parts of the bill, so here are some quick thoughts on the new draft, focusing not only on the provisions which are likely to attract the most attention, but also on a few quieter provisions that are nonetheless worthy of scrutiny.

Some controversial provisions have been eliminated entirely or softened greatly. One of the most controversial provisions in the last draft of the bill would’ve “farm[ed] out the certification of safety of modified devices to third parties, circumventing the FDA altogether.” That provision seems to be absent from the new draft. The last draft, in creating a program for breakthrough review of medical devices, controversially called for the use of “shorter or smaller clinical trials” for those devices. The new draft asks the Secretary only to ensure that the design of such clinical trials is “as efficient and flexible as practicable, when scientifically appropriate” (section 3051).

Other controversial provisions remain, sometimes under new names. One of the most troubling provisions in the previous draft of the bill would’ve created a program for the use of “clinical experience” evidence in drug approvals. Rather than relying on the gold standard of randomized clinical trials, this provision “would[‘ve] require the Secretary to establish a draft framework for implementing” such evidence. The new draft keeps this provision but changes the term “clinical experience” to “real world evidence” (section 3022). To be sure, this provision gives enormous discretion to the Secretary to limit (and maybe even reject) the use of such evidence. But in light of recent high-profile clinical trial failures, most notably just two days ago, we ought to be concerned about claims that the FDA is too slow and imposes too stringent requirements on drug approvals.

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Drug prices: Where do we go after the Election?

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By Rachel Sachs, Washington University in St Louis
[Originally published on The Conversation]

Martin Shkreli. Valeant Pharmaceuticals. Mylan. These names have become big news, but just a year ago, most Americans devoted little time and attention to the question of pharmaceutical pricing. Now, a Kaiser Health Tracking Poll released Oct. 27 suggests many people care more about the increasing prices of drugs than they do about any other aspect of health care reform.

Nearly three in four, or 74 percent of respondents, said that making sure that high-cost drugs for chronic conditions are affordable for patients should be a top priority for the next president and Congress. And 63 percent similarly said that government action to lower prescription drug prices should be a top priority.

This poll comes on the heels of highly publicized scandals involving individuals and companies who hike the prices of products like the EpiPen, a life-saving anaphylaxis treatment whose price roughly quintupled in five years, to more than US$600, or Daraprim, a drug used to treat parasitic infections whose price increased by 5,000 percent overnight. Read More

Sarepta: Where Do We Go From Here?

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By Rachel Sachs

This morning, the FDA finally reached a decision in the closely watched case of Sarepta Therapeutics and its drug for the treatment of Duchenne Muscular Dystrophy (DMD).  The FDA granted accelerated approval to Sarepta’s drug, Exondys, on the condition that Sarepta complete a new trial demonstrating the drug’s clinical effectiveness.  As regular FDA observers already know, Exondys’ path to approval has been highly contentious.  The key clinical trial used to support approval contained just twelve patients and no placebo, and the FDA Advisory Committee voted against both full approval of the drug and accelerated approval.  The FDA’s 126-page Summary Review, released today with their approval letter, reveals the intense disagreements within the agency over Exondys’ approval.  FDA staff scientists charged with reviewing the drug recommended against approval but were overruled by Dr. Janet Woodcock, Director of the Center for Drug Evaluation and Research.  FDA Commissioner Califf deferred to her decision.

Sarepta presented the FDA with a series of bad options.  DMD is a rare, heartbreaking, and ultimately fatal genetic disease with no other real treatments, and it is clear why patients and their families would fight for access to anything that might work.  At the same time, the FDA has rarely if ever approved a drug on less evidence than that provided by Sarepta, and approving the drug might send a dangerous signal to both the public and other companies investigating rare disease drugs.  The FDA has now made its choice.  Where do we go from here?  In my view, there are at least three key issues to watch going forward. Read More

Mylan Announces Generic EpiPen; Baffles Health Policy Wonks Everywhere

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By Rachel Sachs

For weeks now, the list price of Mylan’s EpiPen ($600 for a two-pack) has been exhaustively covered by journalists, debated by academics, and skewered by policymakers as an example of the pricing excesses of even generic pharmaceutical companies.  Mylan’s latest response to the outrage?  Announce that soon, it will be launching a generic EpiPen at a list price of $300 for a two-pack.  I and others who study these issues full time cannot understand why Mylan thought this would work to quell the widespread indignation over its pricing practices.

