FDA Accelerated Drug Approval: Can it help with rising drug prices? Should it?

In the final weeks of summer, a new villain emerged in the eyes of many Americans- Mylan Pharmaceuticals.  Mylan Pharmaceutical Company raised the prices of the EpiPen to over $600 for a pack of two pens, a 400% increase since Mylan took on the project in 2007. The CEO of Mylan, Heather Bresch, had to explain to the nation why the steep hike in price was necessary. Bresch defended the increase, saying that it was mostly caused by the heavier use of high-deductible plans, which caused higher out of pocket costs, increasing the wholesale cost of EpiPen. However, this explanation did little to appease most EpiPen users, parents of children with severe allergies, or the American public at large, because it became obvious that much of the cost came from other factors that had nothing to do with the drug itself.

There were a number of factors other than high-deductible costs that the media and law-makers quickly pointed to as the reasons for the increase in EpiPen’s price. First, as the price of the EpiPen increased, so did the salaries of top executives at Mylan. Bresch earned just under $2.5 million when Mylan first acquired the EpiPen. Her salary is now $19 million, a 600% increase in the eight years since Mylan acquired the Epipen. Secondly, it became clear that the $600 price tag was not the result of production and other costs because, amid heavy criticism, Mylan offered a $300 generic alternative to the EpiPen. Finally, Mylan has quickly gained a monopoly over emergency auto-injectors when its only competitor Sanofi’s Auvi-Q recalled its entire supply last fall, leaving Mylan to increase the price without fear of consumers switching to another product. This dominance in the market has been the subject of a call by Senator Blumenthal (D-CT) and Senator Klobuchar (D-MN) for the FTC to investigate Mylan. While this extreme episode of drug pricing points to a number of more serious problems in the pharmaceutical world there is a more immediate question about how the FDA should react.

The FDA’s Mission is to protect the public’s health by ensuring the safety, efficiency, and security of human drugs. The FDA is also responsible for advancing public health by helping to speed innovations that make medicines more effective, safer, and more affordable. So the question becomes, in the face of price gauging, does the FDA have an obligation to accelerate generic drug applications? The FDA has worked since 2012 to reduce its 2,868 generic drug application backlog and has to some degree. The FDA approved 1,551 generic applications since 2012, but many applications have also been rejected for “major deficiencies”, a response received by Teva Pharmaceuticals. In March, the FDA rejected a generic version of the EpiPen created by Teva Pharmaceuticals. The FDA rejected the application due to “major deficiencies” in the application, which will delay the release of the drug until at least 2017.

However, accelerating drug applications more than FDA already has may be difficult if the agency does not have the money or personnel to evaluate the applications, which in the area of generic drugs has tripled in the last ten years. Additionally, the FDA has already made serious policy efforts to accelerate certain generic drug applications, particularly “sole-source” application vouchers. Sole-source generic drugs are those applications in which there is currently only one manufacturer on the market.  The FDA is making a concerted effort to get competition out onto the market, but as the FDA’s mission statement also requires it to approve safe and effective drugs.

Although accelerated applications can be beneficial to create more options for consumers, the FDA also has to be aware of safety consequences. This is exactly the argument made by Progressive think-tank, American Progress, who warns that faster drug approvals will only help pharmaceutical companies, not patients. The organization’s report on this issue, released last March, states “this approach would lead to additional drugs entering the market with little evidence to support safety and effectiveness.”  It also states that the FDA’s drug approval process is actually one of the fasted in the world, therefore putting the blame on FDA is a faulty argument.

It is clear there have been efforts by the FDA to get more competition out on the market, but it has to do so cautiously because availability isn’t the only concern. Also, it’s clear that even if backlogged applications are part of the drug pricing problem, it’s a small part. The FDA should continue to employ the methods it is already using to decrease its generic drug backlog. However, as more generic drug applications continue to come into the FDA, it should be careful not to bow to the pressure of the generic drug companies and politicians to lower safety standards in order to increase efficiency.

