Focus on Drug Prices Continues Amid Uncertainty Over Potential Changes

High prescription drug prices continue to be of concern at the federal level. Signaling the administration’s strongest action so far on drug pricing, President Joe Biden on July 9 unveiled his Executive Order on Promoting Competition in the American Economy. And earlier this month, HHS issued a proposed rule seeking to rescind the Most Favored Nation (MFN) drug price model, saying it instead was exploring value-based care options for the Medicare Part B program. However, it remains to be seen whether any significant changes are going to occur any time soon, say industry experts.

Biden’s executive order called for the HHS secretary to take multiple health care services-focused actions, including:

  • Publish a proposed rule for notice and comment on over-the-counter hearing aids no later than 120 days after the order.
  • Support existing and new price transparency initiatives for hospitals, other providers and insurers.
  • Improve competition and consumer choice for health insurance plans.
  • Submit no later than 45 days after the order “a plan to continue the effort to combat excessive pricing of prescription drugs and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the Federal Government for such drugs, and to address the recurrent problem of price gouging.”
  • Promote generic and biosimilar drugs to help lower prices of and improve access to prescription drugs and biologics by (1) clarifying and improving the approval framework for these therapies, including “improving and clarifying the standards for interchangeability of biological products”; (2) supporting biosimilar uptake through educational materials for and communications with providers, patients and caregivers; (3) updating FDA regulations for biologics to clarify requirements and processes related to Biologics License Applications by advancing the Biologics Regulation Modernization rulemaking (RIN 0910-AI14); and (4) working with the chair of the Federal Trade Commission (FTC) to detect and address efforts to get in the way of generic and biosimilar competition “including but not limited to false, misleading, or otherwise deceptive statements about generic drug and biosimilar products and their safety or effectiveness.”
  • Submit no later than 45 days after the order any concerns that the patent system does not “unjustifiably delay generic drug and biosimilar competition beyond that reasonably contemplated by applicable law.”
  • Continue to implement the Creating and
    Restoring Equal Access to Equivalent Samples (CREATES) Act of 2019 to support the market entry of generics and biosimilars by speedy issuance of covered product authorizations and issuance of guidance around CPAs.
  • Through the CMS administrator, prepare for Medicare and Medicaid coverage of interchangeable biosimilars and for payment models that support the growing use of generics and biosimilars.
  • Through the FDA commissioner, work with states and tribes to import prescription drugs in accordance with the Medicare Modernization Act of 2003.

In addition, the order encourages the FTC to address practices that inhibit competition, including “unfair anticompetitive conduct or agreements in the prescription drug industries, such as agreements to delay the market entry of generic drugs or biosimilars,” known as “pay-for-delay” deals. According to a Morrison & Foerster article published July 16, this is “the most significant new proposal.”

Ryan Cox, vice president of the access experience team at PRECISIONvalue, points out the fact sheet on the executive order released by the White House “identifies ‘pay-for-delay’ agreements as a cause for high drug prices, specifically by $3.5 billion per year, as well as reducing innovation.”

“With a focus on antitrust and marketplace competition, the recent executive order from President Biden reasserts many of the policy priorities that were included in his campaign promises, including a focus on pharmaceutical companies to address increasing drug prices,” explains Erin Lopata, Pharm.D., senior director of the access experience team at PRECISIONvalue. She notes that through the order, “Biden calls for aggressive reforms to lower prescription drug costs, including allowing Medicare to negotiate drug prices, an updated framework and approval process for interchangeable biosimilars, support for drug importation programs, imposition of inflation caps and other enacted reforms.

“Despite the call for sweeping reforms related to the pharmaceutical industry, this order represents only the first step in a lengthy process that will need to occur before these initiatives are implemented and have an impact on the health care system,” she continues. “Any meaningful reforms will require action from the legislature and/or regulatory agencies, and it remains uncertain as to if and when these parties will take action based on Biden’s executive order.”

Asked about the biosimilars provisions, Elan Rubinstein, Pharm.D., principal at EB Rubinstein Associates, replies that the executive order “reinforces actions the government is already taking to improve the biosimilars market.” He adds that the instruction to Medicaid and Medicare to prepare for interchangeable biosimilars “could prove particularly interesting if CMS responds to the instruction by implementing policies that preference interchangeable biosimilars,” the first of which was just approved in late July (see story, p. 1). “In addition to impact to government programs and those covered by them, such policies are likely to influence private-sector insurance coverage policies,” he states.

