How global regulations are written

By Kevin Outterson

In secret, during “trade” negotiations. Just one example: the 12 years of data exclusivity for biologics is currently US law, but that may get carved into stone in the new Trans-Atlantic Trade and Investment Partnership (TIIP). Once enshrined in a trade agreement, this rule and thousands more will be immune to change by any national democratic process.

Who participates in this process? Generally, only “cleared advisors” from the Fortune 500.

A partial (leaked) list of the initial bargaining positions for the EU are downloadable here. In the Initial Positions Papers, the EU notes that they have approved 16 biosimilars which have not yet been recognized as such in the US. Other topics include generic approvals, GMP inspections, and regulatory science for drug approvals.

All of decisions have immense potential impact for consumer welfare. My concern is the undemocratic lack of transparency for the entire process.

(cross-posted from TIE)

The Tylenol Debate: Can Hospitals be Sued for Excessive Markups on Medications and Devices?

By Alex Stein

Steven Brill’s TIME MAGAZINE blockbuster article, Bitter Pill: Why Medical Bills are Killing Us, uncovers the CHARGEMASTER: a publicly undisclosed pricelist accountable for what we see in hospital bills. What we see there doesn’t look good: it includes acetaminophen sold for $1.50 a tablet (you can buy 100 of those for the same price at Amazon); $77 for a box of sterile gauze pads (Amazon’s prices vary between $6 and $11); $18 for a single diabetes test strip (sold for 54 cents by Amazon); $108 for antibacterial Bacitracin ointment (Amazon’s prices vary between $2.50 and $6.50); and so forth. Charges for stay, scans, surgeries, canes, and wheelchairs skyrocket as well.

The American Hospitals Association (AHA) rejects Brill’s analysis. According to AHA, the chargemaster aggregates the hospital’s overall costs on delivering quality care to patients: “In order to take medications in a hospital, even over-the-counter medicines, they must be prescribed by a doctor (a little bit of cost for the doctor), that order gets transmitted to the pharmacy (a little more cost), the order gets filled by a pharmacist or pharmacy tech who retrieves just one Tylenol pill and individually packages that one pill (still more cost), the pill gets transported from the pharmacy to the nursing unit where the patient resides (a little more cost), then the pill is retrieved by a registered nurse who personally gives the pill to the patient and then must document the administration of that pill in the patient medication administration record (a little more cost). All of this process to give a patient a single dose of Tylenol in a hospital bed [must also be] in compliance with all pertaining regulations (a little more cost).”

This post will not try to resolve the Tylenol Debate. Nor will it say anything about the government as a plausible substitute for the eccentric chargemaster. Instead, I will raise a legal question: Can patients sue hospitals for excessive markups on medications and devices?

My answer to this question is a qualified YES. Entrepreneurial and business aspects of running a hospital fall under states’ consumer protection laws (Brookins v. Mote, 292 P.3d 347 (Mont. 2012)). Those aspects certainly include billing (Jaramillo v. Morris, 750 P.2d 1301, 1304 (Wash. App. 1988); Ambach v. French, 216 P.3d 405 (Wash. 2009)). The key question here is whether an excessive markup on medications and devices amounts to deceit or an unfair trade practice. If it does, the hospital would be in violation of the relevant state consumer protection law. This might happen to hospitals whose billing practices—to which patients gave no informed consent—are particularly aggressive. Those hospitals might face class action suits and the prospect of paying treble damages. They also may be stripped of the special protections given to defendants in medical malpractice suits (that include shortened limitations and repose periods for filing suits, caps on damages, and charitable immunities). For my account of the competition between medical malpractice and consumer protection rules, click here.

Brill and other participants in the Tylenol Debate call on the government to start regulating hospital prices. My short advice to hospitals: get rid of unconscionable markups forthwith.

Supreme Court Decision on FTC v. Actavis paves the way for development of cheaper drugs

Zachary D Caplan JD, attorney at law firm in Philadelphia that filed amicus brief on behalf of drug wholesalers and pharmacies in FTC v. Actavis

Arthur Caplan PhD, Division of Medical Ethics, NYU Langone Medical Center

Amidst all the news about various Supreme Court decisions there is one that ought not be overlooked for its impact both on public health and healthcare reform—FTC v. Actavis.  Today the Court decided, by a vote of five to three, that Big Pharma companies can be sued over deals with generic companies to not bring generic drugs to market.  In so deciding, the Court endorsed the idea that Big Pharma companies with weak patents on their drugs may not pay off other companies that want to make cheaper generic versions to not do so.  This practice, known as pay-for-delay, has run rampant in the pharmaceutical industry over the last two decades costing American consumers billions and restricting access to cheaper versions of drugs.

In FTC v. Actavis, the Federal Trade Commission had alleged a pay-for-delay arrangement between Solvay Pharmaceuticals and Actavis that was intended to keep Actavis from producing a generic version of Solvay’s blockbuster AndroGel testosterone drug.  A lower court—the Eleventh Circuit Court of Appeals—dismissed the FTC’s complaint.  Now the Supreme Court has reversed that dismissal.

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Supreme Court deals a major blow to reverse-payment settlements.

By Nicholson Price

The Supreme Court keeps coming out with major opinions in the biotech/pharma area, with today seeing a major blow to reverse-payment settlements wherein brand-name pharma companies pay generic companies to delay their entry into the market.  This type of settlement shows the opposite pattern to that in most patent litigation, where the accused infringer (here, the generic drugmaker) usually pays the patent-holder, rather than the patent-holder paying the infringe, and is a result of the dynamics of generic drug market entry created by the Hatch-Waxman Act.  Since reverse-payment settlements result in the generic agreeing to stay out of the market in return for payment from the patent-holding brand name company, they look like antitrust violations – the question is whether the involvement of a patent (which creates a monopoly) means the settlements are acceptable under antitrust law.