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The False Claims Act (FCA), 31 U.S.C. §§ 3729-3733, was enacted during the time of the Civil War to combat  fraud committed by the suppliers of  goods to the Union army. What made the False Claims Act different from other fraud and abuse laws was the inclusion of the qui tam provision that allowed private citizens/whistleblowers (“relators”) to bring a lawsuit against companies and individuals who were defrauding the government. Over the years, the FCA has had many changes, but more recently, the FCA has become the primary tool in combatting federal healthcare fraud and abuse.

Healthcare spending is skyrocketing in United States. As of the recent data, published by the Center of Medicare and Medicaid services on December 3, 2015, health spending accounted for 17.5 percent of the nation’s Gross Domestic Product (GDP). In 2014, U.S. health care spending grew 5.3 percent, reaching $3.0 trillion. It is no surprise that, with this gargantuan amount of healthcare cost, there is a renewed attention to expose health care fraud and abuse. False certification is an archetypal example of fraud and abuse perpetrated by healthcare providers.

False certification is when hospitals, physicians, and healthcare providers misrepresent to government health care programs through non-compliance with all the regulations and obligations under their contracts with government. For example, when providers misrepresent non-covered treatments as medically necessary for the purpose of obtaining payments from federal healthcare program.  However, in legal terms there are two categories of certification: 1) express false certification and 2) implied false certification. Express false certification theory applies when a government payee, “falsely certifies compliance with a particular statute, regulation or contractual term, where compliance is a prerequisite to payment.” United States. ex rel. Conner v. Salina Reg’l Health Ctr., Inc., 543 F.3d 1211, 1217 (10th Cir. 2008). While express false certification may not seem too hard to understand on its face, circuit courts across the country have been split on the application of the implied certification theory of liability. Government and qui tam plaintiffs have argued that just submitting a claim for reimbursement alone implies compliance with federal rules, and the implied false certification theory can be a basis for liability. On the other hand, defense counsels have argued that implied certification creates an excessive burden on defendants, especially when defendants have to pay treble damages for noncompliance of a contractual or regulatory terms as conditions of payment.

On June 16, 2016, the  Supreme Court in Universal Health Services v. United States ex. rel. Escobar, 136 S. Ct. 1989 (2016) unanimously held that implied certification theory, can be a basis for FCA liability,  thus resolving a  circuit split. Under the Universal Healthcare decision, “when a defendant submitting a claim makes specific representations about the goods or services provided, but fails to disclose noncompliance with material statutory, regulatory, or contractual requirements that make those representations misleading with respect to those goods or services 136 S. Ct. at 1994.

However, the Supreme Court limited the wide application of the implied certification theory. First, when government payee submits a claim for government payment, the claim must not “merely request payment,” but also makes “specific representation about the goods or services provides.” Second, the Supreme Court applied the common-law rule to misrepresentation, where “half-truth representations that state the truth . . . . while omitting critical qualifying information- can be actionable misrepresentation.” 136 S. Ct. at 1994. In a footnote, Justice Thomas gave examples of tort law, contract law and securities law to demonstrate the example of common law misrepresentation, which is very much the same in understanding misrepresentation in the FCA context. Third, the Supreme Court pronounced that the materiality standard is demanding. The Court further went on to state that when assessing materiality under FCA, it’s not dispositive that every violation of express condition of payment can trigger liability. Id. at 2003. The Supreme Court identified additional situations on what can trigger materiality, and in sum, it is dependent on specific context.

The much-anticipated Universal Health Services decision resolved the circuit split, and at the same time would thwart attempts by plaintiffs and the government to bring cases for a “garden variety of breaches of contract or regulatory violation.” Overall, this decision is a win for plaintiffs and government because a healthcare provider can still be facing implied certification liabilities under FCA for making a fraudulent claim for payment from the federal healthcare programs, but at the same time defense counsels have an assurance in light of this decision that minor regulatory and contract violations would not result in huge liabilities. Lower courts will determine what lies ahead in the wake of this decision, whether qui tam plaintiffs will have difficulty pleading facts sufficient to prove the test outlined by the Universal Health Services court or whether the defense community have these new guardrails to shield them from unsubstantiated implied false certification liability.

