Prescription Medication Drug Spending

Transcription

1 Objectives: Prescription Medication Drug Spending C. Michael White, Pharm.D., FCP, FCCP Professor and Chair of Pharmacy Practice & Director of the UConn Evidence based Practice Center Storrs, CT Upon completion of this lecture, learners will be able to: 1. Identify current trends in drug spending 2. Select the main drivers of high drug costs 3. Discuss the benefits and risks associated with different strategies used or proposed to control healthcare costs Disclosures Dr White has nothing to disclose regarding this presentation. He has not received funding for composing or presenting this content or from entities that may benefit from the content being presented herein. Family of 4 with Private Insurance, Who Pays What? 17% = $4,316 26% = $6,717 57% = $14,793 Employer Contribution Employee Contribution Employee Out of Pocket Average family spends $11,033 per year on healthcare expenses mmi/ Value of Pharmaceuticals New Medicines Account for 40% of Increase in Life Expectancy Drug Spending Where does the money go Lichtenberg FR. The Impact of New Drug Launches on Longevity: Evidence from Longitudinal, Disease-Level Data from 52 Countries, , (Cambridge, Mass., National Bureau of Economic Research: June 2003). 1

2 Value of Pharmaceuticals Reductions in Disease Attributed Deaths Drug Spending: Fast Facts 17% of all medical spending is prescription drug spending $457 billion spent on prescription drugs Biologic drugs are responsible for 73% of spending growth over the past 5 years Biologic drugs average cost $53,000/yr Higher than median US household income Three times the median social security benefit Orphan biologic drugs cost $137,000/yr Costs rose 5.2% in 2015 after a 13% rise in 2014 Tightly managed plans saw a 3.3% increase in 2015 Tighter management is inconvenient and time consuming for patients and clinicians but cost effective EFPIA Purvis L. Health Affairs Blog 2016/05/17. Express Scripts 2014 Drug Trend Report Prescription vs. Medical Cost Increases Over Time Prescription Drug Spending in 2015 vs mmi/ $457 billion spent on prescription drugs in 2015 Express Scripts 2015 Drug Trend Report; usahealthcare pricing iduskcn0wa2o0 Brands are Up, Generics are Down Assessment Question #1 1. What has happened to drug prices gone over the course of time? A. They have gone up slower than inflation B. They have gone up faster than medical costs since 2001 C. Both generic and brand name drug costs have gone down since 2008 D. Both A and C are true Express Scripts 2014 Drug Trend Report 2

3 How The Traditional Classes Break Down Specialty Drugs: The Elephant in the Room Class # Scripts (pmpy) Prevalence Cost/Script Diabetes % $94.21 Pain/Inflammation % $38.36 Cholesterol % $29.78 ADD From # % $ Hypertension/Heart Dx % $10.45 Heartburn/Ulcer % $43.14 Mental/Neurological % $ Asthma % $51.37 Compounded Drugs From # % $1, Skin Conditions % $ New to List, Depression Fell Off Express Scripts 2015 Drug Trend Report How The Specialty Classes Break Down Class # Scripts (pmpy) Prevalenc Cost/Script e Inflammatory Dx % $3,036 Multiple Sclerosis % $4,549 Oncology % $7,159 Hepatitis C % $17,090 HIV % $1,272 Growth Deficiency % $2,735 New, Replaces Misc Disorders Cystic Fibrosis % $6,441 Pulmonary Arterial HTN % $3,892 Hemophilia New, Replaces Transplant % $25,669 Sleep Disorders % $8,929 Express Scripts 2015 Drug Trend Report Why are Prescriptions So Expensive? 1. New Drugs in Small Markets (Biologics) Many new drugs are for rare conditions or cancer subtypes involving a particular genetic mutation Market is thousands or hundreds, not millions of people Biologics are cell produced, not chemically mass produced They are more expensive to make, store, and administer There are no generic biologic agents Mechanism of action specificity reduces competition and price negotiating power Cohen JP. J Market Access and Health Policy. 2014;2: file:///c:/users/cmw02007/downloads/ PB.pdf Orphan Drugs Orphan Drug Act 1983 Special grants to sponsor research into rare diseases 50% tax credit on clinical test costs Shorter FDA approval time Guarantees 7 years of patent life after drug is FDA approved Open to diseases with fewer <200,000 people afflicted If approved and then used in larger numbers, companies maintain their designation and benefits 34 drugs FDA approved from 1967 to 1983 would have qualified as orphan drug From 1983 through 2009, 347 orphan drugs FDA as of the end of 2009 Share of total pharmaceutical market represented by orphan drugs was 3.5% in 2015 and estimated at 4.5% by ,112 orphan drugs studied from 1983 to 2009 Cohen JP. J Market Access and Health Policy. 2014;2: file:///c:/users/cmw02007/downloads/ PB.pdf Kesselheim AS. National Academies Press. 3

