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PAPs may be a lifeline, but they're not the final answer

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By Mari Serebrov
Regulatory Editor

Whether patient-assistance programs (PAPs) are a boon or a boondoggle is in the eye of the beholder.

For the U.S. patients they help to get access to expensive drugs, PAPs literally can be a life-saver. But they're worthless to patients who are shut out of the programs because of state and federal laws and who don't meet the income qualifications set up by charities or manufacturers' free drug programs. (See BioWorld Today, Oct. 18, 2016, and Oct. 20, 2016.)

For the drug companies that offer patients help with their out-of-pocket cost, PAPs can help launch a novel drug, build brand loyalty, ensure that many patients can afford the copays or coinsurance regardless of where the drug is placed on a formulary and improve patient compliance with a prescribed drug regimen, resulting in better health outcomes.

But for Congress and many federal and state policymakers, PAPs are merely industry "talking points" that allow manufacturers and the rest of the drug supply chain to play a shell game with pricing. "They're only causing the cost of the drug to go up," Rep. Buddy Carter (R-Ga.) told BioWorld Today.

"The middlemen are still getting their part," he added. If the manufacturer is directly helping patients with their out-of-pocket expenses through a PAP, there's no incentive – read, public pressure – for middlemen such as pharmacy benefit managers (PBMs) to cut their costs, explained Carter, who is the only pharmacist in Congress.

"Everybody in the chain that's involved in drug pricing works on volume discounts," Carter said, so it's to their advantage to keep the list price of drugs as high as possible.

That comes back to hit taxpayers through higher costs to federal- and state-funded health care programs such as Medicaid, Medicare and Tricare. It also hits them through increased insurance premiums, higher deductibles, bigger copays and denial of coverage for some drugs.

"It's a vicious circle," Carter said.

Ron Cohen, president and CEO of Acorda Therapeutics Inc. and chair of the Biotechnology Innovation Organization (BIO) executive board, agreed. "The entire system incentivizes a spiraling upward" in pricing, he told BioWorld Today.

ACTION NEEDED

Spurred by public outrage over Mylan NV's most recent price hike for its Epipen (epinephrine) auto-injector, Congress is looking at a variety of measures to address drug costs. Some of those efforts could be glued to the must-pass, five-year user fee agreements that will come before Congress next year.

They're mostly recycled ideas – allowing Medicare to directly negotiate drug prices with manufacturers, permitting the reimportation of drugs approved in Canada and the EU, reducing the 12-year exclusivity for biologics, making price part of the drug approval process and requiring transparency on how much a company spends on R&D. Despite congressional distrust of PAPs, there's no move, so far, to clamp down on the programs or to address the economic hardships faced by patients who can't use them because of federal laws and regulations.

States, which bear much of the cost of drugs covered by Medicaid, also are looking for solutions. Each year, states spend more than $20 billion on prescription drug coverage for public employees, prisoners, higher education and Medicaid, according to the National Academy for State Health Policy. To deal with those rising costs, the academy charged its Pharmacy Costs Work Group with coming up with innovative solutions, which were unveiled this week.

Again, several of the group's ideas were nothing new – increased transparency, reimportation, shareholder activism, tighter control over misleading marketing, and stricter enforcement of unfair trade and consumer protection laws. Other potential solutions floated by the work group included regulating drug companies like public utilities and allowing states to operate as PBMs to negotiate prices directly with manufacturers.

Direct government negotiating is a red herring, Cohen said, pointing out that Medicare is already negotiating drug prices the way everyone else does – through a PBM. As a result, the Congressional Budget Office has scored direct Medicare negotiations as a zero because it would not produce savings, Cohen noted.

The same would likely be true with direct state negotiations, as each state wouldn't have the buying power of a national PBM. Individual state negotiations also could lead to more disparity across the country, with larger states getting better drug prices than the smaller states. Another potential problem is that states, like PBMS, might not pass negotiated rebates on to patients, choosing instead to use that money to shore up or expand other state programs.

