Transcript Slide 1

Pharmaceuticals Conference
National State Attorney General Program
at
Columbia Law School
May 11, 2007
John Rother, JD
Director
Policy & Strategy
Rx Drugs in Context
Costs for National Health
Expenditures
Billions
Projections
Source: CMS, National Health Accounts
Overall Medicare Costs compared to Overall Health Costs
27%
Hospital Care
15%
Rx Drugs
21%
Physician &
Clinical
Services
Source: Calculations by PPI AARP using Centers for Medicare & Medicaid
Services, Office of the Actuary, CY 1960-2004 National Health Expenditure Data
Rx Drug Increases in 10 years (1995 thru 2004)
Big Portion of Rising HC Bill
U.S. Total Drug Expenditures as Percent of
National Healthcare Expenses: 1988 to 2010
% of NHE
Projected
22.1%
Will have
tripled share
Doubled share
in 10 years
Today
Source: Compiled by the PRIME Institute, University of Minnesota from data found in Pharmaceutical Benefits Under
Medical Assistance Programs, National Pharmaceutical Council, 1975 to 2002 and in HCFA Form 64.
Average % Change
53.6%
Inflation 20.3%
Years refer to change from previous year. Source: AARP Public Policy Institute April, 2007
Average Rx Manufacturers’ Price
Increases Far Outpacing Inflation
Distribution of Gross Revenues for
U.S. Drug Companies by Expense Type
Marketing, Advertising,
& Administrative Costs
$6
Taxes & Other Costs
Net Profit
Research & Development
Cost of Production
Source: Compiled by the PRIME Institute, University of Minnesota from data found in DHHS, CMS, Jan 2003, and
from Bloomberg, analysts models, & corporate annual reports. Presented by AARP Rx Watchdog Forum February 2005
Percent of Rx Filled
Generic Substitution Rates in USA, 1984-2006
•More than half of Rx drugs dispensed in USA are GENERIC
•Yet they account for only 13% of total Rx costs
USA in a Global Context
Excesses, Gaps in US HC Spending
28%
Overall
Below ESAW
40%
36%
27%
Rx
ESAW = Estimated Spending According to Wealth
Source: OECD; MGI analysis McKinsey & Company
82%
-57%
-70%
15%
Lessons from Europe
• Price transparency - a precondition for
good policy and fair competition
• U.S. prescription drug pricing now
takes place in a black box
The “Black Box” of U.S.
Pharmaceutical Pricing
U.S. Pharmaceutical Supply & Payment
Drug
Manufacturer
Pharmacy
Consumer
U.S. Pharmaceutical Supply & Payment
Pharmacy Benefit Manager
(PBM)
Drug
Manufacturer
Employer/
Plan Sponsor
or
Health Insurer
Pharmacy
Consumer
Wholesale
Distributor
Source: AARP---Based on work of The Health Strategies Consultancy (now Avalere Health) for the Kaiser Family Foundation
U.S. Pharmaceutical Supply & Payment
Employer/
Plan Sponsor
or
Health Insurer
Pharmacy Benefit Manager
(PBM)
M.D.
Drug
Manufacturer
Pharmacy
Consumer
RxRxRx
Advertising
Wholesale
Distributor
Payment for Marketing and Advertising
Source: AARP---Based on work of The Health Strategies Consultancy (now Avalere Health) for the Kaiser Family Foundation
Lessons from Europe (con’t)
• Comparative Effectiveness
information held by the industry and
by other governments; using
effectiveness as a basis for pricing
has been successful in Europe.
