A survey of 180 physicians recently conducted by Nature Reviews Drug Discovery  which asked participants to rank truly innovative drugs showed the same pattern. Only 2% or 17 out of 984 assessments from 2000 to 2010 received one of the top two ratings or were considered a real therapeutic advancement. In contrast, 33% or 49 out of 151 products approved between 1995 and 2003 were considered important innovations.

This does not mean that important new drugs with novel modes of actions are not coming to market. New effective treatments for leukemia (see our previous post in RxObserver on December 6, 2012), Hepatitis C, and macular degeneration have all lately come to the marketplace.

The Affordable Care Act dictates that an independent research institute, the Patient Centered Outcomes Research Institute, compare the effectiveness of different treatments for the same condition. This is to ensure that patients and payers (i.e. insurance companies and government programs like Medicare) stop paying more for less effective therapies. This “comparative effectiveness research” could conclude that newer more expensive brand name drugs are only marginally (if at all) more effective than older drugs which are more likely to be the more affordable generics.

Experts offer a variety of reasons why newer drugs appear to be less effective than older compounds. Earlier research and discoveries were based on the most basic or easily targeted causes of a disease, so that any drug that came as a result could have been more efficacious than a newer compound targeted to a secondary cause of the disease. The scientific rigor of clinical trials was greater in the 2000’s with hundreds of patients enrolled compared to dozens in the earlier studies. This means that compounds are analyzed more thoroughly for effectiveness, so perhaps newer compounds have a higher hurdle to pass to be considered effective. Another author suggests that the early results may be skewed to appear more effective by duplicate studies of the same drug. Many of these earlier trials were for drugs that had been used for a while. The bulk of the trials in 2005 were for new compounds that had a higher technical risk of failure.

Whatever the reason for declining effectiveness of new drugs, it is sobering to note that U.S. pharmaceutical companies spend over $50 billion a year to develop new medications. Research does not come with guarantees, and compounds can fail at every stage of development. These high stake decisions on what drugs to pursue impact both Americans’ health and pocketbooks.

This proposed settlement highlights the efforts – both legal and potentially illicit — by brand-name pharma to preserve market exclusivity for high-volume pharmaceuticals.   The US Supreme Court is expected to rule shortly on the legality of brand-name drugmakers paying generic pharmaceutical manufacturers to keep competing generics off the market.   By some estimates, the “pay for delay” practice adds more than $3.5 billion annually to our nation’s health care tab.  While drugmakers claim it is legal, the practice is at best unseemly and may well violate antitrust law.

Patents are an inherent part of the rule of law that makes markets function more efficiently for everyone.  Patents issued by the government for a limited period help protect the substantial investments associated with developing new drugs and other intellectual property and provide market certainty.   At the same time, patents should not be misused so as prevent legitimate competitors from entering the market after the original patent period.   Case in point:  we have opined frequently about the lack of workable generic pathway for high-cost, injectible biologics.  While these biologic drugs transform lives, they also have the potential to drive overall prescription drug trend – and medical costs – higher.   The Affordable Care Act empowered the US Food and Drug Administration to create a pathway for approval of biosimilars (the generic version of biologic drugs), but brand-name pharma continues to throw up regulatory road-blocks at every turn.  Biosimilars are available and, most importantly, safely administered in nations like Japan, Germany, Great Britain, France, and Canada. 

Erecting sometimes questionable barriers to market entry in order to preserve market exclusivity stifles the very innovative spirit that has helped the US economy grow for decades.   And when these actions cause consumers and payers to needlessly pay billions of dollars more every year for prescription drugs, the behavior borders on disgraceful. 

In recent months, the national epidemic of prescription painkiller abuse has generated

While state and federal policymakers are increasingly aware of the depth and breadth of prescription painkiller abuse, decisive legislative and regulatory has been lagging.  In recent years, legislative proposals on Capitol Hill have gone nowhere. Federal enforcement of existing laws may have reached its limit, and state action has been inadequate.  While nearly all states have prescription drug monitoring programs (PDMPs) in place, unscrupulous patients, physicians, and pharmacists have exploited gaps in inter-state data sharing and evaded detection.