Today, the Supreme Court came down on the side of protecting competition and sticking with traditional antitrust doctrines.  The Court didn’t go so far as to say that all reverse settlements are presumptive unlawful, instead requirings courts to apply a “rule of reason.”  But the Court firmly rejected the idea that a reverse payment settlement is immune from attack as long as it falls within the nominal scope of the patent.  The Court also noted that a large reverse settlement payment may itself provide evidence of a patent’s weakness, avoiding the need for a full determination of patent validity in the context of the antitrust action.  The opinion is here.

Prof. Einer Elhauge and Alex Krueger wrote about the economics of this question last year; their article can be found here.

Our Bodies, Our Cells: FDA Regulation of Autologous Adult Stem Cell Therapies

By Mary Ann Chirba, J.D., D.Sc., M.P.H. and Alice A. Noble, J.D., M.P.H.

Stem cells have been an endless source of fascination and controversy since Dolly the sheep was cloned in 1996. This month’s announcement of a cloned human embryo from a single skin cell [1] came on the heels of Sir John B. Gurdon and Dr. Shinya Yamanaka’s receipt of the 2012 Nobel for Physiology and Medicine for their work with induced pluripotent stem cells. Pluripotent stem cells can be embryonic or induced. Embryonic stem cells (ESCs) can generally be obtained from human embryos or by cloning embryos through somatic cell nuclear transfer (SCNT), as was done for Dolly.  Gurdon and Yamanaka demonstrated that pluripotent cells may also be formed by reprogramming adult cells to an embryonic state, resulting in induced pluripotent stem (iPS) cells without having to use eggs or cloning, or destroy embryos. However derived, pluripotent cells are capable of differentiating into virtually any cell type in the human body. This imbues them with great promise for scientific breakthroughs and medical advances, but also raises serious ethical, legal and safety concerns about their use.

Less controversial are “multipotent” adult stem cells (ASCs) which do not involve embryos or raise as many safety concerns as pluripotent cells.  ASCs are found throughout the body.  Their ability to differentiate is more limited than pluripotent cells but is vast nonetheless. The NIH’s site lists some 4500 ASC trials as compared with 27 for embryonic stem cells and 21 for induced pluripotent stem cells. Recent announcements of new stem cell treatments usually involve ASCs, such as last month’s news that a toddler born without a trachea received a new one made from her own adult stem cells.  It is therefore no surprise that ASCs have captured the attention of researchers, investors, physicians, patients and – increasingly – regulators, both here and abroad.

A growing number of physicians routinely offer treatments involving ASCs to their patients which can be performed in their offices.  Autologous adult stem cells, used to treat a variety of conditions, are harvested from the patient, processed, and returned to the same patient. It is no surprise that moving ASCs from laboratories to physician offices raises complex questions of law. We consider one of the more pressing ones: to what extent can the FDA regulate a physician’s ability to treat a patient with that patient’s own stem cells?  In the coming months, the D.C. Circuit Court of Appeals will hear oral arguments on this very issue in United States v. Regenerative Sciences.[2]

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Live Blogging from FDA in the 21st Century Conference, Panel 6: Regulatory Exclusivities and the Regulation of Generic Drugs and Biosimilars

[Posted on behalf of W. Nicholson Price II, Academic Fellow, The Petrie-Flom Center (with the disclaimer re: live blogging – see posts below)] 

The first panel of today is on regulatory exclusivity and generic drugs, moderated by Ben Roin at the Petrie-Flom Center.

Leading off was Kate Greenwood, discussing orphan drug development and recycled molecules.  She started off with Makena, known as 17-P,  first approved in 1976 as Delalutin.  In 1996 FDA withdrew its approval at the manufacturer’s request, as it hadn’t been marketing it.  A few years later, a study showed that the molecule, 17-P, helped prevent premature birth.  Compounding pharmacies started making it, and in 2006, CustoPharm filed a Citizen’s Petition asking whether the way was clear for a generic; FDA said yes, though the route might be challenging.  But in May 2006, a different company filed for a NDA for this new use; it was approved as Makena in January 2007; the company (KV Pharmaceuticals) priced it at $30,000 for a course of treatment (vs. $300 for the compounded version, still available pre-approval).  Responding to criticism, FDA stated that Makena’s reliance on government funding did not prevent Orphan Drug application.  But a few months later, FDA stated that compounding pharmacies could still make 17-P for patients; KV declared bankruptcy and blamed FDA’s decision not to discretionarily enforce Orphan Drug exclusivity.  KV has since sued FDA and HHS, and the case is pending.

Kate moved on to discuss ways to adjust the innovation/access balance, including shortening the exclusivity period, allowing limited competition, or capping or controlling drug prices.  There are concerns, however, that after Makena payers won’t really allow any monopoly price period.

Next up was Kevin Outterson, talking about opacity of R&D information; all we see are the shadows of data.  There are $250 billion of branded drug sales, with something like $200 billion in patent rents in the U.S. alone (twice that globally).  Patent theory describes this as the engine behind development in drugs – but it’s not free; we pay in higher drug prices.  We’re paying for R&D, not the pills themselves, which would be priced at the generics’ cost.  There’s no industry that celebrates inefficiency the way drugs do, touting the $1.2 billion figure for drug development.  Don’t blame patent law, though!  They require up-front disclosure.  But that doesn’t apply to clinical data, which is kept locked away, only accessible to FDA.  This process, which society pays for, is anathema to the scientific process.