Putting Patients First: Innovative Solutions for Prescription Drugs & Older Americans

U.S. Senator Tim Scott, Ranking Member of the Senate Special Committee on Aging, has published a report exploring the consequences of Democrats' prescription drug price control policies; which include long-term drug shortages (an almost 50 percent decline in access to medicines); shattered innovation (a 50-90 percent decline in new medicines); and bankrupt businesses (an economic loss in the trillions of dollars).

The report also describes four policy options to reduce lower prices and expand access to treatment. Read more at this link.

Pharmaceutical Profits And Capital Markets

An interesting research article at the Health Affairs blog asserts there is no relationship between high U.S. prescription drug prices and drug companies’ research and development budgets. The point of the article is to debunk the argument that research-based drug companies must earn high profits if they are going to reinvest in R&D. While the data are correct, the article misunderstands the nature of capital markets.

U.S. Patients Have Much Greater Access to New Cancer Drugs Than Others Do

New research by scholars at the University of Pittsburgh shows how much better access American patients have to new cancer medicines than their peers in other developed countries:

Of 45 anticancer drug indications approved in the United States between January 1, 2009, and December 31, 2013, 64% (29) were approved by the European Medicines Agency; 76% (34) were approved in Canada; and 71% (32) were approved in Australia between January 1, 2009, and June 30, 2014. The U.S. Medicare program covered all 45 drug indications; the United Kingdom covered 72% (21) of those approved in Europe— only 47% (21) of the drug indications covered by Medicare. Canada and France covered 33% (15) and 42% (19) of the drug indications covered by Medicare, respectively, and Australia was the most restrictive country, covering only 31% (14).

(Y. Zhang, et al., “Comparing the Approval and Coverage Decisions of New Oncology Drugs in the United States and Other Selected Countries,” Journal of Managed Care and Specialty Pharmacy, 2017 Feb;23(2):247-254.

Celebrity Apprentice And Medical Innovation Have Something Important in Common

(A version of this column was published by Forbes.)

A new report should help President Trump find his way out of the confusion suggested by his very mixed signals on the role of medical innovation to American prosperity and patients. Last month, he said research-based drug-makers’ practices were “disastrous,” the industry was “getting away with murder,” and suggested the federal government should dictate prices of medicines.

A couple of weeks later, he told pharmaceutical executives: “You folks have done a terrific job over the years … The U.S. drug companies have produced extraordinary results...” To cap it off, he promised to end “global freeloading.” “Foreign price controls reduce the resources of American drug companies to finance drug R&D and innovation.”

One difficulty with the President’s recent statement is that policies which allow American research-based drug-makers to succeed apply equally to foreign drug-makers which operate here. Any innovative drug-maker which wants to supply its therapies to American patients can apply for patents which assure its intellectual property will not be taken by copy-cats. While patents are issued by national governments, international agreements are necessary to ensure global benefits.

President Trump traduces international trade agreements, which have included protections for intellectual property since the United States and other countries signed the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1994.

However, President Trump should be in a good position to understand how important global protection of intellectual property is. After all, he is a beneficiary.

The Apprentice, which launched in the United States in 2004, has been licensed in many other countries. Effective copyright protection is necessary to ensure President Trump and his business associates’ innovative model of reality entertainment can be enjoyed by global audiences. (The tiff between Mr. Trump and his American successor, Arnold Schwarzenegger, pales beside his 2012 Twitter battle with his British counterpart, Alan Sugar. When asked by Piers Morgan why he did not fire Lord Sugar, Mr. Trump replied “I easily could but as long as Sugar is making me money (it's my show) I won't.”)

Research just published by the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) measures the welfare benefits of protecting all types if intellectual property, from medical innovation to reality TV.