The first red flag came when Mylan stated it would launch the product “in several weeks.”  I often find myself defending the FDA against charges that it is too slow to approve new technologies, but let’s face it: it would be shocking news if they were able to approve a new version of anything in just a few weeks.  Mylan has not had this in the works for months, so it seems that the new generic product is literally identical to the branded EpiPen – just with a different label.  So, essentially, Mylan is preparing to cut the price of its product in half.  (Even though that’s still higher than the price was just three years ago, before Mylan began its regular price hikes, and even though this should make us question their justifications for the $600 price.) Great, right?  Not so fast.

What reasons (other than public relations) might Mylan have for introducing an authorized generic of this type and how might they attempt to use the two products to maintain their current level of revenues?  By bringing the first generic EpiPen to market, Mylan has now planted its flag in the generics space.  Although epinephrine (the drug inside the EpiPen) is now generic and cheap to produce and sell, companies do seem to find it difficult to replicate the device portion of the EpiPen, with Sanofi’s product recently removed from the market due to dosing issues and Teva’s application for a generic denied by the FDA with no public explanation just a few months ago.  Mylan has now benchmarked a new price for those products if they return – they must price below $300 for a two-pack to compete effectively with Mylan. Read More

The Catch-22 of Bayh-Dole March-In Rights

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By Rachel Sachs

Earlier today, the NIH rejected a request filed by consumer groups including Knowledge Ecology International (KEI) to exercise the government’s march-in rights on an expensive prostate cancer drug, Xtandi.  Xtandi costs upwards of $129,000 per year, and KEI had asked the government to exercise its rights under the Bayh-Dole Act, which specifies a range of conditions under which the government may require a patentholder to grant licenses on reasonable terms to others to practice the patent.  Specifically, the government may require such a license where “action is necessary to alleviate health or safety needs which are not reasonably satisfied,” 35 U.S.C. § 203(a)(2), or where the benefits of the invention are not being made “available to the public on reasonable terms,” 35 U.S.C. § 201(f).

For some time now, there has been debate over the question of whether high prices for pharmaceuticals are a sufficient trigger to invoke the use of march-in rights under these clauses of the statute.  I don’t take a position on that question here.  Instead, I want to ask whose responsibility it is to decide that question.  Congress has the legal right to do so, but it seems unwilling or unable to.  The agencies in question have recently declined to, even assuming they have the power to interpret the statute in that way.  And so we might look to the courts.  But there’s a puzzle here: it’s not clear that anyone can ask a court to decide whether high prices meet the statutory requirements unless an agency actually decides that high prices meet the statutory requirements.

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Thoughtful CREATES Act May Help Speed Generic Drug Approvals

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By Rachel Sachs

Earlier this week, a bipartisan group of Senators introduced the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, a bill designed to speed generic drug approvals (and thus lower drug costs) by removing a delaying tactic some branded drug companies use to impede the generic approval process.  Essentially, branded drug companies sometimes refuse to sell samples of their drugs to generic companies who want to come to market, preventing them (for at least a time) from performing the necessary bioequivalence testing and extending their market dominance.  Sometimes companies try to hide behind a regulatory program, Risk Evaluation or Mitigation Strategies (REMS), in claiming that they legally cannot provide such access.  Other times, such as in Martin Shkreli’s case, no such excuse exists and the company simply refuses to provide access.

These delaying tactics have received substantial attention from both scholars (Jordan Paradise’s work can be found here) and lawmakers.  This is Congress’ third attempt at addressing the situation, although as Ed Silverman helpfully notes at Pharmalot, the previous attempts would have only dealt with REMS delays, not Shkreli-like closed distribution systems.  By contrast, the CREATES Act would require brand-name companies to provide access to samples of their drugs, whether subject to a REMS or not, on “commercially reasonable, market-based terms” or face potential civil action from the generic drug company in question.  There’s already been a lot of commentary on the bill, including a particularly helpful blog post from Geoffrey Manne providing background on REMS abuses and on why antitrust law has not sufficed to solve the problem.  Here, I want to add two points that I haven’t yet seen in the discussion: one about drug shortages and another about remedies.