4 2. Price Control Strategies Lax The US government does not regulate national drug prices Many countries have government agencies determine coverage for all citizens Explicit rationing of care based on price or value (QALY, Cost per Life Year Saved) Coverage decisions made by numerous private (PBM/Insurers) and public entities (CMS, VA) Medicare is not allowed to negotiate drug prices with drug manufacturers Market forces to control cost are circumvented by the manufacturers and US government Coupons and patient rebate cards to circumvent copay barriers Legislation weakening patient denials US Agency for Healthcare Research and Quality prohibited by law from even mentioning cost in comparative effectiveness reviews Drug makers in US set prices based on what the market will bear reasons drugs are expensive of which two are false/#6338abd948a5 Competition Lowers Prices If people choose and then pay (phones, pools, houses, cars, food), market forces work well, people buy the option that best fits with their ideals and financial realities Manufacturers in other industries charge what the market will bear but competition or fear of competition holds down prices In 1979 the Federal Trade Commission stated the forces of competition do not work well in a market where the consumer who pays does not choose and the physician who chooses does not pay. Insurance company or government had been the consumer until recently, the patient paid little to no part of the cost Unless they were the uninsured Now insured with tiered co pays or coinsurance patients are increasingly the consumer Which Type of Payor Did Best: Traditional Drugs? Which Type of Payor Did Best?: Specialty Drugs government policypromotes high drug prices/ takeaways ondrug spending.html takeaways ondrug spending.html Price Control Strategies Abroad One prime way that costs can be curtailed is via rationing Of 46 European countries assessed, ten reimbursed no biologic DMARDs UK does not allow use of several therapies for kidney cancer because the cost per life year saved is above 20,000 euro or pound (~$23,000) Akin to choices made in other European countries for expensive or rare diseases We can only spend our money once. If we spend it on a few people with rotten diseases, we will deprive others UK Official When we do these big assessments, and see that we can save, say 200 million kronor, I see that this money can be used for another patient group. Swedish Official Ann Rheum Dis Jan;73(1): doi: /annrheumdis Epub 2013 Mar 6. June 2009/Drug Watch/33/Health rationing in Europe can cancer get a fair hearing.html Price Control Strategies Abroad FDA approved 116 outpatient orphan drugs between 1983 and 2012 In England, only 36 of these were reviewed by NICE, 15 were not reimbursed and 12 were only conditionally reimbursed (42% rejection rate) In Netherlands, 98 of these were reviewed by the Health Insurance Board, 14% denied reimbursement, 24% conditionally reimbursed 11 orphan drugs in US cost more than $250,000/year Most have 20 28% co insurance (Medicare Part B and D) None of these drugs have been reviewed by NICE Netherlands has earmarked money for 7 of these orphan drugs but when it is gone, it is gone Cohen JP. J Market Access and Health Policy. 2014;2: file:///c:/users/cmw02007/downloads/ PB.pdf 4