The Roots of Innovation is the fifth edition of the Chamber’s annual effort to rank countries by a number of indicators of strength of IP protection. The current edition ranks 45 countries representing about 90 percent of the world’s Gross Domestic Product. Countries are scored by 35 indicators within six categories of IP protection: Patents, copyrights, trademarks, trade secrets and market access, enforcement, and ratification of international treaties. The indicators measure both law and enforcement: Countries which do not enforce IP rights, despite the letter lf the law, are marked down. Most of the indicators are straight forward: Longer patent, copyright, or trademark terms are better; strong enforcement mechanisms are better; and treaty obligations protecting intellectual property invented in other countries is better.

The report does not attempt to determine causality between strong IP protection and social or economic outcomes. Indeed, 45 indicators is likely far too many to use for such an analysis. Nevertheless, it does determine a number of positive correlations between strong IP protection and other beneficial indicators. For example, the correlation between countries’ scores and

• access to venture capital is 0.77, and countries scoring above the median are 45 percent more likely to attract venture capital and private investment than those scoring below the median;
• Research & development spending is 0.70, and countries scoring above the median are over 40 percent likely to attract private investment in R&D.
• human capital is 0.82, and countries scoring above the median have six times more workers in R&D;
• Development of biological therapies is 0.70, and countries scoring above the median host nearly 15 times more clinical trials on innovative biologic medicines;
• Cutting edge clinical research is 0.73, and countries scoring above the median attract more than 20 times the number of early-phase clinical trials;
• Creative outputs is 0.86, and countries scoring above the median are 75 percent more likely to have larger and more dynamic content and media sectors;
• Access to licensed music outlets is 0.78, and countries scoring above the median have greater access to new, licensed music content with a wider array of choice over secure platforms;
• Greater consumption of new audiovisual content is 0.73, and countries scoring above the median are likely to see at least 3.5 times more theater screenings of feature films, and generate more tax revenue from ticket sales; and
• Wider and more convenient access to video content is 0.61, and countries scoring above the median have more than double the level of advanced and easy-access home entertainment.

Protecting intellectual property in medical innovation and entertainment go hand in hand. The Roots of Innovation shows there are no innovative and prosperous countries today that do not have strong IP protections across the board. As he develops policies that will determine whether patients will benefit from future medical innovation, let’s hope President Trump recognizes this in his own experience as a successful creator of intellectual property.

Government Failure In Public Health: Zika

Other than anarcho-libertarians, most agree that government has a role to play in preventing and suppressing epidemics, a classic public-health problem. Viral or bacterial infections are not passed from animal to person, or person to person, by voluntary exchange. Instead, proximity to another’s infection can lead to an individual’s becoming infected, notwithstanding any market interaction.

So, even the most freedom-oriented individuals accept government spending and restrictions on individual choice when the threat of epidemic increases. In 2014, the arrival at Dallas-Fort Worth airport of a man carrying the Ebola virus caused some lawmakers to seek a ban on air travel from countries where Ebola had broken out.

Divided on Obamacare, Trump and Clinton Both Threaten Medical Innovation

(A version of this column was published by Forbes.)

The recently announced 25 percent rise in Obamacare health insurance premiums has brought renewed attention to health policy. As this is my last column before Election Day, it is time to review how the presidential candidates would address the continuing challenge of skyrocketing health costs.

We should not kid ourselves that Obamacare’s failure is enough to cause the next President or Congress to act energetically to fix the problems Obamacare exacerbated. The interest groups which brought us Obamacare have cut bait and moved on. The health care sector – interests for which the $3.35 trillion spent on health care counts as revenue rather than cost – has bigger fish to fry.

Although insurers are losing money in Obamacare’s exchanges, they are far more concerned with employer-based group benefits, Medicare Advantage, and Medicaid managed care than Obamacare exchanges. Obamacare exchanges cover fewer than 13 million people at any time during the year; and only about four million stick with Obamacare coverage throughout the year. Those poor souls comprise a powerless political constituency, unlike employers or seniors on Medicare.

They Can't Even Give It Away: Global Charity Rejects Free Vaccines

Doctors Without Borders /Médecins Sans Frontières (MSF) has decided to reject a donation of one million doses of pneumonia vaccine from Pfizer, Inc. The global health charity’s convoluted reasoning goes like this:

There is No Such Thing as “Free” Vaccines

Pneumonia claims the lives of nearly one million kids each year, making it the world’s deadliest disease among children. Although there’s a vaccine to prevent this disease, it’s too expensive for many developing countries and humanitarian organizations, such as ours, to afford.