A new proposal by Joanna Shepherd, Associate Professor of Law at Emory University might just provide the roadmap for policymakers seeking to address this epidemic.  In a forthcoming paper in the American Journal of Law and Medicine , “Combatting the Prescription Painkiller Epidemic:  A National Prescription Drug Reporting Program,” Dr. Shepherd proposes using an existing infrastructure – pharmacy benefit managers’ (PBMs) links with retail pharmacies – to create a national controlled substance reporting framework.  This timely and cost-effective option may well be the solution policymakers have been seeking.

In summary, Dr. Shepherd’s approach is based on the following framework:

• Currently, nearly all retail pharmacies communicate electronically with PBMs as part of their daily operations.  PBMs process claims in real time and allow the pharmacy to verify eligibility, confirm drug coverage and provider reimbursement, detect potentially dangerous drug interactions, and determine the patient’s out-of-pocket responsibility, if any.

• Dr. Shepherd proposes federal legislation be enacted establishing a unified national reporting system that builds on this PBM-retail pharmacy model.   Pharmacies dispensing controlled substances would be required to provide real-time notification to the reporting system.  In turn, this system would notify pharmacists when the reporting system indicates there is probable abuse.

• This simple, yet effective, national reporting solution would flag indicators of likely prescription drug abuse in real time.   These include cash-paying customers visiting multiple doctors or crossing state lines to visit multiple pharmacies, and physicians / other providers who are disproportionate prescribers of prescription drug painkillers.  In addition, since all pharmacies and providers are required to have a National Provider Identifier (NPI), rogue pharmacies or physicians engaged in fraudulent activities related to prescription painkillers would also be captured by this system. In short, this model would likely capture a substantial share of illicit behavior by patients, physicians, and/or retail pharmacies thereby providing an important tool for law enforcement to crack down on prescription drug abuse.

Dr. Shepherd has put forward a proposal worthy of serious consideration.  For anyone seeking workable ideas about how to end prescription painkiller abuse, her paper is a good place to start. 

In the past several years, the proposal of a formal track and trace system has met some resistance on Capitol Hill. But this year, there seem to be improved prospects. Both the House of Representatives and the Senate have come up with bipartisan drafts of bills that could help the FDA realize its mission to enhance pharmaceutical supply chain safety. As Dr. Janet Woodcock, the director of the FDA Center for Drug Evaluation and Research (CDER) recognized, counterfeiting scams are evolving. Copycats are getting more sophisticated in their methodologies and more apt at evading detection.

The Senate bill, released by the Health Education Labor and Pensions Committee (HELP), provides a tentative timetable for the progressive implementation of a national electronic track and trace system. This would be achieved by assigning a unique ID number (e.g. radio frequency tag) to each drug product. The bill proposes two levels of tracing: ‘lot-level’ (Phase 1) and ‘unit-level’ (Phase 2). Lot-level tracing follows batches of drugs (containing between 1 million and 100 million individual packages) as they leave the manufacturer while unit-level tracing gives supervisory agencies the ability to identify the whereabouts of each and every pill bottle in the batch. There are further refinements in the enactment goals for different parties–repackagers, wholesalers, third party logistics providers, dispenser pharmacies–in the process. A summary of the HELP draft reads: “instead of imposing one-size-fits-all requirements, requirements are tailored to the supply chain members to reflect the different and unique roles each sector plays in the pharmaceutical distribution supply chain.” Should the legislation become law, 5 years after enactment, repackagers would be required to accept and transfer only serialized products, wholesalers and third party logistics providers would have to meet this requirement after 6 years and dispensaries after 7 years. This proposal would effectively create a standardized national track and trace system by preempting existing state-level programs designed to combat the issue.

The House of Representatives bill (H.R. 1919),  looks very similar to its Senate counterpart, though the two differ on the exact timing of the Phase 2 rollout goals.  The House of Representatives approved the bill on June 3, 2013.

House and Senate lawmakers are actively trying to bridge the gap between their  bills. The Pharmaceutical Distribution Security Alliance (PDSA), an industry interest group comprised of companies such as Novartis, Walgreens and UPS, is voicing support for recent legislative developments on the track and trace program. With the bill moving forward in Congress, we may finally be one step closer to a national pharmaceutical track and trace program.

As Dr. Woodcock stated “An effective national track-and-trace system for all drug products throughout the supply chain would improve the security and integrity of the drug supply and ensure transparency and accountability of product distribution.  Many of the challenges we have with securing the supply chain — including contamination, diversion, counterfeiting, and other adulteration—could be addressed by such a system.”