5 3. Lengthy Exclusivity Laws Federal law prohibits the FDA from approving a copy of a new drug for a period of seven to 12 years even if there are no patents Patents last longer in the US than in other countries Patents for orphan drugs are especially long even if the drugs end up being used for non orphan indications 5 year exclusivity for small molecules and 12 year exclusivity for biologics Up to 5 year extensions if certain studies are conducted + six month pediatric exclusivity extension The FDA is prohibited from approving a generic drug anytime a claim of patent infringement is alleged Policy that has encouraged patent claims just to delay competition Company can pay generic companies NOT to manufacture a competitor Generics Reduce Drug Prices Loss of Exclusivity = Increased Competition and Lower Cost Lichtenberg FR. file:///c:/users/cmw02007/documents/drug%20costs/generics%20and%20cost.pdf Patent Expirations Increase Utilization and Decrease Prices of Meds 4. Limited Competition in the Market Consolidation in the brand name manufacturer market in years past reduced the number of companies making me too drugs Drug in the same class that were brand name but provided similar efficacy and safety Fewer brand name drugs losing patent protection versus years past FDA backlog in approving new generics limits competition Manufacturers able to pay generic companies not to produce generic versions Consolidation in the generic market reduces number of generics for a given brand name drug Investment groups buy target generics and price gouge For older, brand name drugs that treat conditions too rare to attract multiple manufacturers, the sole maker has a de facto monopoly Poor oversight of foreign manufacturing facilities triggered production shutdowns Generics: The Best Deal in Healthcare Generics saved consumers and insurers over $1 trillion dollars to date $88% of prescription are for generics in 2014 ~50% generic use in 1990s Patent expirations in 2014 reduced spend $11.9 billion down from $29.3 billion in 2012 Cost analysis by Connecture on 21,000 generics (2015 vs. 2008) ~50% had no price change ~5% had prices drop more than 30% ~17% had prices rise dramatically (more than double) governmentpolicy promotes high drug prices/ tips for fighting risingprescription drug costs /print Generic s Not As Wonderful These Days Prices driven by willingness to pay, not just cost of manufacture Competition drives down cost Consolidation in the industry 2009, profit outlook in generic industry was poor Extensive competition holding down price Consolidation in distributor industry put additional pressure on manufacturers Four major buyers control 90% of generic purchasing in the U.S.: McKesson Corp.; CVS Health Corp. through its partnership with Cardinal Health Inc.; Walgreens Boots Alliance Inc. through its arrangement with AmerisourceBergen Corp.; and Wal Mart Stores Inc. Result: dramatic consolidation in generic industry Teva Allergan, Sandoz, and Mylan now have a commanding presence in industry Number of companies producing a product is dramatically pruned Creates environment for rising prices Creates environment for shortages Creates speculative price gouging opportunities /teva s just the start as moregeneric drugmakers poised to merge ; deal underscores genericsmarket/

6 Why Generics are Not Driving Down Costs As Much as in the Past Foreign generic manufacturers Created low cost generics but were not inspected in person by FDA Ranbaxy fraud, poor manufacture and storage of drugs Fraud undermines MD confidence in generics (lying about drug levels achieved for 15 drug products) Plants closed, major investments needed to achieve US standards Products stored in abysmal conditions, glass particles in product Ranbaxy effect other foreign manufacturers get the message and upgrade plants and processes Costs need to be recouped Why Generics are Not Driving Down Costs As Much as in the Past Collusion Ranbaxy and Teva settlement with NY Attorney General Colluded to not challenge regulatory exclusivities held by the other for dozens of drugs Legal collusion likely in consolidated market where generic companies decide not to move into one companies bread and butter to avoid retaliation in their market leader Increases in ingredient costs Generic manufacturers may or may not make the active ingredients or diluents, increases in raw materials can increase manufacturing costs 5 reasons generic drugs cost so much CBS News Assessment Question #2 2. Why are generic drugs not reducing costs as much as in the past? A. Reduced competition due to consolidation B. Reduced competition and shortages due to years of very poor profitability and FDA inspection negligence overseas C. Venture capitalist purchase of targeted generics and price gouging D. Choices A, B, and C are all correct 5. Volume of Drug Use Population is aging Obesity is having a negative impact on diabetes, heart disease, and joints Weight loss and low intensity exercise would impact health spending Mental health (depression, attention deficit disorder) utilization is up Drugs for asthma, heart disease, HIV, and oncology are more effective together than separately, multiplying utilization for the same disease Heart attack in 1980s: beta blocker (nitro for pain) Today: beta blocker, ACE inhibitor, aspirin, anti platelet, statin (nitro for pain) Drugs reduce major adverse cardiac events more together than alone Survival from heart attack is now amazing but people are developing heart failure and other chronic diseases (diabetes) because they live longer This will continue to be a cost issue but is hedged by real benefits Express Scripts 2014 Drug Trend Report ; Gladwell M. High prices. New Yorker, Oct 25, ; White CM. Cardiac Disease Discussion Aging of Population One But Not Main Factor in Healthcare Costs Assessment Question #3 3. Which of the following is the least impactful on US drug prices? A. Increased approval of specialty/biologic drugs B. Lax price control strategies versus other countries C. Consolidation of manufacturers D. Volume of drug use whistleblowerreveals how he exposed massive pharmaceutical fraud/ ; banidindeea0n03r congress /reports/11 13 lt health.pdf 6