Free is not always better. Donations often involve numerous conditions and strings attached, including restrictions on which patient populations and what geographic areas are allowed to receive the benefits.

Critically, donation offers can disappear as quickly as they come. The donor has ultimate control over when and how they choose to give their products away, risking interruption of programs should the company decide it’s no longer to their advantage.

This remarkable document goes on to praise GSK, a competitor of Pfizer’s, for having declined to offer pneumonia vaccines for free, but instead offer them for $3.05 per dose to all humanitarian organizations. I don’t know about you, but I will take free over three bucks any day.

Mixed News on Generic Drug Approvals

A response to expensive patented medicines is generic competitors. The U.S. has struck a pretty good balance between innovation and low prices through the Hatch-Waxman (1984) Act, which specified patent terms for newly invented medicines, and a pathway for generic competitors to enter the market after a period.

One obstacle to generic entry in recent years was a very slow approval process at the Food and Drug Administration. This led to a backlog, which was unexpected because one important benefit of Hatch-Waxman was that generic competitors did not have to replicate the expensive clinical trials innovative drug-makers had to carry out to receive the FDA’s approval.

The FDA’s Office of Generic Drugs (OGD) considers approving generic copies of drugs upon receipt of an Abbreviated New Drug Application (ANDA) from the manufacturer. The system changed under a law passed in 2012, the Generic Drug User Fee Act (GDUFA). Recent data show improvement:

The United Nations Report on Access to Medicines is a Public Health Hazard

(A version of this Health Alert was published by RealClearHealth.)

Almost one year ago, the Secretary-General of the United Nations convened a High-Level Panel on Access to Medicines, which is especially limited among the poor in parts of the developing world still suffering the burden of tropical diseases (such as river blindness, sleeping sickness, leprosy, and rabies.) According to World Health Organization, 1.7 billion people in 185 countries needed treatment for neglected tropical diseases in 2014.

In the 21st Century, such numbers are shocking. However, the panel’s recommendations would have many harmful effects on the development of new medicines that benefit patients in both the developing and developed world. Indeed, it identifies the wrong culprit in the ongoing health catastrophe in the developing world.

Rather than allow the current decentralized system of primarily private for-profit - supplemented by some government and philanthropic - funding for researching, developing, and distributing new medicines, the panel recommends governments take over this function. And not even governments acting independently, but a sort of supra-national cartel would dictate how the world’s R&D budget would be spent.

Specifically, the panel advocates that governments “negotiate global agreements on the coordination, funding, and development of health technologies.” The funding would come from “transaction taxes and other innovative financing mechanisms.” (Only a panel mostly comprised of public-sector veterans would describe tax hikes as “innovative financing.”)

The report estimates $240 billion was invested in medical R&D in 2009 and 2010, of which $144 billion was from the private sector, $72 billion from the public sector, and $24 billion from the non-profit sector. Ninety percent was from highly developed countries, especially the U.S., which the panel recognizes holds a “central position in health technology innovation.”

The purpose of a multi-lateral government cartel seizing control of this capital would be to cause a “delinkage” between R&D spending, prices and consumer costs. In other words, investors would no longer be allowed to execute business plans that channeled R&D funding to profitable therapies.

Who Benefits From the "Right to Try” Experimental Medicines?

The Goldwater Institute has had great success getting states to pass “Right to Try” laws. Right to Try allows a desperately sick patient to take an experimental new medicine before the FDA has approved it.

Thirty-one states have passed Right to Try. Further, U.S. Senator Ron Johnson (R-WI) has tried to get a federal Right to Try law through the U.S. Senate. However, there has been push-back. According to Allison Bateman-House of NYU Langone Medical Center, “there is no confirmed instance of anyone getting a drug through Right to Try.” Jonathan Friedlaender, a survivor of advanced metastatic melanoma, has written a compelling essay in Health Affairs, which concludes Johnson’s proposed federal law would not improve access to experimental medicines.