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Our Current Pharmaceutical Payment System Isn’t Neutral

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By Rachel Sachs

Last week, former Pfizer Global R&D head John LaMattina wrote another of his columns for Forbes, this one on the subject of pay-for-performance deals for pharmaceuticals.  These deals, in which insurers contract with pharmaceutical companies to pay for drugs based on how well they perform in practice, are becoming more common as the public conversation over drug prices escalates (examples here, here, and here).  There are many interesting questions around pay-for-performance deals, but LaMattina closes his column with a focus on one: their impact on the direction of pharmaceutical R&D.

Specifically, LaMattina argues: “Biopharmaceutical companies will closely watch how pay-for-performance evolves. Should payers become overly enthralled with rebates and continue to raise the bar, companies could move their R&D efforts into areas where a drug’s impact can be easily defined and measured. In such an environment, therapeutic areas like depression and obesity could give way to diseases like psoriasis or rare diseases where patient advocacy remains strong. In its efforts to rein in costs, payers might unwittingly force R&D out of areas where new drugs are still needed. That would be unfortunate.”

LaMattina is exactly right in one sense – and highly misleading in another.  First, underlying LaMattina’s argument is a critical claim that the way in which drugs are paid for affects the types of drugs that are developed.  This is absolutely right.  Although it may be perfectly obvious to some, as someone who just wrote a 25,000 word article on this very topic (oh hi, SSRN), I can attest that recognition of this idea is too often absent from the legal literature.  We largely focus on prescription drug insurance and payment as a way to encourage access to medications that already exist, but we ignore its effects on the types of drugs that are produced in the first place.

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Divided Infringement in Patent Law and the Doctor-Patient Relationship

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By Rachel Sachs

Regular readers of this blog (hi, Mom) will recall that I often think and write about the interaction between the divided infringement doctrine in patent law and medical method patents of various kinds.  In previous posts, I’ve written about the Federal Circuit’s efforts to assign liability for divided infringement of method patents and considered the potential impact on medical method patents (here and here) and I’ve more recently examined a district court opinion applying the Federal Circuit’s analysis to a method-of-treatment claim (here).

I’ve just posted a new essay on SSRN (here, forthcoming in IP Theory) specifically considering the role of the doctor-patient relationship in the Federal Circuit’s analysis.  Would the Federal Circuit see the doctor-patient relationship as fitting within the scope of its divided infringement analysis?  Should it?  These questions are timely, as the Federal Circuit is due to take up these issues very soon.  Briefing before the court in the Eli Lilly case I considered in my last blog post has just been completed, and the case will likely be scheduled for argument later this summer.

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State Drug Price Cap Laws: How Do They Work?

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By Rachel Sachs

Two weeks ago, I blogged here about various state bills designed to encourage transparency in the pharmaceutical industry, by requiring companies to disclose information about their research & development costs, marketing expenses, and prices charged to different purchasers. In that post, I glossed over the state initiatives to cap drug prices directly, but as these initiatives have been more recently in the news, I want to focus on them here and ask a basic question: can someone explain to me how they would work?

Let’s back up. Two states, California and Ohio, are considering ballot initiatives that propose to cap what drug manufacturers can charge to public payers in the state (such as Medicaid).  The texts of the initiatives are nearly identical, with a few state-specific differences in the enumeration of entities eligible to pay the capped price.  As clearly stated in a comprehensive POLITICO article earlier this week by Nancy Cook and Sarah Karlin-Smith, the initiatives “would require the state to pay no more for prescription drugs than the U.S. Department of Veterans Affairs — one of the few federal agencies allowed to negotiate drug prices.”

We can and should debate whether price caps like these are a good idea, as a policy matter, and the Cook & Karlin-Smith piece canvasses a number of the arguments on both sides.  But first, we should be clear that the laws we’re enacting can actually accomplish their intended purpose.  And if they can’t, we should acknowledge that publicly.  I see at least two primary obstacles to the implementation of these price cap initiatives, and since they’ve largely been absent from the public discussion, it’s useful to state them explicitly.

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