Drug Price Wars, Episode VII: The General Assembly Awakens

As with the long delay between epic Star Wars films, our Drug Price Wars series took a small hiatus while I’ve been focused on being a productive faculty member and PhD student.  However, a new plot twist is beginning to unfold that brings me back to this blog.

In the seventh episode of the Drug Price Wars, we see that the rebel army has gotten wise to the Empire’s drug pricing tactics.  A few brave souls in Annapolis have decided to lead the rebellion with the force of the Maryland General Assembly behind them.

SB 437 / HB 666 – Drug Price Transparency

I have already discussed the transparency bill proposal and why this well-meaning attempt to curb the drug spending phenomena will likely have no real impact on drug pricing.  Oddly enough, I think this drug price transparency bill is the equivalent of getting the blue prints to the Death Star and then praying some Maryland version of Luke Skywalker can fire a rocket into an opening to the main “drug pricing mechanism” reactor.  It definitely has flare, but the probability of success is astronomically low.

SB 415 / HB 631 – Essential Generic Drugs & Price Gouging Prohibition

Now let’s talk prohibition of generic drug price gouging.  This is one that might have more teeth than the ridiculous transparency bill.  This proposal would allow the Attorney General Brian Frosh to take drug companies to court when a manufacturer or wholesale distributor is engaged in price gouging.  Based on the language in the bill, I take away these points:

  • No brand names, only generic drugs that appear on the WHO’s list of essential medicines or deemed by the Secretary as an essential medicine
  • Also extends to devices used to deliver an essential drug (Looking at you EPIPEN!)
  • Price increases not justified by cost of producing the drug
  • Price increases not justified by appropriate expansion of access
  • Consumers have no meaningful choice about whether to purchase at the excessive price (ie: “important to health; and insufficient competition”)
  • Insufficient competition = 3 or fewer manufacturers
  • Price increase = 50% or more in Average Manufacturer Price (AMP) or Wholesale Acquisition Cost (WAC) within preceding 2-year period
  • Compels manufacturer to provide a statement or produce documents relevant to determine whether the price increase was justified

As I evaluate the potential impact of this legislation, I have to consider the potential consequences as well as the implementation if this were to become law.  First, is how to determine “insufficient competition” using the 3 or fewer manufacturers cutoff point.  Generic drug manufacturers ramp up and discontinue products pretty frequently, so what will the Attorney General do to monitor all of these markets?  What if 5 manufacturers make a particular drug, but only 1 manufacturer makes a particular concentration or dosage form?

Issues in the Manufacturing of Generic Drugs

My UMSOP colleague, Brent Reed, published on the impact of cardiovascular drug shortages and described the cases of heparin and nitroglycerin.1  Reed et al. describes a major manufacturing recall by Baxter Healthcare in response to a contaminant and then a subsequent investigation that found adulteration to reduce production costs.1  In the case of IV nitroglycerin, several factors contributed to the shortage including two major manufacturers who halted production for different reasons and another rationing its supply due to issues with rubber stoppers and then shortages of raw material.1

The supply of generic drugs is dynamic and mass-scale production can’t be ramped up with the flip of a switch.  Additional pressures on the supply-side to keep costs low may provide a gross incentive to short-cut manufacturing quality.  I concede that the incentive to keep costs low never goes away in a for-profit company, but when the margins are too slim then the choice becomes “continue production or shut it down” and may lead to drug shortages.  For a generic drug with a WAC of $5 (common for many generic drugs to be cheap) a price increase of $2.50 (50%) would potentially be included in this bill.  I can’t imagine that it is the intent to chase down every manufacturer in this scenario because I’m guessing the Attorney General’s office has limited resources as well (unless more tax dollars are being requested to support these efforts).

When generic manufacturers shut down, hospitals scramble and may rely on compounding facilities for the products.  While pharmaceutical compounding done well can be fantastic, if the pharmacy cuts corners we might end up with another New England Compounding Center fiasco.

This won’t help Hepatitis C

I keep seeing folks refer to the $100k drug regimens being used to cure hepatitis C viral (HCV) infections in their drug pricing arguments.  I want to remind you that these are not “essential generic drugs” and wouldn’t fall under the scope of SB415.  If they believe the transparency bill would adequately address HCV drugs, you have to realize that HCV drugs are COST-EFFECTIVE and the drug companies have plenty of sources to point to.2–7  The issue is a “budget impact” one, not a cost-effective one.  For HCV, the cost-effectiveness comes from the prevention of future liver transplantation, hepatocellular carcinoma, or death.  However, a large portion of infected individuals today may never experience these terrible outcomes or at least they won’t experience them for another 20 years. If Medicaid pays $100k today to treat a 60 year old patient with HCV, in 5 years that patient will be moved to Medicare and fall under a totally different budget.  In other words, the savings for treating now would not benefit the Medicaid budget but would benefit Medicare (I know this sounds stupid…it is).

Ok, I’m sure I’ve put you to sleep now so I’ll stop here.  Stay tuned this spring as the epic battle of drug pricing continues…

References

  1. Reed BN, Fox ER, Konig M, et al. The impact of drug shortages on patients with cardiovascular disease: causes, consequences, and a call to action. Am Heart J. 2016;175:130-141. doi:10.1016/j.ahj.2016.02.004.
  2. Younossi ZM, Park H, Saab S, Ahmed A, Dieterich D, Gordon SC. Cost-effectiveness of all-oral ledipasvir/sofosbuvir regimens in patients with chronic hepatitis C virus genotype 1 infection. Aliment Pharmacol Ther. 2015;41(6):544-563. doi:10.1111/apt.13081.
  3. Chahal HS, Marseille EA, Tice JA, et al. Cost-effectiveness of Early Treatment of Hepatitis C Virus Genotype 1 by Stage of Liver Fibrosis in a US Treatment-Naive Population. JAMA Intern Med. 2015;94118:1-9. doi:10.1001/jamainternmed.2015.6011.
  4. Leleu H, Blachier M, Rosa I. Cost-effectiveness of sofosbuvir in the treatment of patients with hepatitis C. J Viral Hepat. 2015;22(4):376-383. doi:10.1111/jvh.12311.
  5. San Miguel R, Gimeno-Ballester V, Blázquez A, Mar J. Cost-effectiveness analysis of sofosbuvir-based regimens for chronic hepatitis C. Gut. 2014:1-12. doi:10.1136/gutjnl-2014-307772.
  6. Linas BP, Barter DM, Morgan JR, et al. The cost-effectiveness of sofosbuvir-based regimens for treatment of hepatitis C virus genotype 2 or 3 infection. Ann Intern Med. 2015;162(9). doi:10.1056/NEJMoa1214853.
  7. Chhatwal J, Kanwal F, Roberts MS, Dunn MA. Cost-effectiveness and budget impact of hepatitis C virus treatment with sofosbuvir and ledipasvir in the United States. Ann Intern Med. 2015;162(6). doi:10.7326/M14-1336.

 

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Joey
Joey Mattingly, PharmD, MBA is an assistant professor at the University of Maryland School of Pharmacy located in Baltimore, Maryland. Joey has managed retail and long-term care pharmacy operations in Kentucky, Illinois and Indiana. Leading Over The Counter is a blog of Joey's views and opinions on the topics of pharmacy leadership and management and do not represent the University of Maryland, Baltimore. Joey can be followed on Twitter @joeymattingly.

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