The problem has two parts:

A Modest Proposal To Reduce The Price Of EpiPens

(A version of this Health Alert was published by Forbes.)

Posturing politicians on Capitol Hill conducted a hearing a few days ago, in which they grilled Heather Bresch, CEO of Mylan. N.V., which makes EpiPens. Prices of EpiPens have skyrocketed in the last few years. According to Aaron E. Carroll, writing in the New York Times, the real (inflation-adjusted) price of EpiPens has risen 4.5 times since 2004.

The politicians were more interested in wagging their fingers and tut-tutting at Ms. Bresch for the amount of money she has made, than actually figuring out a way to lower the price of EpiPens. (By the way, Ms. Bresch testified she has no intention of reducing prices in response to their badgering.)

A Health Care Legacy Moonshot for Obama

(A version of this Health Alert was published by Forbes.)

President Obama has an opportunity to win a positive legacy in health care. Although his attempt at payment reform, Obamacare, has failed in public opinion, he is also encouraging important initiatives in medical innovation. The Cancer Moonshot and Precision Medicine Initiative represent investments in innovation that can bring big payoffs. However, they will not succeed fully unless the Food and Drug Administration allows patients access to new therapies. Legislation modernizing the FDA, the 21st Century Cures Act, is being fumbled inches away from the Congressional end zone. Presidential leadership is needed.

EpiPen: A Case Study In Health Insurance Failure

I recently wrote a post describing EpiPen as a “Case Study in Government Harm,” describing how the government had made it possible for the manufacturer to increase prices of the life-saving drug multiple times without fear of retaliation. It is also a case study in how health insurance distorts our choices and increases their cost. I learned this by following an Internet advertisement for EpiPen down its rabbit hole.

The ad induced me to download my “EpiPen Savings Card” which would ensure I paid nothing for my EpiPens (up to six, according to the ad):

However, I had to answer a skill testing question first: What was my insurance coverage? As you can see from the screenshot below, when I answered I had no insurance, the EpiPen savings card was figuratively ripped from my hand:

EpiPen: Government is Part of the Problem

Much has been written about the dramatic price hikes for EpiPens, which inject a drug that counters severe allergic reactions (anaphylactic shock). According to Aaron E. Carroll, writing in the New York Times, the real (inflation-adjusted) price of EpiPens has risen 4.5 times since 2004.
Both Carroll and the Wall Street Journal have described how government has allowed EpiPen’’s manufacturer to hike prices so much. EpiPen is complicated, being both a drug and a device. The drug is very inexpensive, and not patented. The device is protected by patents issued in 2005, which expire in 2025.

First, the government made a couple of interventions in the market that allowed the manufacturer to raise prices above the free-market level. The federal government changed its guidelines such that the EpiPens have to be sold in packages of two (while customers might prefer just one, or at least an odd number). Also, the federal government gave public-emergency grants to states on condition they stockpile EpiPens.

Government Price Controls & Drug Addiction

In a recent print issue of National Review, David French has a sobering article describing how the Veterans Health Administration is overdosing veterans on prescription drugs. A veteran himself, French has plenty of anecdotes about his buddies:

They couldn’t sleep, so they had to take Ambien. They were depressed, so they were taking Lexapro. They had chronic neck and back pain after hanging 90 pounds of gear on their frame day after day, month after month, so they took Lortab. They were anxious, so they took Xanax.

It was as if a VA doctor had simply listened to a list of symptoms, located a pill to address each complaint, loaded up the patient with prescriptions, and called it “treating” a soldier with PTSD. 

In 2014, an inspector-general report found that the VA was systematically over-medicating its patients – even to the point of death.

Wisconsin’s Senate race is being roiled by a report on the VA facility at Tomah, a place so notorious for freely writing narcotics prescriptions that it gained the nickname “Candyland.”

(David French, “Casualties of the VA,” National Review, Vol. LXVIII, No. 12, July 11, 2016, pp. 20-21.)

