10.1.2020
Congressional Klieg lights could give way to restructuring of biopharma
Mari Serebrov, BioWorld
Attributing recent reductions in certain U.S. prescription drug prices to intense congressional scrutiny rather than a biopharma industry commitment to affordability, Rep. John Sarbanes (D-Md.) said Congress must put more guardrails in place and restructure how the industry does business.
“I don’t trust the industry to do the right thing when we’re not looking at you with these Klieg lights,” he told executives from Amgen Inc., Mallinckrodt Pharmaceuticals and Novartis AG Oct. 1 during the second day of a House Oversight Committee hearing on drug prices.
Whether a promise or a threat, Sarbanes comments align with analysts’ thoughts on what may lay ahead for drug prices after the November election. For instance, RBC Capital Markets LLC analyst Randall Stanicky said he expects more aggressive drug price reform, as well as corporate tax reform that would have broader market implications, if former Vice President Joe Biden is elected president and Democrats gain a strong majority in both the House and Senate.
While major industry reforms would be largely off the table if Republicans hang on to the Senate under a Biden presidency, Stanicky said Biden “could still take targeted actions to ensure public access to high priced drugs or those that have low stockpiles.” Such actions would include exercising the government’s Bayh-Dole march-in rights on federally funded research and using existing patent law that enables the government to issue licenses for other patents, without the patentholder’s consent, to other drug manufacturers.
Although President Donald Trump’s recent executive orders on drug pricing, including importation and most-favored nation prices, have created campaign talking points, Stanicky said no meaningful impact to the drug pricing structure is expected should Trump be re-elected.
But if Republicans and Democrats in Congress could put aside their differences and look for common ground, some changes could be in the forecast regardless of the election outcome. In his closing comments at Thursday’s Oversight hearing, Ranking Member James Comer (R-Ky.) said he hoped that in the future his colleagues from both sides of the aisle could come together to work toward solutions rather than just identify problems, which seemed to be the purpose of the hearings and the committee Democrats’ 18-month investigation into U.S. drug price increases.
“There’s an opportunity to work together moving forward. … This is an issue the American people are demanding that Congress address,” Comer said. One area of agreement he noted is the need to spur generic and biosimilar competition by doing away with barriers such as pay-for-delay patent settlements and forcing companies to provide samples of their innovative drugs to would-be competitors.
Bigger spotlight needed
But to bring true reform, Comer and some of his colleagues said Congress must shine a light on the entire drug pricing structure, including pharmacy benefit managers (PBMs) and insurance companies, which are exempt from antitrust laws.
Because of the current system in which drug companies pay percentage rebates to PBMs for preferred formulary placement, about 46 cents of every dollar spent on a brand prescription drug in the U.S. goes to intermediaries, Amgen CEO Robert Bradway testified. Companies don’t have to pay those rebates in other countries, so they can offer lower prices in those countries.
Under the U.S. rebate system, created by Congress, higher list prices result in higher rebates being paid to PBMs. But since insurance companies base patient copays on the list price, the higher list prices that benefit PBMs mean patients have to pay more out of pocket.
Because of the rebates, Bradway said Amgen had to match the higher price of its competitors when setting the price for Enbrel (etanercept), otherwise the PBMs wouldn’t keep it on the formulary. That “sounds crazy,” Bradway said, “but that’s how the system works.”
Calling it a dysfunctional system that doesn’t serve the patient, Bradway said, “The time is now and the place is here to craft” the remedies needed. But it will take more than a single drug company to fix it, he added.
Thomas Kendris, U.S. country president for Novartis, noted how the rebate system affects the price patients have to pay for cancer drug Gleevec (imatinib). The current list price for the drug per year is $120,000, but the net price is $80,000. Patients’ out-of-pocket cost is based on the $120,000 price.
(Generics to Gleevec hit the U.S. market five years ago, so the price has come down in recent years. And since generics have become available, Novartis is giving away 55% of the Gleevec it produces through patient assistance programs, Kendris said.)
Democrats on the committee either ignored the PBM contribution to high drug prices or poohpoohed it. Rep. Robin Kelly (D-Ill.) claimed that drug companies pointing the finger at PBMs is a “convenient way to justify their own actions.”
Although Committee Chair Carolyn Maloney (D-N.Y.) said the committee likely will hold more hearings on drug prices in November and December, she indicated those hearings would continue to focus on drug companies – not PBMs and other intermediaries.
Meanwhile, she continued to push for removing provisions that prevent Medicare from directly negotiating drug prices. She pointed out that drug companies negotiate prices in Canada, Europe and other countries and still make a profit there.
Disputing role of R&D
Like the testimony Wednesday of executives from Celgene Corp., Bristol Myers Squibb Co. and Teva Pharmaceutical Industries Ltd., the testimony Thursday centered on the need to recoup ongoing R&D costs that continue after a drug is approved and to help cover the cost of failures. Both days, industry executives noted that only one in 100 drug candidates make it from initial research to market.
While some on the committee were sympathetic to that argument and asked for ideas on further incentivizing innovation, the majority didn’t buy it. “The single most remarkable revelation coming out of these hearings is the claim by drug companies that they need to raise their prices for research and development or to promote innovation,” Maloney said. “This is completely and utterly false. It is baseless.”
Referencing internal documents the committee obtained from a number of biopharma companies, Maloney said companies’ pricing discussions behind closed doors have nothing to do with R&D or innovation. Instead, those conversations “show a meticulous, even ruthless, focus on squeezing every possible dollar out of the pockets of American people and American taxpayers,” she said, adding that industry views life-saving drugs in terms of profit.
“We cannot let these drug companies continue to target our country … for the biggest and deepest price increases anywhere in the world,” Maloney said in closing the hearing.
Reductions in price
Regardless of what happens in the election next month, some changes already are being made as drug companies respond to the glare of the spotlight on pricing. And increased competition also is having an impact.
For instance, Bradway said the average list price for Amgen drugs declined in each of the past two years and is on track to decline again this year. In addition, the price of its chronic kidney disease drug, Sensipar (cinacalcet), has dropped 95% since generic competition came to the market. Amgen also is producing biosimilars to bring competition to some of the costliest biologics.
Mallinckrodt also is lowering some drug prices, its CEO Mark Trudeau testified. It has committed to rolling back the price of its autoimmune/inflammatory disease drug, H.P. Acthar Gel (repository corticotropin injection), by the end of the year to the price it was in 2015 after the company acquired it as part of its $5.6 billion acquisition of Questcor. The drug is currently priced at $39,000 a vial – up from $30,000 a vial in 2015.
The committee was especially critical of the Acthar pricing, given that it was first approved in 1952 when it sold for less than $100 a vial. When Questcor bought the drug in 2001, it was still selling for $100 a vial, Rep. Harley Rouda (D-Calif.) said. Questcor immediately began raising the price, and then Mallinckrodt added its own increases.
Following Thursday’s hearing, Maloney once again released Democratic staff reports stemming from its investigation of drug price increases. One report focuses on Amgen’s pricing of Enbrel and Sensipar, along with selected documents from that investigation. Another report examines Novartis’ repeated price increases for Gleevec, along with selected documents. The final report, and document package, looks at Mallinckrodt’s actions in acquiring and pricing of Acthar.