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Pharmaceutical Transparency Bills: Targeting Disclosures Purposefully

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By Rachel Sachs

On Monday, the Massachusetts Joint Committee on Health Care Financing held a hearing on Senate bill 1048, which would require pharmaceutical companies to report to the state a range of information on their research & development costs, marketing and advertising costs, and prices charged to a number of different purchasers.  The hearing, recapped by the Boston Globe and Gloucester Times (among others), went as expected, with industry executives opposing the bill and health insurers, consumer advocates, and others testifying in support.

Massachusetts is not the only state considering a transparency bill.  At least ten other states, including California, North Carolina, Oregon, and Virginia have all drafted bills that would advance similar goals.  These bills do differ in their details.  As just one example, each state would require disclosure from a different set of drugs and companies.  Massachusetts would only require disclosure of costs and pricing for the top twenty selling drugs in the state (where the list is based around a set of criteria including but not limited to cost), California, Oregon, and Virginia would require disclosure for any drug whose wholesale cost is $10,000 or more per year (in California, this includes over 900 drugs), and North Carolina’s bill is framed around classes of drugs, rather than prices.

It is no accident that these bills have been developed in the wake of Martin Shkreli, Valeant Pharmaceuticals, and other drug pricing scandals.  Patients and policymakers are seizing this moment to take action against the drug industry.  Forcing companies to disclose their R&D costs, advertising costs, and pricing practices is seen as a step in the right direction against these secretive companies.  In this blog post, I want to focus on just one of many interesting issues raised by these bills: what and who are they useful for, and how can we target the required disclosures to best achieve those ends?  More specifically, I’m not interested in transparency for transparency’s sake.  Disclosure rules (like nutrition labels, for instance) can and should be used to help people make better decisions than they would’ve otherwise made.

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Medicaid Expansion Through Section 1115 Waivers: Evaluating The Tradeoffs

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This new post by Rachel Sachs appears on the Health Affairs Blog as part of a series stemming from the Fourth Annual Health Law Year in P/Review event held at Harvard Law School on Friday, January 29, 2016.

Nearly six years after the passage of the Affordable Care Act (ACA), health law and policy experts continue to painstakingly track the progress of the Act’s Medicaid expansion. The original intention of the ACA was to expand Medicaid in every state, leading to gains in coverage by all individuals below a certain income.

However, the Supreme Court’s 2012 ruling in National Federation of Independent Business v. Sebelius(NFIB) invalidated the original expansion as unconstitutionally coercive, effectively making the Medicaid expansion voluntary for states. As of this blog post, just 32 states including DC have expanded Medicaid pursuant to the ACA.

Most of the states that have expanded Medicaid thus far have done so through the standard procedure, following the statutory guidelines set forth by the ACA and the Centers for Medicare & Medicaid Services (CMS) and incorporating the newly eligible enrollees into their existing programs as a new beneficiary group. But some states have successfully negotiated customized expansions with CMS through the use of the Section 1115 waiver process, seeking to expand Medicaid only on their terms. […]

Read the full post here.

FDA Announces Draft Guidance That Would Limit Enforcement Discretion for FMT

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By Rachel Sachs

Yesterday, the FDA announced a new draft guidance regarding its exercise of its enforcement discretion around the investigational new drug (IND) requirements as they apply to fecal microbiota transplantation, or FMT.  For almost three years now, the FDA has exercised its enforcement discretion for FMT under a rather permissive set of guidelines, enabling patients to access FMT while companies shepherd a set of products through the clinical trial process.  I recently co-authored an article about the FDA’s regulation of FMT, and I’m concerned about this new guidance, in terms of safety, access, and regulatory clarity.  This is one of the wonkiest posts I’ve written in some time (and that’s saying something), so I’ll endeavor to be as clear as possible.