Chemotherapy Payment Reform: Medicare Is Missing the Elephant in the Room

Last May I wrote about the uproar over Medicare’s proposed changes to how it will pay doctors who inject drugs in their offices. This largely concerns chemotherapy. Currently, physicians buy the drugs and Medicare reimburses them the Average Sales Price (ASP) plus 6 percent. The proposed reform would cut the mark-up to 2.5 percent and add a flat fee of $16.80 per injection.

I did not think the reform would have a positive impact, but I also thought criticism was overblown. Well, Medicare has managed to irritate all the affected interest groups to such a degree that it is likely to toss the proposal and go back to the drawing board.

Should Drug Investors Worry About Medicare Revenues?

(A version of this article was published by Forbes.)

The pharmaceutical sector has held up quite well in this aging bull market. Now, a new political risk is on the horizon: The Independent Payment Advisory Board (IPAB), which was instituted in the 2010 Affordable Care Act. Starting in 2015, the IPAB was empowered to cut Medicare spending if costs increased faster than a certain rate. It quickly faded into the background as the growth in Medicare spending moderated after President Obama signed the Affordable Care Act.

Those days are gone. The latest annual Medicare Trustees’ report, published on June 22, indicates Medicare spending will cross the threshold for IPAB to swing into action in 2017. The 2017 threshold is determined by a target rate of growth which is the average of the change in the Consumer Price Index (CPI) and the medical-care component of the CPI. Estimates of both actual Medicare spending per capita and the target rate are calculated as five-year averages.

Table I, extracted from a recent presentation by Medicare’s Chief Actuary, illustrates why investors are becoming concerned. Table I highlights this year’s Medicare spending per capita will increase 2.21 percent (averaged over the five years, 2014 through 2018). The target rate is 2.33 percent, higher than the estimated actual rate, so the threshold is not crossed. IPAB remains asleep.

Reform Medicare Part D To Improve Access To Medicines

Specialty drugs are typically high-cost prescription drugs used to treat complex chronic and/or life threatening conditions. Many do not have substitutes available at lower costs.  Over the last decade, the Medicare Part D benefit has imposed high out-of-pocket costs as a way to control costs of specialty drugs. This is causing many patients not to fill prescriptions. Some patients may be adding costs to the system by getting drugs more expensively by injection in doctors’ offices, where they are covered by Medicare supplemental insurance.

Misleading Rhetoric on Cancer Payment Reform

A few weeks ago, Medicare proposed a pilot program to test a new way to pay doctors who inject drugs. Cancer is the big kahuna, cost-wise, when it comes to injected drugs. Medicare payment policy leads to certain industry practices to profit from the status quo. When the status quo is threatened, the “preservatives” immediately form a defensive coalition to stop the change.

Although I do not endorse this precise reform, the campaign to roll it back has become irresponsible and misleading. Currently, physicians who inject drugs are paid by Medicare a margin of 6 percent on top of a reported price called the Average Sales Price (ASP). The concern is that the oncologists make more margin off an expensive drug than a less-expensive drug.

People who sell injection drugs to physicians sometimes refer to their sales technique as “selling the spread.” Physicians, especially oncologists, sometimes say they cannot earn a living off the fees Medicare pays them, so they need to earn the “spread,” too. I do not believe there is evidence “selling the spread” leads oncologists in general to prescribe inappropriately, but others do. Further, whether this reimbursement leads to artificially expensive drugs is a different issue than oncologists’ prescribing behavior.

Producer Price Index: Pharma Prices Stand Out

The Producer Price Index (PPI) for final demand goods grew 0.2 percent last month, or 0.3 percent less food and energy. Prices for pharmaceutical preparations and most medical devices grew significantly faster, at 1.0 percent and 0.5 percent, although prices for X-Ray and similar equipment were flat.

With respect to final demand services, for which prices rose 0.1 percent (or 0.3 percent, less trade, transportation, and warehousing), prices of medical services changed similarly. However, prices for health insurance jumped 0.8 percent.

Read more at NCPA's Health Policy Blog.