BIO agrees that more transparency is needed, Cohen said, but not the kind states are calling for. Transparency that focuses on how much a company spent on R&D for a specific drug ignores all the false starts and dead ends that are part of drug development. It also ignores the role PBMs, insurers and distributors play in determining the price of a drug.

Under the current Byzantine pricing structure, drug manufacturers "have no control over what the PBM, the pharmacy and the insurer are going to do" and how much the patient will ultimately be charged, Cohen said.

"Sunshine is the best antiseptic," he said. He would like to see everyone in the system, including the 340B hospitals that profit from steeply discounted drugs, open their books and show where the money is going.

"The American public and our government need to see what's going on. . . . It's necessary that the entire system come clean," Cohen added.

If Rep. Carter has his way, Congress will force some of that transparency. "My hope is that . . . the [House] Oversight Committee is going to take a closer look at the PBMs and the drug pricing chain," he said.

SYSTEMIC APPROACH

While transparency is needed, it is not by itself the total answer. Any solution that isolates drug prices instead of dealing with the cost of health care as a whole is like trying to rearrange the deck chairs after the ship has hit the iceberg, Cohen said. To truly address the problem, BIO is pushing for a systemic approach, one that pulls together leaders from each segment of the health care delivery system.

"We don't want medicine to be an expense. We want it to be an investment," Cohen said. That means focusing on value. He noted that 30 percent of health care dollars are wasted on "low-value" treatments and procedures. To weed out those costs, the system needs common guidelines on evaluating and delivering value.

Obviously, a drug that cures a disease and prevents hospitalizations, surgeries, the potential for infections and debilitating side effects is going to be more valuable, even if the price is higher, than a drug that treats a symptom but leaves the underlying disease unchecked.

The trick is figuring out how to pay for that value. The state work group suggested pursuing return-on-investment, or value-based, pricing and other approaches to allow flexible financing based on long-term, avoided costs.

Drug companies are already exploring innovative value- and outcomes-based pricing, especially for high-priced drugs that work well in certain patients but not others. But some of those innovative ideas are getting snagged by the same laws and agency regulations that prevent Medicare beneficiaries from using manufacturer coupons to reduce or eliminate their out-of-pocket costs, Cohen said.

As an example, he pointed to Acorda's Ampyra (dalfampridine), the only drug approved by the FDA to improve walking in patients with multiple sclerosis. Ampyra has proved effective in 40 percent of patients, but no biomarker has been identified to determine who will benefit from it. To get coverage for the drug, the company offers it free for the first two months, which is long enough to see if it will help a patient.

As a result of the company's risk-sharing program, most patients with commercial insurance receive the first two months of the drug free. And then insurance only covers the drug going forward for patients who responded to it. But because of the federal antikickback law, Cohen said the two months of free drug would be considered an inducement for patients in government-funded plans. Thus, a Medicare patient couldn't take advantage of the offer, and the government ends up paying for the drug not knowing whether it would help a given patient.

(In addition to the two-month risk-sharing payment structure, Acorda offers a PAP that provides Ampyra free to patients based on their income. Because the government would incur no cost, the PAP is available to patients covered by government plans. However, patients must re-enroll annually.)

Recognizing that a payer's economic benefit from a cure occurs over time, some companies have looked at amortizing the cost of a drug over several years, based on a patient's outcomes. The hitch with that kind of pricing structure would be the reimbursement formulas used by government programs. Medicaid, for instance, has to get "best price." The fear is that if an $80,000 drug were amortized over five years, Medicaid would decide the one-year payment of $16,000 is the "best price" and would then demand a 23 percent rebate on top of that, Cohen said.

If lawmakers don't act to remove the regulatory barriers, Cohen said they will be standing in the way of value-based and outcomes-based drug pricing. "It is an acute and urgent problem that must be addressed by Congress," he added.