Pharmacy benefit manager Express Scripts has just updated its useful

Specialty drugs present payers and policymakers with both opportunities and challenges.  These drugs, which treat complex conditions (such as inflammatory diseases, rheumatoid arthritis, cancer, and HIV) fulfill the promise of pharmaceutical research and development by allowing individuals and their loved ones to lead fuller and more enriching lives.   For employers and other payers, these drugs can lead to increased worker productivity and output that helps businesses succeed in a global marketplace.   Yet, these drugs are also very expensive and generic alternatives are not readily available in the US.

We have all known for some time that specialty drugs represent a rapidly-increasing share of prescription spending, but the new report makes clear just how steep that spending increase trend will be.  By 2015, spending on specialty drugs is projected to increase 67% over 2012 spending.  And by 2019 or 2020, specialty drugs are expected to represent 50% of plan sponsors’ overall drug-related expenditures.  The top three therapy classes – inflammatory conditions, multiple sclerosis, and cancer – are expected to account for more than half of specialty drug spending.

According to the Express Scripts report, costs for specialty drugs will rise as newer, more-sophisticated therapies with prices tags of “tens and hundreds of thousands of dollars” come to market.   At least 60% of the new drugs expected to gain FDA approval in 2013 alone will be specialty drugs.

By comparison, the spending on traditional drugs is expected to be 4% lower by the end of 2015 than it was in 2012.  Express Scripts reports that the primary driver of this favorable traditional drug spending trend is the decrease in medication costs resulting from the “patent cliff,” the wave of patent expirations for tens of billions of dollars of “blockbuster” drugs.  Among these patent expirations was the 2011 expiration of the patent for Lipitor, the best-selling prescription drug of all time.

Discussing the specialty drug trend, Glen Stettin, M.D. of Express Scripts writes, “It’s time for employers and health to act so they can continue to offer an affordable pharmacy benefit for their members.  New specialty treatments are making a real difference in the lives of patients, but the very high cost of these drugs creates difficult decisions for plan sponsors on which medicines to cover.”

In a nod to the value proposition from Express Scripts and other pharmacy benefits managers, the Express Scripts report discusses a recent study involving 60 employers and more than 5 million Americans.  The study showed that plan sponsors that implement an array of utilization- and network-management solutions for specialty drugs can achieve a spending trend 50% lower than that of plan sponsors that do not implement such solutions.

The report notes that “the introduction of biosimilars in key therapy classes with high-cost, highly utilized drugs has the potential to alter the trajectory of specialty drug spend.”  But, as we have previously written, the FDA has not yet established a clear pathway for the introduction of biosimilars and innovator drug companies are preemptively lobbying state legislatures to erect roadblocks to the use of biosimilars. 

As the Express Scripts report notes, “double-digit growth in specialty drug costs is not sustainable for plan sponsors.”  If they haven’t already done so, health plan sponsors need to begin to address spending on specialty drugs now.  Because of cost, it may be necessary for plan sponsors to exclude certain new specialty drugs from prescription benefit plans (or impose high co-pays or other limits) even if those new drugs represent a quantum improvement in available therapies. The alternative, making every new specialty drug available under health plans, will result in rapidly increasing health insurance costs for both plan payers and participants and could ultimately make health insurance unaffordable for everyone.

Private and public payers seeking value in pharmacy benefits should be heartened by a recent  study about medication waste in Medicare Part D.   Commissioned by the Pharmaceutical Care Management Association, the study found that less than 1 percent of all medications dispensed for Medicare beneficiaries are defined as “wasted.”

According to the study, medication waste can occur when a patient stops taking his or her medication before using the entire supply of a prescription. This stoppage can be due to the need to discontinue therapy, switch to a different drug, a change in dosage strengths, or the patient’s death.  One of the more interesting aspects of the study examines how quickly mail-service pharmacies are able to disable auto-refill programs in the event of a beneficiary’s death – usually in about 24-48 hours.