What is FMT and why is it important? To make a long story short, it’s a poop transplant.  Filtered stool from a healthy donor is transplanted into the gastrointestinal tract of a sick patient.  Although scientists are continuing to explore the use of FMT for a range of indications, we already know that FMT is a startlingly effective treatment for recurrent C. difficile infection.  C. difficile infections have become among the most common hospital-acquired infections in the United States, with more than 450,000 total incident infections annually.  Unfortunately, many of these infections are resistant to antibiotics: with those 450,000 infections came 80,000 recurrences and 29,000 deaths.  But FMT may provide a way forward.  A recent randomized trial of patients with recurrent C. difficile infections was stopped early, when 94% of patients in the FMT group were cured, as compared to roughly 30% of those getting only antibiotics.

How is the FDA involved? In May 2013, the FDA announced that fecal microbiota would be regulated as a drug.  All uses of FMT would therefore need to be part of an IND application, and patients who wanted to be treated with FMT for recurrent C. difficile would need to participate in a clinical trial to do so.  Physicians and scientists responded with concern, arguing that available evidence supporting FMT’s effectiveness as a therapy for recurrent C. difficile infection was too compelling for regulators to restrict its availability to clinical trials.  As such, in July 2013, the FDA announced that it would exercise enforcement discretion when FMT was used to treat patients “with C. difficile infection not responding to standard therapies,” so long as the treating physician obtained informed consent. Read More

Evolving Industry Structures in Biosimilar Development

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By Rachel Sachs

Yesterday, I had the privilege to moderate a fantastic event here at the Petrie-Flom Center on Assessing the Viability of FDA’s Biosimilars Pathway.  Bringing together expert panelists from legal practice (Donald R. Ware, Partner, Foley Hoag LLP), industry (Konstantinos Andrikopoulos, Lead IP Counsel, Manufacturing, Biogen, Inc.), and academia (W. Nicholson Price II, Assistant Professor of Law, University of New Hampshire School of Law), the event explored different aspects of the biosimilars issue, considering the guidances issued (and still to be issued) by the FDA, the role of the “patent dance” in biosimilar litigation, and whether Europe’s experience with biosimilars has helpful lessons for our own situation.  For those who weren’t able to make it, video of the event will be posted on the Petrie-Flom Center’s website soon.

But I wanted to write here about one of the very last questions we explored during the panel, because its implications are more far-reaching than we had the time to consider.  The situation is as follows:  In the decades after the Hatch-Waxman Act created a generic pathway for small-molecule drugs, companies typically specialized in developing either innovator or generic drugs, but not both.  And although generic drug companies had great capacity for innovating in manufacturing, they were not research companies in the way that we think about innovator companies.  The situation has changed somewhat over the years, as generic companies began to invest in innovative products, and as innovator companies put out authorized generics, but in general this broad division within industry has persisted.

In the biologic context, by contrast, the biosimilar applications being filed with the FDA are more typically being filed by innovator companies themselves or by subsidiaries thereof.  For instance, the only biologic approved in the United States thus far is marketed by Sandoz, which is part of the innovator company Novartis.  Instead of a situation in which innovators battle generic companies for access to the market, now innovator companies are battling themselves.  There are a host of reasons for this development, most notably including the complex manufacturing processes involved in the biologics space and the need for the development of expertise there.

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March-In Rights Alone Won’t Solve Our Drug Pricing Problems

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By Rachel Sachs

On Monday, a group of over 50 members of Congress sent a letter urging the Department of Health and Human Services (HHS) and the National Institutes of Health (NIH) to use a little-known statutory provision to take action against high drug prices.  Their goal is laudable, and HHS and the NIH should certainly offer guidance in this area – but the existing law offers only a partial solution to the problem as the legislators describe it.

The members of Congress wrote to remind HHS and the NIH of a provision in the 1980 Bayh-Dole Act giving the government “march-in rights” to patents resulting from government-funded research.  More specifically, the statute spells out a range of conditions under which the government may require a patentholder to grant licenses on reasonable terms to others to practice the patent.  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).  The legislators argue that many drugs today violate these conditions, as even many insured Americans cannot access prescription drugs without incurring significant financial harm.