Lopata notes that the executive order “included a strong focus on supporting interchangeability of biosimilar products through updates to existing FDA biologic regulations, as well as education on biosimilars for health care providers, patients, and caregivers. Uptake of biosimilars has been slow to start but has been slowly increasing over time. Many in the industry are expecting that interchangeable status will further catalyze biosimilar uptake, as it will allow patients to seamlessly be switched over to biosimilars. With Semglee (insulin glargine-yfgn) just recently becoming approved as the first interchangeable biosimilar, many in the industry will be watching closely to understand exactly how interchangeable status impacts uptake. Any changes to frameworks or regulations that support manufacturers in achieving interchangeable status is expected to have a meaningful impact on usage of biosimilars.”

According to Cox, “CMS should ensure that there are no current barriers to uptake of these products by beneficiaries or disincentives to coverage of these products vs. the innovators. New rules could be considered that would prohibit payers from disadvantaging an interchangeable biosimilar product to the originator through either tier placement or utilization management.”

On the provision directing HHS to submit any concerns over patents delaying biosimilar competition, Rubinstein tells AIS Health, a division of MMIT, that “my non-lawyer opinion is that originator biologics manufacturers have created ‘patent thickets,’ which effectively extend patent life and that would likely require litigation by biosimilar manufacturers to try to invalidate — or, alternatively, would require delay deals between biosimilar and originator manufacturers around launch of the biosimilar at a future time to avoid litigation (e.g., the many such arrangements for Humira biosimilar competitors). The HHS report will likely include discussion of these issues. I expect the HHS report to primarily highlight the problem in the public eye and for legislators and underscore the problem by having been ordered produced” by the executive order.

A recent report from the Medicare Payment Advisory Commission (MedPAC) found that biosimilars may be starting to have an impact on drug prices. The report, titled Health Care Spending and the Medicare Program, was published in July 2021. It found that while total Medicare spending on all Part B drugs continued to rise from 2018 to 2019, average sales prices (ASPs) for some traditionally costly drugs actually decreased, a trend that may be due to biosimilar competition, it posits.

According to the report, “Over the period from 2005 to 2021, 17 out of 20 of the top Part B drugs have experienced net price increases, with 12 of these products’ ASPs increasing faster than the consumer price index for urban consumers on average over the period.”

However, from first-quarter 2020 to first-quarter 2021, more of the top 20 drugs — 12 — had a price decrease than had a price increase. In addition, when compared with the five-year average annual rate of price growth prior to 2020, the ASP for 17 of the top 20 agents either grew at a slower rate or decreased between the first quarter of 2020 and the first quarter of 2021.

The report suggests that biosimilars could be the reason for these trends. It notes that five of the originator biologics within the top 10 have faced biosimilar competition since 2019 or earlier: Roche Group member Genentech USA, Inc.’s Avastin (bevacizumab) and Herceptin (trastuzumab); Amgen Inc.’s Neulasta (pegfilgrastim); Remicade (infliximab) from Janssen Biotech, Inc., a Johnson & Johnson company; and Rituxan (rituximab) from Genentech and Biogen. “For these five products, the recent price declines have begun to reverse a long period of rising prices, with average price growth over the last 16 years ranging from -1.0 percent per year for Remicade to 4.6 percent per year for Rituxan,” says the report.

Medicare pays for Part B originator biologics at ASP+ 6%; for biosimilars, it pays 100% of the biosimilar ASP plus 6% of the ASP of its reference biologic. Payment rates are generally lower for biosimilars since they generally have lower prices than their reference drugs. According to the report, “the extent to which originator biologics have lowered their prices in response to biosimilar entry and the extent to which market share has shifted to biosimilars varies by product” (see chart, p. 7).

On the CREATES Act, Cox explains that the law “is designed to establish a private right of action that allows generic and biosimilar product developers to sue brand companies that refuse to sell them product samples needed to support their applications. If the generic or biosimilar product developer prevails, a court will order the sale of samples, award attorneys’ fees and litigation costs to the product developer and may impose a monetary penalty on the brand company.”

Teva Filed Case Based on CREATES Act

Teva Pharmaceuticals Development, Inc. on July 13 filed what is believed to be the first lawsuit (No. 2:21-cv-03105) based on the CREATES Act. The company is suing Amicus Therapeutics U.S., Inc. over its alleged refusal to provide access to samples of its Fabry disease therapy Galafold (migalastat).

