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Budget Crunch, Political Battles Shape Policy Agenda for Year
Manufacturers backed Obamacare two years ago as a way to expand the market for prescription drugs, including a growing number of pricey biotech therapies. In return, industry agreed to pay hefty new fees as well as higher rebates on Medicaid drugs, and to subsidize the cost of drugs sold to seniors caught in the "doughnut hole" of the Medicare prescription drug program. The worst-case scenario for manufacturers now would be to eliminate the market reforms and insurance exchanges designed to expand enrollment in health plans, while retaining provisions that cut revenues and raise costs for industry.
The 800-pound gorilla in the room is the looming Supreme Court decision on the constitutionality of the Obama healthcare reform legislation. While the Justices ponder the weighty legal issues, the US Department of Health and Human Services (HHS) will continue to implement the multitude of policies and programs established by that law. The administration's working assumption is that the Affordable Care Act (ACA)—or much of it—will remain in place. Many states are moving ahead with efforts to expand health IT systems and to establish processes for determining insurance eligibility and coverage. But a Republican takeover of the White House in November 2012 would bring considerable changes in health-related programs.
Whatever the legal and political outcome, policymakers on all sides will be looking to cut payments to providers, to increase cost-sharing by patients, and to reduce benefits and services. Increased reliance on managed care plans and coordinated care programs, initiatives to reduce fraud and abuse, perennial proposals to reform the nation's medical liability system, and efforts to curb pharmacy expenditures will emerge as ways to save money without compromising care.
Payers will continue to look for more drug discounts and rebates, threatening to relegate pricey products to unfavorable positions on health plan formularies. Although the Medicare Part D drug benefit has provided seniors with access to affordable medicines, benefits may suffer as many plans boost co-pays and limit coverage for costly therapies. In Europe, government agencies such as the United Kingdom's National Institute for Health and Clinical Excellence (NICE) are opposing coverage of expensive products that lack sufficient added benefits.
Manufacturers are responding with risk-sharing programs that skew prices based on patient response to a new therapy. The claim by biopharmaceutical companies that effective treatment with expensive therapies can reduce overall healthcare costs will remain a hard-sell to the number-crunchers that regard pharmacy outlays as a discrete expenditure, rather than as a way to save money.
Pressure to cut costs will drive support for the ACA provision that establishes a pathway for bringing biosimilars to market. FDA guidance on the scope of preclinical and clinical testing needed to document product comparability, if not interchangeability, will spur manufacturers of all stripes to move aggressively into the follow-on biologics field. For the program to be effective, policymakers will have to decide a number of thorny issues, including policies for names to identify these products, coding requirements for reimbursement, and rules governing patent challenges and protection.
Biosimilars are a big issue because payers anticipate hefty savings from these look-alike therapies, as has been the case with small molecules during the past 25 years. Generic drugs now account for about 80% of prescriptions in the US, and the proportion will rise further as more blockbuster brands such as Pfizer's Lipitor (atorvastatin) go off patent. The wave of new generic drugs puts more pressure on FDA to speed up its process for approving new generic drugs for market. New user fees paid by generic drugmakers will help fund such efforts.
Efforts by Pfizer to retain a good portion of the Lipitor market by cutting its price and negotiating long-term deals with payers and PBMs have roiled the drug industry and pharmacy programs. These actions further spur industry critics to harp about brand-generic patent settlements that can delay when a generic comes to market and propose policies to curb those practices.
The search by pharmaceutical companies for new products and new markets will further expand global pharmaceutical production, with the relevant opportunities and perils. Rising international sourcing of APIs and excipients will put more pressure on industry to manage production processes to ensure the quality and safety of their products.
A sharp rise in supply problems for vital drugs has led to a focus on drug quality and supply chain problems. The White House unveiled a drug shortages initiative in October 2011, which supports proposals before Congress to broaden requirements for manufacturers to report to FDA production issues that could lead to supply problems. Policymakers also seek tighter controls on drug imports, better track-and-trace systems, and stiffer penalties for counterfeiting and drug adulteration. FDA officials are instructing pharma companies to police suppliers and distributors more effectively for early detection of quality problems. The regulators also want manufacturers to establish backup plans for dealing with supplier and production snafus that could halt production.
This increased focus on systems for ensuring reliable drug supplies will further intensify efforts by industry, FDA, and other regulatory bodies to promote continuous quality improvement strategies, including adoption of quality standards established by the International Conference on Harmonization (ICH). Regulators are looking to extend these quality assurance policies to include generic drugs and ingredients from other regions.
