Budget Crunch, Political Battles Shape Policy Agenda for Year - Pharmaceutical Technology

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Budget Crunch, Political Battles Shape Policy Agenda for Year
Pressure to approve new user fees opens the door to action on drug shortages, prices, and regulation.

Pharmaceutical Technology
Volume 36, Issue 1, pp. 28-34

Pricing pressures

In Washington this month
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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