7 What Patients and Payors Can do About these Costs? What a Patient Can Do? Tell your clinician that cost is very important to you Clinicians tend to prescribe what they perceive as the most effective, safest, or most convenient option even though there is a lower cost option available Talk with the pharmacist to see if there is another drug in the same class or a different form (cream vs. ointment) that is cheaper Ask how much the drug would cost without insurance and then decide if you should use your copay or cash Some copays are more than the cost of some drugs If you have a combination drug, ask what it would cost to get the two drugs separately If your generic drug price spikes, ask how much the brand name drug is If you are low income, check into Medication Assistance Programs that the companies, states, or federal government have Slow disease progression through diet, exercise, or other lifestyle improvements Heart disease, diabetes, asthma, osteoarthritis all impacted by lifestyle White CM, Ask the Pharmacist. Fox61 News What a Payor Can Do? Drug prices will not moderate without market forces brought to bear Pharmaceutical industry interested in maximizing profit for shareholders and beating market forecasts Using market forces to lower prices requires inconvenience to clinicians and patients who will have to navigate the rules established by insurers Legislators, patients, clinicians, and payors need to understand this dynamic tension Costs in 2015 Mitigated by Active Management: Market Forces Work Express Scripts 2015 Drug Trend Report Tiered Formulary Drugs in a class or for a disease are tiered with preferred drugs that have lower copays Drugs that are not preferred are not banned but the copays are greater To get preferred status some manufacturers gave additional rebates to the companies If the difference in patient out of pocket cost is >$50, people were six times less likely to use non preferred drugs 90% of health plans had tiered formularies in their hey day The kryptonite of tiered formularies is the drug coupon or the patient drug rebate card The company gives a coupon capping the non preferred copay at the preferred copay level for the patient or reimburses the patient the difference Manufacturers spent $1 billion spent on couponing in 2010 to $7 billion now Eliminated patient cost as a barrier to access and they can then increase the total cost of the drug to make up the difference Cost shifting back to insurers Estimate ROI for couponing for drug manufacturers is 4:1 to 6: /that drugcoupon isn t really clipping costs combatpharma%e2%80%99s costly coupon programs Closed Formulary In truly closed formularies only preferred drugs are covered No coverage for drugs not on the formulary unless it has prior authorization Like the gatekeeper PCP for medical costs Can create frustration among patients and clinicians treating the patient, especially when a preferred drug is replaced with another one Switching medications can increase the risk of medication errors and poorer compliance The rationale for making the decisions need to be clear to clinicians and patients ed healthcare executive/news/closed formularies hold linecosts?page=0,0 7