From our perspective, there are at least two major takeaways from this study’s findings.  First, in a program like Medicare Part D that serves tens of millions of senior and disabled beneficiaries, the amount of medication identified as “wasted” seems reasonably low, perhaps even lower than one might expect.  While the study’s authors did not go into detail, we cannot help but wonder if the Part D model deserves some credit.  Part D is a managed pharmacy benefit, which is designed to provide for better care coordination between the patient and his or her doctors, pharmacists, and other providers.   In this model, the right hand knows what the left hand is doing – and vice versa – and helps prevents dangerous drug interactions, non-compliance with prescribed therapies, and medication waste.

Second, the study is significant because it debunks a long-time retail pharmacy industry allegation that medication waste is more prevalent with 90-day prescriptions dispensed by competing mail-service pharmacies.  In reality, the new study finds that most of the wasted medications in Part D — more than two-thirds — were dispensed by retail pharmacies.    This finding is intuitive because most 90-day prescriptions dispensed by mail-service pharmacies are for long-term chronic conditions.  In these instances, the patient’s prescription is customarily filled at a retail pharmacy first and only then transitioned to the mail-service pharmacy after 30 or 60 days.  Patients taking medications addressing long-term chronic conditions, such as hypertension or hyperlipidemia, are usually stable with their dosage and therapy and waste would be expected to be very low.

From a payer’s perspective, it is good to see the pharmacy profession growing robustly and generously compensated.   At the most optimal level, pharmacists are a vital link in promoting improved care coordination and generating better outcomes.  Better outcomes and greater care coordination yield efficiencies that, over time, help drive down costs for consumers and both private and public programs.  Well-designed pharmacy benefit programs recognize the integral role of the pharmacists – including such important skills as improving adherence and exploring lower cost generic alternatives – and align incentives for consumers, pharmacists, and payers.

With an uneven economic recovery, health care employment has been a bright spot and pharmacy employment stands out.   The number and diversity of pharmacies continues to grow and competition for pharmacists in many markets has remained intense.  The career opportunities for new graduates among retail pharmacies, mail-service pharmacies, specialty pharmacy, hospital pharmacy, long-term care pharmacy, and other niche specialties is strong.

From a public policy perspective, pharmacists rising income levels signal a troubling disconnect between the retail pharmacy industry’s lobbying rhetoric and marketplace realities.  For well over a decade, the drugstores’ trade associations have repeatedly pushed a special-interest agenda that has been predicated on redressing supposed declining pharmacy income.  Legislative proposals related to Medicare prompt pay, pharmacist antitrust exemptions, minimum dispensing fees, and many other related proposals have proliferated at the state and federal levels.

At a very fundamental level, the rising income of pharmacists is a strong economic indicator that the profession is not suffering from the changing marketplace or increased competition.  In fact, it suggests the opposite. Thus, there is no reason to provide further government protection to this one profession when many other professions including accounting, law, engineering, etc. thrive in a free market system.

Cancer patients may benefit the most from advances in this technology because before it, “medicine took the ‘carpet-bombing’ approach, injecting a drug into the general area of the diseased tissue or bombarding it with radiation.” The result is collateral damage to healthy tissues that surround the diseased targets, leading to lackluster outcomes and increased patient suffering. Nanoparticles usually come in the form of polymers, gold or graphene — a new ‘wonder material’ made of pure carbon. To put things in perspective, a 1-square meter sheet of graphene weighs a mere 0.77 milligrams. The nano-dimension of these particles lets them navigate the blood stream so precisely that they would only work on the desired regions composed of target cells. Because of the protective layer nanoparticles provide, effective drugs that had been set aside because of instability or too much damage to other cells can now be safely and accurately targeted. This past February, Roche got FDA approval for its targeted anti-cancer nanotech delivered drug, Kadcyla. Around 120 drugs are in varying stages of testing for cancer treatment, and many have shown promising results in preliminary mice trials. As Yale University researchers explain, nanotechnology improves the bioavailability of drugs. In other words, these drugs would be available in the body only where they are needed. Such enhanced efficacy and efficiency could significantly ease the burden on our healthcare system because patients could get better with fewer medications and fewer hospitalizations. Based on statistical data, the overall anticancer nanomedicine market reached $28 billion in 2011, up from $16.4 billion in 2006, a 71% increase. It is expected to reach $46.7 billion by 2016, a CAGR of 10.8% between 2011 and 2016.