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The Debate Surrounding the Right to Die

In 2014 Brittany Maynard became the face of the nation’s right-to-die debate. Maynard, 29, was diagnosed with terminal brain cancer and given six months to live. After assessing her options, Maynard and her family reluctantly decided to move from the San Francisco Bay Area to Oregon, one of five states that authorized physician-assisted suicide at the time. Maynard died on November 1, 2014 after taking a lethal dose of drugs prescribed by her physician. An ardent advocate for physician-assisted suicides, Maynard revitalized the discussion across the country and made the topic relevant to a younger generation.

The topic sparks rigorous debate and there are complex arguments on both sides of the issue. At play are legal, ethical, and moral dilemmas. Proponents of physician-assisted suicide say that it gives those suffering from terminal illnesses a right to die with dignity. They argue that in the face of a terminal illness where the prospect of unbearable pain, diminished quality of life, inevitable suffering, and death are all imminent realities, one should have the right to decide how and when to die.  Opponents say that it is dangerous and unethical. They argue that when doctor-induced death becomes an acceptable remedy for suffering, “logical extensions grease the slippery slope.” For example, one doctor who opposes the practice cited statistics from Holland, where the practice is legal, that claim more than forty people sought and received doctor-assisted death for depression and other mental illnesses.

In two 1997 cases, Vacco v. Quill and Washington v. Glucksberg, the U.S. Supreme Court ruled that physician-assisted suicide is not a fundamental liberty interest protected by the Due Process Clause of the Fourteenth Amendment. Because it was not determined to be a fundamental liberty interest, the Court gave a great deal of deference to the laws in place at the time of the rulings. In particular, Washington v. Glucksberg dealt with a Washington statute that made it a felony for a person to assist in the death of another. The state of Washington argued that it had a legitimate interest in preserving lives, preventing suicides, avoiding the involvement of third parties and the use of unfair or arbitrary influence, protecting the integrity of the medical community, and avoiding future movement toward euthanasia and other abuses. The Court held that the law was rationally related to those legitimate interests. However, it left the door open for states to permit physician-assisted suicides by declining to ban the practice.

Currently California, Oregon, Washington, and Vermont have enacted “Death with Dignity” statutes, and Montana has made the practice legal through case law. Twenty more states are considering “Death with Dignity” legislation this season, and twenty-five states have no legislative activity on the topic this year. Clearly there is still a lot to be decided in this area, and it is likely to be an active area of law for many years to come.

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Pharma Transparency Bill Wains in California as Price-Gouging Discussion Gains Momentum Nationally

On August 17, California lawmakers killed a drug price transparency bill, putting to rest a policy that would have major implications on the pharmaceutical industry in the United States’ most populous state. The bill, which was first introduced by State Senator Ed Hernandez (D-West Covina) in February 2016, sought to require drug makers to report and explain any price pharmaceutical increase of ten percent within any given twelve-month period, as well as justify any drug price of at least $10,000 within thirty days of moving to that amount and require insurers to disclose how much money they spent on drugs. While the bill received far-reaching support from healthcare providers, insurers, patient advocacy groups, labor groups, and business groups alike, it was met with fervent opposition by pharmaceutical companies.

According to the Los Angeles Times and lobbying activity filings, Hernandez’s legislation was one of the most lobbied bills of current the session, with at least seventy groups spending  money to advocate for or against it. “It’s probably amongst one of the more heavily lobbied bills — similar to tobacco and the most controversial bills,” the measure’s author, Senator Hernandez, told The Times.  However, by August 17, after four amendments, Hernandez pulled the plug on it entirely, stating that the amendments made it difficult to accomplish the bill’s intention, which would have “shed[] light on the reasons precipitating skyrocketing drug prices.”

