Pricing pressures
In Washington this month
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The drive for healthcare savings will continue to shine the spotlight on pharmaceutical pricing, reimbursement, and access.
Policymakers increasingly will be looking for more convincing evidence of the value of new medicines and for new ways to reduce
risk in determining coverage of new therapies. The Centers for Medicare and Medicaid Services (CMS), pharmacy benefits managers
(PBMs), and other payers and insurers will question the value of high-cost therapies that appear to offer limited benefit.
Payers and policymakers will face difficult questions about cost versus safety and efficacy, as seen in the debate over treatment
of age-related macular degeneration with off-label use of the cancer drug Avastin (bevacizumab), instead of with its more
costly formulation Lucentis (ranibizumab). Similarly, the controversy over the sharp price hike for preterm-birth treatment
Makena (caproate) after it gained market control under FDA's policy for halting sales of unapproved drugs, indicates that
prices perceived as excessive can override some drug safety issues.
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.
Securing supplies
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.
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