• Truly innovative medicines should
receive high reimbursement; “me-too”
drugs required to show cost savings
State & Federal
Strategies to Lower Rx
Drug Costs
State Strategies
•
•
Large purchasing pools
Comparative Effectiveness
[Oregon Evidence-based Practice Center]
•
Transparency [e.g. NY program requiring that
pharmacies post prices online]
•
NH court case on physician profiling
Federal Strategies
•
Secretarial negotiation for Medicare
–
–
–
Very narrow rejection in Senate –
needed 60 votes
With no formulary – CBO estimates no
savings
Veto threat
Federal Strategies
S. 1082, the Prescription Drug User Fee Amendments
sponsored by Senator Kennedy
– Reauthorize Prescription Drug User Fees that help fund FDA
– Also includes some Rx drug safety provisions and other
amendments
– Currently on the Senate floor (and will likely pass by today)
S. 316 – the Kohl-Leahy bill
– Would prohibit generic manufacturers from accepting
anything of value as part of a patent settlement with a
brand name company
– Offered as an amendment to PDUF
– Unclear whether will pass as part of that measure
Federal Strategies
S. 1088 – the Stabenow-Lott bill
– “Lower Prices Reduced with Increased
Competition and Efficient Development of
Drugs” Act
– Many of its provisions on PDUFA, offered as
part of a “managers’ amendment”
– Expected to pass
S. 623 – the Clinton-Schumer biologics bill.
– As part of PDUFA, there was a “sense of the
Senate” amendment that essentially said that
the Senate HELP Committee should report out
a generic biologics bill by June 13
– Key players are working on proposals
Federal Strategies
HR 1038 –
– Waxman-Emerson biologics proposal identical to the Clinton-Schumer proposal
- issue moving more slowly in the House,
though two hearings already held
HR 380 –
– Emanuel-Emerson importation proposal
– This is the House companion to DorganSnowe
Federal Strategies
PDUFA Reauthorization in the House
– The House moving more slowly than Senate;
hasn’t drafted language yet, just starting
process
– Expected to move in the House, get
conferenced with the Senate bill over the
summer
– Unknown at this time whether the House will try
to include Rx safety and other measures on the
PDFUA reauthorization or whether it will simply
move a “cleaner” piece of legislation.
Federal Strategies
HR 1902 – the Rush-Waxman legislation
– similar to the Kohl-Leahy bill
– Energy & Commerce Committee held a hearing on this
issue last week
– Unknown at this time whether sponsors will try to attach
this to PDUFA
HR 2184 – Comparative effectiveness research
– Monday, Rep. Allen (D-ME) introduced legislation to
expand comparative effectiveness research (including a
significant increase in funding)
– Senator Clinton working on similar legislation
Federal Strategies
S. 242 – the Dorgan-Snowe importation legislation
–
–
–
Co-sponsored by 33 Members of Senate
Allows for safe importation of Rx drugs from abroad
Offered as amendment, the
measure passed by voice vote Monday
However, “poison pill” amendment sponsored by
Senator Cochran also passed by a vote of 49-40
–
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•
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Requires that before any importation system can be
implemented the Secretary of HHS must certify safety of
imported drugs
Similar provision already part of current law
Stronger political support possible if Canada
does industry negotiating for us
Unlikely to produce much in short-term savings
Plays off of public anger in being played for fools
Longer-Term Agenda
•
•
Generic biologics
Continuing Comparative Effectiveness
studies
Focus on marketing costs
•
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DTC advertising
Physician detailing
Payments to physicians
“Date certain” patent expiration policy
Consumer Strategy
Consumer campaign for “Wise Use”
–
Counters detailing, DTC and other
questionable marketing
–
Promotes use of generics
–
Fosters full compliance
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Continue taking full prescription until finished
Continue on with maintenance drugs
–
Encourages shopping around for price
–
Has patient proactively inform physician about
every health and Rx substance taken
–
Focuses patients on knowing side effects to
watch for
Pharmaceuticals Only
Part of Reform
•
Rx pricing, patent, advertising, and
detailing practices only one
component of broader health
reforms needed
Future Agenda
•
The AG’s nationwide have great
opportunities to influence
pharmaceutical pricing by creating:
–
–
Better market rules
More effective consumer protections
Pharmaceuticals Conference
National State Attorney General Program
at
Columbia Law School