Lopata tells AIS Health that while the executive order may spur some new initiatives, “it is more likely that we’ll see some familiar strategies that have been previously discussed, including initiatives that were considered by the Trump administration. One concept that continues to rise to the top of discussion is support for drug importation from other countries, even though there has been pushback on this strategy from stakeholders across the health care system, citing concerns around safety and supply chain vulnerabilities. More practically, few countries appear willing to support this strategy, and there is limited evidence to suggest that importation will support the overall goal of managing increasing drug prices. Another concept that could re-emerge is limiting drug price increases to no more than the rate of inflation. Limits on annual drug price increases, if passed and implemented, could have meaningful impact on drug prices over time, although these requirements would likely be limited to Medicare.”

Rubinstein says it’s “uncertain” what may be the result of the drug price provisions in the executive order. He says it’s likely that the HHS secretary’s plan to address high prices for prescription drugs will echo approaches under discussion, such as Senate Finance Committee Chairman Ron Wyden’s (D-Ore.) proposals for drug pricing reform, as well as proposed legislation, such as the Elijah E. Cummings Lower Drug Costs Now Act (H.R. 3).

Unveiled June 22, Wyden’s Principles for Drug Pricing Reform paper contains five values: (1) Medicare must be able to negotiate with drug companies, (2) U.S. consumers must pay less out of pocket at a pharmacy, (3) drug prices that rise faster than inflation “will not be subsidized by patients and taxpayers,” (4) drug pricing reforms should go beyond Medicare to all Americans and (5) drug prices “should reward scientific innovation.” The move is part of the Finance Committee’s effort “to produce a consensus proposal that can pass both chambers of Congress.”

H.R. 3 Was Reintroduced in April

After initially being introduced in September 2019 and passing in the House of Representatives, H.R. 3 was reintroduced in April. That bill has several drug price proposals, including that Medicare must negotiate prices for certain drugs. But it has received tremendous pushback from Republicans and the pharmaceutical industry. After the legislation was first introduced, then-Senate Majority Leader Mitch McConnell (R.-Ky.) said that legislative branch would not take action on the bill, which he described as “socialist price controls.”

However, according to an article posted July 23 on the Kaiser Family Foundation website, “while the immediate prospects for legislation to allow the federal government to negotiate drug prices for Medicare and private payers are unclear, the proposal may have greater momentum in the current session of Congress given support among the leadership in the House and Senate, the strength of public support among both Democrats and Republicans, and the potential to achieve meaningful savings for patients, employers, and Medicare.”

Cox tells AIS Health that the issue “appear[s] to have momentum in both the House and Senate.…Given the current control of Democrats in the House and Senate, as well as President Biden in the White House, prospects are more favorable than under prior administrations, although a clear path forward is not certain.”

That said, Rubinstein states that “I personally do not expect that the legislative restriction against Medicare direct negotiation of drug prices with pharmaceutical manufacturers will be lifted during this administration, because (1) there is fierce lobbying in opposition, (2) there are many legislators opposed and (3) Senate rules require 60 votes to pass if a filibuster is invoked.” For these same reasons, he says, “I personally do not expect significant drug pricing reform to occur during this administration.”

Adds Cox, “prior to the mid-terms in 2022, there does not seem to be enough support or momentum in the Senate to pass significant drug pricing reforms.”

Rule Seeks to Rescind MFN Model

One effort from the previous administration that looks unlikely to move forward within the current administration is the MFN drug price model. On Aug. 6, CMS released a proposed rule that seeks to rescind the MFN interim final rule (86 Fed. Reg. 43618, Aug. 10, 2021).

The agency is accepting comments until Oct. 12.

Implemented through the CMS Center for Medicare & Medicaid Innovation (CMMI), the MFN model is like a legislative zombie, going through cycles of being published, getting struck down and then revived in a slightly different form.

Its first iteration, known as the International Pricing Index (IPI) model (83 Fed. Reg. 54546, Oct. 30, 2018), was unveiled on Oct. 25, 2018, in an Advanced Notice of Proposed Rulemaking (ANPRM). It proposed that instead of CMS reimbursing Medicare Part B drugs at ASP plus 6%, it would reimburse these medications per an IPI based on drug pricing data from not only the U.S. but also 16 other developed countries (SMA 11/18, p. 1).

That ANPRM was followed by a July 24, 2020, executive order that took a more hard-hitting approach than the IPI in that it called for MFN pricing in Part B (SMA 8/17/20, p. 1). The order was signed yet never made public, as then-President Trump encouraged drugmakers to come up with an alternative approach.

When the industry and the Trump administration could not reach an agreement, the former president revoked that order and issued another one on Sept. 13, 2020, that focused on MFN pricing for Parts B and D (SMA 10/5/20, p. 1).