The demise of this legislation is another huge win for Big Pharma lobbyist PhRMA, which in October 2015 won a summary judgment ruling in the United States District Court for the District of Columbia, blocking certain hospitals from receiving discounts for pricey orphan drugs. It also comes at a time when pharmaceutical companies, biotech firms, and orphan-drug makers have come under high scrutiny for price gouging, including the 5,455% price increase of HIV and Malaria-treatment medication, Daraprim, from $13.50 to $750 per pill in September 2015. Earlier this month, the uptick of the price of the allergic reaction-treating EpiPen Auto-injector medical device – from $57 to $600 between 2007 and 2016 – as its maker anticipates the arrival of a generic competitor, though, its non-generic, brand name competitor Auvi-Q was recalled in 2015 over dosage concerns.

A proponent for changes to Big Pharma since the 1990s, United States Senate Bernie Sanders (I – VT) made “out of control” prescription drug pricing a key issue during his 2016 presidential campaign. After winning the Democratic nomination, Presidential hopeful Hillary Clinton has carried the torch, speaking out on drastic price increases, sending stocks for EpiPen-maker, Mylan, tumbling.

With little being done by the United States Congress on the issue of drug price transparency, fourteen state legislatures have introduced measures to reign in prices. As of 2016, only Vermont has been successful in passing a bill, while others stall or fail outright, as is the case in California.

The pricing war in California now marches to the ballot in November. Citizens will vote on an initiative that would prohibit state agencies, like Medical (the state’s version of Medicaid) and Medicare from being charged any more for drugs than the United States Department of Veterans’ Affairs.

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Holding Nursing Homes Accountable

There are currently over 1.4 million Americans living in nursing homes. When people enter a nursing home, they expect to receive the utmost quality care. However, if for any reason that care is anything less than adequate, there are not reasonable safeguards in place to hold nursing homes truly accountable to patients.

In an effort to prevent nursing home residents from suing for resident rights violations, abuse or neglect, nursing homes ask residents or their families to sign agreements prior to admission that include binding pre-dispute arbitration provisions. The arbitration clauses in these contracts require residents and their families to settle disputes through private arbitration rather than in a court of law in front of a jury. Most arbitration clauses are hidden in contracts so that consumers will not pay attention to the fact they are waiving important, constitutional rights to a jury, the right to discovery, and the right to a written record. However, instead of simply banning these pre-dispute clauses, the Centers for Medicare and Medicaid Services allows them as long as the nursing homes take steps to explain and disclose the clauses. Unfortunately, even if nursing homes explain these clauses it does not mean that residents and their families will fully understand prior to signing. Forced arbitration shields corporations from liability, but at the same time denies justice to patients, meaning that business wins and consumers lose.

In July 2015, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule to revise requirements for nursing homes, including specific requirements relating to the use of these pre-dispute arbitration clauses. In October 2015, 27 members of Congress sent a letter to CMS criticizing CMS’s proposed rule, stating it would not adequately protect residents in nursing home facilities. The letter called on CMS to issue a final rule; this ensured that residents entering these agreements will do so only on a voluntary and informed basis after a dispute arises instead of prior to a dispute. This would give residents the choice to use arbitration as an alternative dispute resolution rather than a forced resolution. Further, the congressional members wanted to ensure that signing the agreement would not be a requirement for admittance, but simply an option to handle unresolved disputes.

In July 2016, 32 members of Congress sent another letter to CMS that commended many provisions of the rule, but highlighted critical issues that must be fixed before the final version to protect our country’s most vulnerable population.  The letter applauded CMS for recognizing the problems with these pre-dispute arbitration clauses, but said CMS was not doing enough. The letter asked to explicitly prohibit these clauses from nursing home agreements for many reasons. CMS cannot expect residents and their families to make such decisions during their initial admission to a nursing home. Nursing homes must be held accountable for the care they provide to our nation’s elderly community.

The final version of the new regulations for nursing homes is expected to arrive in September.




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