The world’s first nanomedical drug, Doxil, was approved in 1995 for the treatment of Kaposi’s sarcoma, an AIDS-related cancer. Advances since then have been rather scarce, but promising changes are in the air. This year, three pharmaceutical giants –  Amgen, Pfizer and AstraZeneca – have established strategic alliances with BIND Therapeutics, a U.S.-based company that is at the forefront of nano-scale medicine. As a part of its medicinal nanoengineering platform, the company came out with a new polymer-based nanoparticle, Accurins, which is expected to “selectively targe[t] diseased cells and tissues using ligand molecules that are attached to the particle surface in a highly controllable fashion.” These highly selective particles are, so to speak, programmable. They boast not only precision treatment of target cells, but also evasion from the body’s immune system to prevent adverse side effects. Pfizer would pay BIND more than $200 million for each drug derived from its proprietary platform. Amgen, on the other hand, has signed on for exclusive rights to the development and commercialization of an Accurins-based kinase inhibitor to be used against solid tumor targets. This deal is worth around $200 million as well.

Development of nano-products is underway at all the major pharmaceutical houses. There are over 70 nano-medical products currently in clinical trials. Depending on how pharmaceutical companies price their new products, nanotechnology has the potential to reduce medical costs by reducing debilitating side effects through targeted treatment options. Future advancements could hold the potential for even more dramatic cost reductions. Nanotechnology’s impact on medical treatments is just beginning. It will be an exciting development to watch.

The Express Scripts analysis looked at pharmacy-related decisions that lead to healthcare waste – defined as extra medication-related spending that provided no additional clinical benefit.  It found that $55.8 billion was spent unnecessarily on higher-priced medications when more affordable, clinically equivalent alternatives were available.  Another $93.1 billion could have been saved if patients used the most cost-effective and clinically appropriate pharmacies, including home delivery and specialty pharmacies.  The potential savings from using these pharmacies includes $33.5 billion in lower drug costs and $59.6 billion in avoided medical costs attributed to higher adherence rates associated with home delivery and specialty pharmacies.  Finally, another $269.4 billion was spent on avoidable medical and pharmacy expenses as a result of patients not remaining adherent to their medication treatments.

In looking at the state-by-state medication related waste numbers, the analysis found that the most wasteful spending, about $1,623 per resident, was in Mississippi, the state with the lowest median household income in the country.   According to census bureau data (using three-year averages), Mississippi had a median household income of $39,078.  So, in Mississippi, pharmacy decision-related waste was about 4% of household income for every person in a household.

We can speculate that there is a correlation between the level of pharmacy-related decision waste and the legislative influence of home-state pharmacists in protecting themselves from competition and pressures to cut prescription spending.  We note that Mississippi is a state where pharmacists seem to have been successful in getting much of their wish list of laws hampering pharmacy benefit manager (PBM) prescription cost savings.   The Mississippi Pharmacy Audit Integrity Act (Mississippi Code §§ 73-21-175 through 73-21-191) includes constraints on pharmacy audits by PBMs and payers that are even more pro-pharmacist than those recently proposed by a handful of U.S. Senators.  The Mississippi Pharmacy Benefit Prompt Payment Act (Mississippi Code §§ 73-21-151 through 73-21-159) requires PBMs to use a nationally recognized reference (updated at least every three business days) in calculating pharmacy reimbursements and to pay electronic claims within 15 days (even where those claims may be questionable).  And, most recently, Mississippi pharmacists were able to convince the legislature to give the Mississippi State Board of Pharmacy (composed entirely of Mississippi pharmacists) regulatory jurisdiction over PBMs, despite warnings from the Federal Trade Commission that doing so would lead to higher prescription costs in Mississippi.

New data from the Bureau of Labor Statistics indicates that the mean annual wage for a Mississippi pharmacist in May 2012 was $115,690, putting Mississippi pharmacists among the top half of states in terms of pharmacist compensation.  The mean wage for Mississippi pharmacists was more than triple the mean wage ($35,310 ) for all occupations in Mississippi.

It may just be coincidental that the state with the highest pharmacy-related decision waste has some of the most onerous restrictions on PBM cost saving tools and puts the pharmacists in charge of regulating PBMs.  And, it may also be coincidental that Mississippi pharmacists earn more than those in at least half the other states, despite the fact that Mississippi has the lowest household income in the nation.  We are somewhat suspicious of coincidences.

