Month: January 2018

The battle to control high drug prices between pharmaceutical companies, insurance companies, and the government continues to rage on. On January 8, Patient Services Inc. (PSI), a patient-assistance charity, launched the newest crusade by suing the Department of Health and Human Services (HHS).

What is a patient-assistance charity?

A patient-assistance charity works to help patients with expensive prescriptions pay for their medication. Though seemingly benign, patient-assistance charities get most, if not all, of their funding from pharmaceutical companies. These are the same pharmaceutical companies that have, since the heyday of Martin Shrekli, been criticized countless times by the media and dragged into Congress for raising drug prices.

This is where a patient-assistance charity comes in and provides a shield for badly bruised companies. Charities help quell public criticism for increased drug prices because companies, by pointing to the charities, are able to ensure critics that patients who need their drugs will be able to afford them. Shrekli even did this for Daraprim, the drug that he raised the price by 5,000%. Within days of raising the price, Turing, the company that manufactures Daraprim, called PSI and created a fund for patients with toxoplasmosis, the infection that is most often treated with Daraprim.

The good publicity is only icing on the cake. The real reason pharmaceutical companies donate to patient-assistance charities is because it is profitable. For every $1 million spent on a charitable donation, the company has the potential to generate $21 million in revenue. The company also receives a tax deduction for their donation. Companies profit because they only have to pay a couple hundred dollars to cover the patient’s co-pay and they will receive thousands of dollars for the remaining cost of the drug from the patient’s insurance company.

The funds also allow drug companies to get around anti-kickback provisions. Pharmaceutical companies cannot give patients enrolled in Medicare or Medicaid a co-pay coupon (coupons that help reduce or eliminate co-pay costs for a certain drug). However, companies are authorized to give to patient-assistance charities that help patients on Medicare or Medicaid.

There are rules governing the relationship between the companies and charities. Companies are not allowed to dictate how the donations are spent, but this doesn’t always play out in practice. An IRS analysis of the Chronic Disease Fund (CDF) found that almost all of the financial assistance went to patients taking drugs from their biggest funder, Genentech. In 2011, Celegene gave CDF $48.8 million to support a fund for multiple myeloma patients and 98% of the money from that fund went to patients taking drugs from Celegene.

Patient Services Inc v. Health and Human Services

In its suit, Patient Service Inc v. Health and Human Services, PSI alleges that the federal oversight of its charity violated its free speech rights by limiting its ability to communicate with donors. PSI says the oversight is burdensome and threatens the existence of the organization.

PSI might be going on the offensive in reaction to the Office of Inspector General (OIG) of HHS revoking its favorable advisory opinion of another patient-assistance charity, Caring Voice Coalition (CVC). OIG rescinded its favorable opinion because CVC gave drugmakers data that could help them see if their contribution was being directed for their own drugs, potentially giving the companies “greater ability to raise the prices of their drugs while insulating patients from the immediate out-of-pocket effects.” The coalition has since announced that it will no longer be able to offer any financial assistance in 2018. On top of this, patient-assistance charities are also feeling the heat from the U.S. Attorney’s Office in Massachusetts and the Internal Revenue Service.

Blockbuster biologics have represented the forefront of the biopharmaceutical industry for nearly two decades. Biologics are drug products that are derived from natural sources and include a wide range of products such as vaccines, allergenics, gene therapies, and recombinant therapeutic proteins. Biologics offer treatments for diseases that conventional drugs have been unable to sufficiently treat or have previously been considered untreatable altogether. Indeed, biologics, which are coined “blockbusters” upon generating over $1 billion in annual sales, have dominated U.S. markets recently. For example, Humira, a biologic drug, has been considered the top-selling drug since 2013. Despite the widespread success of biologics among manufacturers, this progress has not yet translated to the pockets of patients. Instead, biosimilars, which are therapeutic drugs that are similar but not structurally identical to an approved brand-name biologic, tout expected savings of $54 billion from 2017 to 2026. The emerging biosimilars market promises significant cost reductions and increased clarity regarding the approval of new biosimilars.

Enacted as part of the Patient Protection and Affordable Care Act (ACA) in 2010, Congress developed a new regulatory approval pathway for biosimilars through the Biologics Price Competition and Innovation Act (BPCIA). Specifically, the BPCIA created an abbreviated licensure pathway for biosimilars that are highly similar to already approved “reference” biologics in terms of safety, purity, and potency. The BPCIA also set forth FDA-administered periods of regulatory exclusivity for certain brand-name biologics and biosimilar products, as well as procedures to resolve patent disputes. The primary goals of the BPCIA include increasing access to lifesaving medications, providing more treatment options, and lowering health care costs through increased competition. As well, comparable to how generic drugs avoid duplicating costly clinical trials to attain approval, biosimilars also avoid these costs.

By way of background, and to better understand the events leading up to creating a biosimilar pathway, generic drugs merit discussion. In 1984, the Hatch-Waxman Act was enacted by creating an abbreviated regulatory pathway for generic chemical drugs. The generic drug industry subsequently exploded and the changes in regulation have allowed generics to capture significant market share from brand-name drug manufacturers. The generics market share has increased from merely 19% of dispensed drugs in 1984 to nearly 89% in 2015. The Hatch-Waxman Act allows generic drugs to piggyback off of the efficacy and safety data of a brand-name drug. Central to the Hatch-Waxman Act are the competing interests of medical innovation and access to medicine. Accordingly, the U.S. patent system plays a significant role in the pharmaceutical industry. During the time of congressional debate and subsequent implementation of the Hatch-Waxman Act, the biotechnology industry was still in its infancy, and biologic drugs were specifically not included under the pathway.

There are several key differences between the drugs regulated under the BPCIA as compared to the Hatch-Waxman Act. Biologic and biosimilar drugs are more complex than chemical drugs. Biosimilar drugs are often compared to generics and even called “generic biologics,” but this label is improper. Strictly speaking, a pharmacist can swap a generic drug for a brand-name drug, but biosimilar drugs cannot be swapped. However, many states have laws addressing pharmacy-level substitution, which is a practice that permits a pharmacist to substitute one drug product for another without consulting the prescriber. Another distinguishable aspect between the BPCIA and the Hatch-Waxman Act is how patent rights are enforced. Unlike the Hatch-Waxman Act, the BPCIA does not tightly link FDA approval with patent rights. Nonetheless, patent disputes have been the subject of every lawsuit concerning the BPCIA to date. Currently, there are nine approved biosimilars in the United States, but only three have launched on the market. Patent litigation envelops the approval process for biosimilars and although uncertainty remains in the biotechnology industry, the biosimilar approval pathway has gained clarity.