Radar on Drug Benefits

The Federal Trade Commission (FTC) ratcheted up regulatory pressure on PBMs once again, announcing that it will apply more scrutiny to PBMs' rebating practices, particularly regarding insulin. The move follows the agency's announcement earlier this month that it would investigate PBM business practices and consolidation. In an official policy statement, the agency wrote that “some have suggested that high rebates and fees to PBMs and other intermediaries may incentivize higher list prices for insulin” and that “rebate and fee agreements may incentivize PBMs and other intermediaries to steer patients to higher-cost drugs over less expensive alternatives.” Actions the agency said it would pursue include cracking down on exclusionary rebates and intensifying scrutiny of formulary design.

Researchers from the USC Leonard D. Schaeffer Center for Health Policy & Economics are pushing for more transparency in the pharmaceutical supply chain and policy changes in the generic drug sector. Their recommendations, published in a white paper on May 31, were based on their findings that PBMs and health insurers cost patients, employers and the federal government billions of dollars per year in the generic drug market.

Karen Van Nuys, Ph.D., one of the paper’s authors and executive director of the Center’s Value of Life Sciences Innovation Project, tells AIS Health, a division of MMIT, that she recommends changes in the way pharmacies set their cash prices as well as in some formularies that favor branded drugs over generics and so-called spread pricing, where PBMs reimburse pharmacies one price, charge health plans a higher price and pocket the difference.

With COVID-19 infections surging once again, the Biden administration has stepped up efforts to increase the supply of Paxlovid, the Pfizer Inc. antiviral that garnered emergency use authorization as a therapeutic treatment for the coronavirus. However, increased availability for Paxlovid might end in coming months — Congress has stalled on providing the increased COVID-19 response funding that the administration requested, and experts say health plans are likely to treat the drug like any other if the federal government isn’t picking up the tab for treatments.

The Biden administration has pushed in recent weeks to increase the availability of Paxlovid, free of charge, to COVID-19 patients. On May 26, the White House released a statement touting the rollout of more than 2,500 “test-to-treat” sites where free testing and Paxlovid courses are available, along with 40,000 locations where antivirals are available for patients. The administration also noted that it had “increased the number of people benefiting from oral antivirals in the last seven weeks, from about 27,000 prescriptions filled each week to more than 182,000 last week.”

The Federal Trade Commission (FTC) said on Tuesday that it will investigate the business practices and consolidation of PBMs, following months of pressure from health care stakeholders. The FTC’s investigation, which is just the latest escalation in a nationwide regulatory push to clamp down on PBMs’ most controversial methods, was praised by plan sponsors and pharmaceutical groups.

The FTC’s leadership, a panel of five commissioners, voted unanimously to launch the investigation under section 6(b) of the Federal Trade Commission Act of 1914. The commissioners are a mix of two Democrats and two Republicans, with the fifth seat filled by the party that holds the White House. The unanimous vote is a reversal for the two Republican panelists appointed by former President Donald Trump. The Republican commissioners voted against a similar inquiry in February, deadlocking with the two Democratic commissioners — the swing seat on the panel was unfilled at the time. That fifth commissioner, Democrat Alvaro Martin Bedoya, was confirmed by the Senate in May on a party-line vote.

Now that many large employers have finalized employee health benefits for 2023, some clear trends are emerging, pharmacy benefit consultants tell AIS Health. Among them: many plan sponsors have traditional drug benefits on auto-pilot but are hyper-focused on high-cost specialty drugs.

For non-specialty drugs, the cost trend is pretty flat, says Paul Burns, a pharmacy practice leader at the HR consulting firm Buck. “There’s been some increases over the pandemic, but it’s not wildly spiking — and that’s where 98% of the utilization is.”

So far, the FDA has approved eight cell and gene therapies, but the agency is expected to approve several more medications in those classes in the next few years. That has caused concern for payers because such medications have high costs and limited clinical evidence, according to speakers who participated in an Avalere Health webinar on May 25.

As such, the federal government, PBMs, health insurers and other payers are testing innovative ways to reimburse hospitals, providers and pharmaceutical companies for administering cell and gene therapies.

Through 2020, CMS spent $68 billion on 38 drugs that were granted accelerated approval from the FDA between 2012 and 2017, with spending after conversion to standard approval accounting for 75% of overall spending, according to a JAMA Health Forum study. However, only 34% of these drugs had a confirmatory trial evaluating a clinical outcome as a primary end point and more than $40 billion was spent for drugs evaluated using surrogate end points. Clinical trials for one drug that converted to standard approval (pembrolizumab) and three that remained unconverted (atezolizumab, durvalumab and olaratumab) for their original indications failed to confirm benefit for primary efficacy end points, while these drugs cost CMS $14 billion in total through 2020. The researchers concluded that “persistent evidentiary gaps should prompt payers to limit spending on promising drugs with unproven benefits.

Between 2008 and 2021, drug launch prices increased by 20% per year, according to new research published in JAMA. In 2020 and 2021, prices rose 11% each year, even after adjusting for manufacturer discounts. In addition, nearly half of all drugs launched in the last two years initially cost at least $150,000 per year. “Rising brand-name drug prices often translate to payers restricting access, raising premiums, or imposing unaffordable out-of-pocket costs for patients,” the study’s authors observed.

An opinion article published in the New England Journal of Medicine argued that the 340B drug program creates “perverse incentives” for preexposure prophylaxis (PrEP) medications that prevent HIV infection by encouraging safety-net clinics to prescribe the most expensive PrEP treatments. The article observes that “insurers reimburse 340B clinics for medications at an amount close to their list price; the difference between the list price and the discounted 340B price results in revenue — known as the ‘340B spread’ — that clinics can allocate toward other health services. The higher the drug’s price, the bigger the spread….The high cost of PrEP medications has made 340B central to the ability of some safety-net clinics…to provide HIV-prevention and other services....Brand-name oral medications for PrEP, Descovy and Truvada… produc[e] a spread of as much as $1,600 per patient per month. That revenue can fund...important services provided by 340B clinics.” That results in “costs to the health care system that far exceed the clinical benefits.”

Democratic lawmakers are discussing a plan that would allow CMS to negotiate the price of certain medications and place a cap on Medicare beneficiaries’ out-of-pocket spending, an effort they hope could lead to the resuscitation of the drug pricing controls contained in the Build Back Better Act (BBBA). While those talks are far from a sure thing to pass, the Biden administration could institute policies to combat high drug prices that do not need congressional approval, according to health policy experts who participated in a Kaiser Family Foundation (KFF) webinar on May 23.

Rachel Sachs, an attorney and professor at the Washington University School of Law in St. Louis who spoke during the webinar, said the administration could particularly make an impact in federal insurance programs such as Medicare and Medicaid. One way could be via the approval of certain Section 1115 Medicaid waivers that states request. For instance, in Oregon’s Section 1115 renewal application in February, the state asked CMS for permission to exclude from its Medicaid formulary drugs approved under the FDA’s accelerated approval program that have “limited or inadequate evidence of clinical efficacy.”

Under a May 17 court decision striking down a CMS final rule slated to take effect in 2023, pharmaceutical manufacturers will not have to ensure that financial assistance provided to patients goes only to patients and not to payers under their copay accumulator and maximizer programs. However, the renewed attention to these programs could spur more states to take action of their own against them, industry experts tell AIS Health.

The Accumulator Rule (CMS-2482-F), published Dec. 31, 2020, could have resulted in patients facing increased out-of-pocket drug costs and pharma companies being held responsible for ensuring they know exactly where their assistance is going, industry experts tell AIS Health, a division of MMIT.