S. 867 would dramatically increase Medicare prescription drug spending by preventing pharmacy benefit managers (PBMs) from using proven tools to control prescription drug spending.  Don’t take our word for it, just look at the bill.  It requires Medicare Part D plan contracts with prescription drug plan (PDP) sponsors to provide that “the PDP may not enter into a contract with any pharmacy benefits manager … to control the costs of the prescription drug coverage under such plan, unless the PBM satisfies the requirements [in the rest of the bill].”

Here are some of the ways the bill would interfere with PBM tools that have been demonstrated to control costs:

• Hampering audits of pharmacies.  The bill would dictate a very narrow scope for PBM audits of pharmacies intended to prevent fraud, waste and abuse.  To discourage PBMs from auditing pharmacies, the bill would prohibit them from being compensated out of audit recoveries.  To attempt to alter the audit outcome, the bill would require participation of home-state pharmacists in any audit involving “clinical or professional judgment.”  It would allow any prescription complying with State Board of Pharmacy requirements to “validate claims submitted” – even, for example, if the prescription was for an expensive brand-name drug that could have been filled with an inexpensive generic.  It would limit the records pharmacies are required to keep.  It would require payments to pharmacies even when there are significant errors in submitted claims – unless there was an intent to commit fraud.  And, it would prohibit the PBM from using accepted statistical sampling audit techniques, meaning that in order to get the appropriate recovery, the PBM would need to audit each and every prescription transaction separately –  at a tremendous increased cost for the audit.  The bill would prohibit audits from going back more than two years from the date of the claim – thus requiring more frequent and costly audits.  And, the bill would require dilatory procedures, including 60 days to respond to auditor findings, appeals from both preliminary and final audit reports, and introduction of new documentation by the pharmacy at any time prior to final written decision is issued on appeal.

• Increased Payments to Pharmacies for Generics.  In the guise of promoting “business practice predictability,” the bill would require PBMs dispensing generic drugs to reimburse pharmacies using a national average list
• price for those generics, even in situations where the pharmacy could have obtained generics at a lower price.  This approach removes any incentive on the part of pharmacies to negotiate for the best possible price on generic purchases and will drive up costs.  This provision is as nonsensical as requiring consumers to refer only to list price in buying cars.

• Anti-Mail-Service Provisions.  The Federal Trade Commission and others have confirmed that PBMs save a great deal of money for plan sponsors by filling longer-term prescriptions through mail-service pharmacies.  And, to encourage plan participants to use mail-service, PBMs will often provide for reduced co-payments for mail service.  Retail pharmacies would like as many prescriptions as possible to be filled at their own stores – which explains the collection of anti-mail-service provisions in the bill.  First, the bill would prohibit a PBM from sharing with its mail-service pharmacy any information about a prescription it processes unless the plan enrollee has affirmatively elected to have the prescription filled at a PBM-owned pharmacy.  And, the bill prohibits providing an incentive for participants to use PBM-owned mail-service pharmacies.

• Disclosure of Sensitive Pricing Information.  The bill would require PDP sponsors to disclose to participating pharmacies the “methodology and actual per unit reimbursement amount” for every covered drug and to update that information at least every week.  The term “methodology” in the bill is not defined, but it is clearly an attempt to allow pharmacies to reduce the negotiating power of PBMs by giving them access to PBM pricing data.  We have previously written about the pernicious effects of similar legislative proposals in the states.  As Emory University Law Professor Joanna Shepherd notes in her forthcoming Cornell Law Review Online paper “Is More Information Always Better? Mandatory Disclosure Regulations in the Prescription Drug Market,” mandatory disclosure of pricing information to pharmacies will “foster tacit collusion and reduce PBMs’ ability to negotiate discounts with pharmacies and rebates with drug manufacturers. By disrupting competition in the prescription drug market, mandatory disclosure regulations will ultimately increase the prices that consumers pay for prescription drugs.”

Fortunately for taxpayers, before this bill could become law, it would have to go through the scrutiny of the Congressional Budget Office.  CBO would look at the real-world effect of the proposed changes and calculate exactly how many billions of dollars would be added to Medicare costs over the next decade in order to enrich retail pharmacists.  We hope Members of Congress will consider the impact on Medicare spending before going along with a request by NCPA to cosponsor the legislation.  If they cosponsor the bill before knowing the full adverse impact on Medicare, they will almost certainly regret the decision.