Efforts to manage manufacturing changes more efficiently will continue, as FDA officials promote more effective product testing and monitoring to reduce variability in drugs and biologics and to prevent "process drift" in manufacturing operations. FDA has proposed modified reporting requirements for certain postapproval manufacturing changes, with an eye to curbing unnecessary oversight. So far, however, manufacturers are disappointed by the limited scope of the regulatory changes.
Drug quality issues will keep up the pressure on FDA to conduct more frequent inspections of manufacturing facilities and to crack down on noncompliant firms, particularly foreign operators exporting products to the US. FDA is looking to expand partnerships and cooperative programs with regulatory counterparts in Europe and other regions as a way to combine inspection resources and avoid redundant oversight. The regulators also are looking to tap into manufacturing data compiled by third parties to free up resources and focus on the most critical compliance issues. Agency officials hope to finalize a number of manufacturing and production policies in the coming year, but recognize that such efforts can be sidelined by new crises and changing priorities.
Manufacturers who experience serious quality control problems face increased attention from federal and state prosecutors, who are looking more at violations of GMPs—in addition to off-label marketing and illegal pricing— as evidence of corporate malfeasance. Pharmaceutical companies have been hit with huge fines and onerous consent decrees for violation of GMPs and other regulations, but the situation may get worse. Government officials are raising the stakes by threatening to impose penalties on individual corporate executives who fail to take action to prevent such violations, and some of the saber-rattling could escalate into real blows.
Filling the pipeline
Expanded international research efforts are tapping into public-private partnerships for developing important therapies for malaria, tuberculosis, and other diseases most prevalent in tropical climates. Health authorities are pressing for more research on new antibiotics, along with treatments for rare conditions and killer diseases, such as cancer and AIDS. There is growing excitement about new vaccines, which are attracting more industry investment as markets mature around the world.
FDA can help the process, according to Commissioner Margaret Hamburg, who has been promoting the campaign to bolster FDA involvement in regulatory science initiatives to provide new tools and methods to accelerate the R&D process. Several programs are underway to validate biomarkers that can identify potential safety problems early on and improve the efficiency of clinical studies. Other coalitions are looking to streamline the long and costly R&D process by developing research protocols for "adaptive" clinical trials and promoting electronic methods for recruiting patients and collecting research data.
Yet, manufacturers complain that a risk-averse tendency at FDA and demands for more, larger studies keep many promising medicines off the market and raise R&D costs. The recent FDA decision to revoke the metastatic breast cancer indication for Avastin has generated questions about the future of FDA's accelerated approval process and the threshold for bringing new cancer therapies to market.
FDA officials point to last year's jump in approvals for new molecular entities (NMEs) as evidence that the agency is not keeping important new medicines from patients. A number of the approvals involve treatments for rare conditions and serious cancers that carry less risk for patients and lend themselves to speedy FDA evaluation. But it remains to be seen if the spike in approvals is a fluke, or a signal of real progress on the innovation front.
The rise in overseas clinical research activity, as pharmaceutical companies seek more efficient drug development operations and data to support global marketing efforts, continues to focus attention on research ethics and policies to ensure compliance with good clinical practices (GCPs). Several federal agencies are examining past unsafe research practices and weighing changes in policies and standards for clinical studies sponsored by the federal government or regulated by FDA.
Clinical research activities also face more scrutiny at home under transparency requirements that expand disclosure of active clinical trials and study results on the clinicaltrials.gov website. Health reform "sunshine" provisions require pharma companies to disclose payments to physicians and other health professionals, a process that involves major revisions in corporate policies and information systems. The transparency campaign, moreover, may result in broader FDA disclosure of information on drug safety and effectiveness, possibly even proprietary data that manufacturers might prefer to keep confidential. The assurance that US-supported investigators fully protect research participants and ensure the validity of clinical data is critical to improving public confidence in the pharmaceutical R&D process.
"Patient centeredness" will continue to shape a range of regulatory and research initiatives. FDA is encouraging sponsors to incorporate patient needs and opinions into clinical-trial protocol design, patient recruitment, drug delivery, and safety evaluation. This approach will be supported by research sponsored by the Patient-Centered Outcomes Research Institute (PCORI), which is slated to have a $500 million annual budget by 2014 to study effective treatments for important conditions. PCORI plans to finalize priorities for its research agenda by March 2012, and its Methodologies Committee aims to report in May on research methods and standards for this field.
Jill Wechsler is Pharmaceutical Technology's Washington editor, 7715 Rocton Ave., Chevy Chase, MD 20815, tel. 301.656.4634, email@example.com