Most Recent MFN Effort Was in 2020

The most recent MFN model (85 Fed. Reg. 76180, Nov. 27, 2020) was published on Nov. 20, 2020, as an interim final rule with a comment period ending on Jan. 26, 2021 — almost one month after its scheduled start date (SMA 12/21/20, p. 1). The model was to “test whether more closely aligning payment for Medicare Part B drugs and biologicals…with international prices and removing incentives to use higher-cost drugs can control unsustainable growth in Medicare Part B spending without adversely affecting quality of care for beneficiaries.”

The mandatory model was set to be tested nationwide for seven years, running from Jan. 1, 2021, to Dec. 30, 2027. It had a phased-in approach, with reimbursement at 75% ASP plus 25% MFN price the first year, 50% ASP plus 50% MFN in 2022, 25% ASP plus 75% MFN in 2023, with the remaining four years at 100% MFN.

The rule also replaced the ASP plus 6% calculation that Medicare pays per drug with a flat add-on amount, which was $148.73 for the planned first quarter of the model.

As the new proposed rule notes, the most recent model was the subject of four lawsuits filed during its comment period. On Dec. 28, 2020, a U.S. district court issued a nationwide preliminary injunction that preliminarily enjoined HHS from implementing the model, which, in turn, stayed two of the other lawsuits.

The fourth lawsuit was filed by Regeneron Pharmaceuticals, Inc. against HHS seeking to prevent it from applying the interim final rule to its ocular treatment Eylea (aflibercept), a therapy had the most Part B spending in 2018. On Dec. 30, 2020, a U.S. district court issued a preliminary injunction in that case as well, preliminarily enjoining HHS from doing so.

The main lawsuit impacting HHS’s ability to implement the model has been granted stays multiple times, most recently on July 29, 2021, until Sept. 27, 2021.

The proposed rule noted that HHS received “approximately 1,166 timely pieces of correspondence” to the November 2020 interim final rule. Most of them agreed that high drug prices need to be addressed, and almost all were concerned about implementing the model during the COVID-19 pandemic. According to the proposed rule, “given that the nationwide preliminary injunction precluded implementation of the MFN Model on January 1, 2021, as contemplated, that multiple courts found procedural issues with the November 2020 interim final rule, and that stakeholders expressed concern about the model start date, we are proposing to rescind regulations added by the November 2020 interim final rule and remove the associated regulatory text at 42 CFR part 513.”

The proposed rule referred to the July 9 executive order and its drug price and access sections. It noted that “HHS is exploring opportunities to promote value-based care for our beneficiaries; to address the high cost of Medicare Part B drugs, manufacturers’ pricing, and the resulting growth in Medicare Part B drug spending; and to modernize the Medicare program to improve the quality and cost of care for beneficiaries. We will continue to carefully consider the comments we received on the November 2020 interim final rule as we explore all options to incorporate value into payments for Medicare Part B drugs and improve beneficiaries’ access to evidence-based care.”

The proposed rule came almost exactly a month after the administration gave the MFN interim final rule to the Office of Management and Budget for review. According to Michael Newshel, analyst at Evercore ISI, in an Aug. 6 research note, “at the time it was not clear whether the model would be withdrawn or instead the Biden administration might try to scale it back or rework it to have a better chance at getting past legal challenges. This is not the end of the road, however, because the administration is still planning alternative executive action on drug pricing. Last month the president issued an executive order that called for a comprehensive plan to combat high drug prices within 45 days — by August 23. Today’s proposal hints that the alternative could be some form of value-based payment model for Part B rather than referencing a different way to make an international pricing benchmark work.”

According to the Morrison & Foerster article, “these recent actions on drug importation and the MFN proposal, combined with the proposals in the Executive Order on Promoting Competition in the American Economy, demonstrate the Biden administration intends to keep the pressure on drug pricing.”

Contact Cox and Lopata through Tess Rollano at trollano@coynepr.com and Rubinstein at elan.b.rubinstein@gmail.com.

Angela Maas

Angela has an extensive background of editing, reporting and writing for trade and consumer publications. She has written Radar on Specialty Pharmacy (formerly called Specialty Pharmacy News) since she joined AIS Health in 2005 and has broad knowledge of the various issues at play within the space. Before joining AIS Health, she was managing editor at Employee Benefit News and Employee Benefit News Canada and managing editor at HemAware (a hemophilia publication), Lupus Living and Momentum (a multiple sclerosis publication). She has a B.A. in English and an M.A. in British literature from Arizona State University.

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