8 Prior Authorization/Step Therapy Some drugs are studied specifically in people who have failed another therapy or only have strong data in a certain disease or in a certain subpopulation Prior authorization can assure that Botox is being used for severe muscle spasms and not for fewer wrinkles Step therapy can assure that statins or statins + ezetimibe are used before allowing the use of $$$ PCSK9 inhibitors Makes patient care more difficult for clinicians and patients feel caught in between them clinicians and payers Rationale has to be clearly articulated Compounded Drugs: Needed But Abused Used to be a very small part of the drug spend Turn pill into liquid or suppository so someone who cannot swallow can take the drug Create a cream or ointment from a powder or pill for someone without other options Insurers usually just paid the claims and assumed the people had no other options Being actively marketed to consumers and to doctors Legal or illegal kick back arrangements with doctors for using compounded drugs Without compounded drugs, the traditional drug spend in 2014 would have increased 2.3%, rather than 6.4% a major new driver Compounded medications rank in top 10 for first time in 2014 Cost per prescription averages $1,183 (unit costs up ~130% vs. 2013), astronomical given that the drugs in them are inexpensive (most commonly gabapentin, baclofen, cyclobenzaprine, progesterone micronized) scripts.com/insights/drug options/closing the compounding loophole ; compounded drugs goes sky high ; releases/2014/compounding pharmacist admits paying kickbacks for referrals health carefraud Compounded Prescription Limitations Establish pre authorization/step therapy rules to prevent compounded prescriptions to be used in place of established therapies that have greater evidence of safety and efficacy Disallow use of a variety of ingredients that have not been shown to have efficacy, have known safety issues, or for which there is already a prescription product that fills the need These sensible solutions reduced compounded prescriptions from the third to the 9 th most expensive traditional drug class in 2015, led by utilization shrinking 56% What the Government Can Do? Eliminate Direct to Consumer Advertising The American Medical Association has called for an end to direct toconsumer advertising for prescription medications Creates demand for brand name products that pressure physicians into decisions Cannot provide balanced assessment of benefits to harms in a 30 second forum or single page ad Advertising costs increased 30% in last two years US and New Zealand only countries to allow DTC advertising Nexium (esomeprazole, AstraZeneca) spent $500 million in the year following its launch (2001) on advertising This me too drug in crowded drug class had skyrocketing sales at $120/mo even though it contains one of two isomers of Prilosec (omeprazole) which was generic Nexium remained the number 1 traditional drug in PMPY spend in 2014 Disallow Cost Reallocation Efforts Eliminate coupons and rebate card programs or any other program that shifts the cost from the patient to the insurer/pbm These programs make the manufacturers $4 to $6 dollars for every dollar spent They increase the overall drug cost to recover their coupon or rebate cost shifting the burden entirely to the insurer/pbm They remove less punitive incentives for using lower cost alternatives Closed formularies, prior authorization assn.org/ama/pub/news/news/2015/ ban consumer prescription drug advertising.page ; Gladwell M. High prices. New Yorker, Oct 25,

9 Compounded Medications Eliminate direct to consumer advertising of compounded prescriptions Eliminate any payments from pharmacies to physicians or patients for steering prescriptions to them Biologic Drugs: Biosimilars to the Rescue Biosimilars are approved if and only if they are analytically and clinically proven to have no clinically meaningful differences to the reference biologic medicine Guidance from FDA just came out in 2014, years behind Europe where biosimilars are starting to gain traction and save money Branded biologics worth more than $70 billion coming off patent by 2018, Biosimilars can infuse competition in the market RAND Corporation projected that the introduction of biosimilar drugs in the US will reduce direct spending on biologics by $44.2 billion from 2014 to 2024 Like with generics, a campaign to educate the population and health care practitioners about biosimilars and their value is critical for adoption CT needs legislation about how to handle biosimilars biosimilars.com/en/index.shtml ; reporter.com/markets Regulations/US FDA unveils long awaited biosimilar guidance Are Newer More Expensive Drugs Worth It? Generic medications have no DTC advertising, no sales representatives, no advertising geared towards clinicians Easier to manipulate the message about a generic drug Clinicians are inundated with so much information, how can they understand all the nuances of the trials conducted on drugs to determine comparative effectiveness versus other drugs What is the balance of benefits to harms for using this drug versus another? Were the trials applicable to most patients or a select subgroup? How confident are they that the evidence they are seeing is conclusive or is it subject to change when other studies are completed? The Agency for Healthcare Research and Quality (AHRQ) is a Federal Organization specifically changed with answering these questions through the Evidence based Practice Center Program Independent EPCs (UConn, John s Hopkins, Mayo Clinic, Duke, etc) with clinical and methodologic experts review the literature and assess the results, strength, and applicability of the evidence Payors rely heavily on EPC reports when making coverage decisions as do medical organizations designing guidelines for the treatment of certain diseases AHRQ has been specifically targeted for funding reductions by congress and even for elimination over the years because it is thought to be anti business Define an upper limit on cost/qualy for federal healthcare entities that rises with inflation Will be adopted by private payors as well Gives Pharma a target to create new therapies that are effective, safe and financially sustainable isthe effective health care program1/ Erythropoetin Example CMS asked to rule that people with chronic kidney disease can use, and CMS will pay for, erythropoietin therapy even if they can tolerate blood transfusions Proponents contend a causal link between transfusions and kidney rejection UConn EPC charged with assessing the literature to see the link between use of blood transfusions and kidney rejection after transplantation Data suggests that the literature is very weak in this area but supports a neutral or slightly beneficial effect on rejection rates CMS advisory committee supports not altering their rule Chen W, Lee S, White CM.The Impact of Pre-Transplant Red Blood Cell Transfusions in Renal Allograft Rejection. Rockville (MD): Agency for Healthcare Research and Quality (US); 2012 Mar 07. PMID: Generic Fixes FTC needs to look carefully at consolidation of distributors or generic manufacturers Even if the two companies have no overlapping products (or are willing to divest of them) it reduces competition in the market and exposes people for medication shortages Consolidation has not been a boon to the consumer and further consolidation is particularly risky at this time Companies with dramatic price spikes need to justify those increases State laws needs to be rewritten In many states the pharmacist must substitute a generic medication, except for epilepsy medications in some states or when the physician specifically states no substitution, for a brand where one is available They do not have the discretion of checking the price of the generic vs. the brand before determining if this is a better deal for the patient Avoiding Generic Shortages Generic shortages cause rationing of medications, higher prices, and use of substandard alternatives which can worsen patient outcomes and increase the risk of medical errors since the alternatives are not as familiar to the clinicians FDA needs to be more facilitative in assuring that non urgent manufacturing upgrades can be phased in so as to prevent shortages Companies should alert FDA about scheduled upgrades with enough advanced notice to allow competitors to produce alternatives or with a plan to produce product in another facility or line Market driven incentives for competitors to enter the market during a period of planned or unplanned loss of supply will be needed ges/ucm pdf 9