Although the “march-in rights” provision has existed in the statute since 1980, it has never been exercised by the federal government, even when it has been specifically asked.  And some of these cases have been paradigmatic examples where “health or safety needs” are not being satisfied.  A December 2015 study notes that in Bayh-Dole’s history, there have only been five petitions requesting that the NIH exercise its march-in rights.  Three of those requests were based on high prices for drugs for HIV/AIDS and glaucoma, and one was based on a persistent drug shortage which may have caused the deaths of people with Fabry disease, a rare condition.  (The fifth petition involved a medical device under patent litigation at the time.)  The NIH denied each request.  Some scholars argued that if the NIH denied the Fabry disease petition, where Genzyme’s drug shortages lasted for multiple years and caused great suffering, possibly including death, there may be no circumstances under which the NIH would grant such a petition.

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Senator Cruz’s RESULT Act Contains a Particular View of the FDA’s Role – But What About CMS?

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By Rachel Sachs

Last week, I blogged here about the introduction of the Reciprocity Ensures Streamlined Use of Lifesaving Treatments (RESULT) Act (text) by Senators Ted Cruz and Mike Lee. As I noted, the Act would require the FDA to speed review of drugs, devices, and biologics that are already approved for marketing in a particular list of countries, including EU member countries, Japan, and Canada. If the FDA declines to grant reciprocal marketing approval, the Act would permit Congress to override the FDA’s decision through a majority vote via a joint resolution.

My post, and additional commentary from numerous other outlets (including RAPS, Vox, and Marginal Revolution) largely focused on the Act itself – on the merits of the various provisions, and on whether those provisions would be effective at accomplishing the Act’s stated goals. But each commentator’s view of the situation depends in large part on their priors about what the purpose of the FDA is, and relatedly, how it should behave to achieve those purposes. In this post, I want to first briefly explain these different views about the purpose of the FDA before explaining the ways in which our views about pharmaceutical regulators are often tied to our views about public health insurers – a point which has largely gone unmentioned in the debate about the RESULT Act.

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Senator Cruz’s RESULT Act Unlikely to Achieve Results

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By Rachel Sachs

On Thursday, Senators Ted Cruz and Mike Lee introduced the Reciprocity Ensures Streamlined Use of Lifesaving Treatments (RESULT) Act (text), which would require the FDA to speed review of drugs, devices, and biologics that are already approved for marketing in a particular list of countries, including EU member countries, Japan, and Canada. The Act would require the FDA to grant such “reciprocal marketing approval” within 30 days, unless the FDA makes affirmative determinations about the drug or device’s lack of safety and efficacy. If the FDA declines to grant reciprocal marketing approval, the Act would also permit Congress to override the FDA’s decision through a majority vote via a joint resolution.

Zachary Brennan at RAPS has already provided a helpful explanation of the problems with this proposal, and in particular the problems created if Congress were permitted to override FDA denials of approval. In this post, I want to focus primarily on the Act’s premise. Senators Cruz and Lee argue that this bill would speed approval of drugs and devices “which are currently saving lives in other developed countries, but have not been approved in the U.S. because of FDA red tape.” The implication is two-fold: 1) that drugs are often left languishing at the FDA while they enjoy approval in other countries, and 2) that the FDA has no grounds for failing to approve these drugs. The first argument, about the speed of FDA approval, is made quite frequently by legislators who seek to weaken the FDA’s gatekeeping authority over new drugs and devices in the United States. Unfortunately, it hasn’t really been true for decades. The second argument ignores the historical context of the FDA’s decision-making authority.