10 Assessment Question #4 4. What can we do to reduce drug prices in the US? A. Enhance investment in comparative effectiveness research to understand trade off between benefits and harm of competing interventions B. Incentivize competition in the marketplace by facilitating the adoption of biosimilars C. Incentivize competition by preventing or ameliorating the effect of drug shortages D. Choices A, B, and C are all correct Drug Importation is Not the Answer Drug importation allow people to access drugs that are less expensive abroad European lack of access is linked to US inability to limit use of drugs >$$$/QUALY Pharma would rather get more $$ from US than lowering the price to meet EU/UK targets Pharma makes citizens of developing countries show proof of citizenship to get lower prices If importation was allowed, scarcity of drugs to developing countries Can be dangerous, is it really coming from that country or through that country from China or India? Does the drug really have the active ingredient? Is it adulterated? Has it been tampered with? Even a brand name drug may not have the same manufacturing process or achieve the same blood levels What is the impact of storage and transportation of that product into the United States If the drug is rendered ineffective due to freezing or lack or refrigeration, results could be devastating reasons drugsare expensive of which two are false/#6338abd948a5 Drug Importation is Not the Answer During a recent drug importation survey, FDA found that the vast majority of parcels (88%) contained unapproved drugs that could pose significant safety problems. These packages included drugs that have been withdrawn from the U.S. market for safety reasons; animal drugs sold illegally for human use; drugs improperly packaged in sandwich bags or tissue paper; drugs without English labeling or proper instructions for use; and drugs requiring precise dosing and monitoring by a physician. Even if a manufacturer has FDA approval for a drug, a version produced for foreign markets usually does not meet all of the requirements of the FDA approval. Even if a drug bound for a foreign market is produced in the same plant as a similar drug approved for the U.S. market, FDA is not ability to track that drug in foreign commerce before it enters the U.S. Consequently, it is difficult for the Agency to determine that a drug appearing at a U.S. border is in fact the one produced in the FDA inspected plant, pursuant to FDA approval. Conclusions Drug costs continue to rise faster than inflation and faster than medical care We need to understand the impact this has on clinicians, patients, US companies, and insurers The current marketplace which is efficacy and safety focused, rather than price focused, led to amazing advances in rarer diseases or in better targeting of therapy for more efficacy and safety Ruining the marketplace, like happened with generic companies, leads to deferred maintenance, consolidation, shortages, and higher prices in the long run There are several drivers of increased cost velocity that can be addressed but most interventions trade cost savings for confusion, complexity, and frustration on the part of patients and clinicians Solutions that do not have this trade off, like Direct to Consumer Advertising, should be done immediately Better ways to implement control while minimizing complexity for patients and clinicians is needed 10