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FDA Releases Report Detailing Problematic Laboratory-Developed Tests

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By Rachel Sachs

Last week, the FDA issued a report presenting 20 case studies of laboratory-developed tests (LDTs) that have or may have harmed patients, in support of its ongoing efforts to impose greater regulatory oversight on LDTs.  The report came just before yet another House Energy & Commerce Committee hearing on the issue, and the timing of its release may have been motivated in part by questions FDA officials faced at the last Congressional hearing, about the existing evidence of harm to patients.  The report categorizes the 20 case studies into seven groups, organized by the primary problem posed by the LDT: those with a high degree of false positives (the test yields a positive result when the disease is not present), those with a high degree of false negatives (the test yields a negative result when the disease is present), those which yield both false positives and false negatives, those which test for a factor seemingly unrelated to the disease in question, those linked to treatments based on disproven scientific concepts, those which affirmatively undermined the drug approval process, and of course, “other.”

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Generic Drug Price Increases: Implications for Medicaid

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By Rachel Sachs

The internet (not just the health policy part of the internet!) is fascinated by today’s New York Times story about dramatic recent increases in the costs of many decades-old drugs.  The story focuses on the case of Daraprim, the standard of care for treating the parasitic infection toxoplasmosis.  Daraprim was recently acquired by a start-up, which then raised the drug’s price from $13.50 a pill to $750 a pill.  Daraprim has been around for decades, and as the story notes, it’s just one of many recent examples of dramatic price increases for generic drugs, often after their acquisition by other companies (as in this case).

The article raises an enormous number of issues of interest to intellectual property and health policy scholars, both explicitly and implicitly, and other commentators have begun to canvass them.  But I want to spend the rest of this blog post unpacking a single point made in the article, because it actually contains an enormous amount of complexity.  As the author notes, “[the company’s] price increase could bring sales to tens or even hundreds of millions of dollars a year if use remains constant. Medicaid and certain hospitals will be able to get the drug inexpensively under federal rules for discounts and rebates. But private insurers, Medicare and hospitalized patients would have to pay an amount closer to the list price.”

The author is right that there’s one sense in which Medicaid and entities eligible for the 340B program (I assume this is what the author is referring to when he says “certain hospitals”) will be able to obtain this drug “inexpensively” – but there’s another sense in which they won’t be able to.

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Induced Infringement in Patent Law and the Doctor-Patient Relationship

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By Rachel Sachs

Regular readers of this blog will recall that I often think and write about the interaction between the induced infringement doctrine in patent law and medical method patents of various kinds (previous blog posts are here and here).  Until the recent en banc decision in Akamai v. Limelight, courts had been extremely reluctant to attribute the actions of multiple parties to a single actor for purposes of assigning infringement liability.  These cases have largely involved business method or software patents, but I had hypothesized in prior work that this analysis would extend to medical method patents, making them difficult to enforce.

Last week, Judge Tanya Walton Pratt of the U.S. District Court for the Southern District of Indiana provided evidence for the opposite proposition.  Eli Lilly had sued a set of generic drug companies for patent infringement, arguing that they had induced physicians to infringe a set of method-of-treatment claims involving a chemotherapy drug.  The problem for Lilly was that its claims require action by both physicians and patients, who must take certain other medications, including folic acid, before the physician administers the chemotherapy drug.  Judge Pratt was tasked with determining whether the actions of the patient in preparing for their chemotherapy could be attributed to the physician.  She ruled that because the physician “directs or controls the patient’s administration of folic acid,” “the performance of all the claimed steps … can be attributed to a single person, i.e. the physician.”  As a result, the generic companies could be held liable for infringement.

One problem with Judge Pratt’s ruling is that it fails to confront the single Federal Circuit opinion to have considered and rejected this argument.  McKesson Technologies, Inc. v. Epic Systems Corporation dealt with a patent on electronic communication between physicians and their patients.  In that case, the Federal Circuit had occasion to consider how the doctor-patient relationship fits into the induced infringement paradigm.  Judge Linn’s opinion concluded that “[a] doctor-patient relationship does not by itself give rise to an agency relationship or impose on patients a contractual obligation such that the voluntary actions of patients can be said to represent the vicarious actions of their doctors,” declining to attribute the patients’ actions to their physicians for purposes of assigning liability.

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