Robust competition usually keeps the price of generic drugs well below that of brand-name drugs. When there is little or no competition, however, generic-drug manufacturers can substantially increase prices, and drug shortages may occur. Such market failures can compromise care and negatively affect patients, health care providers, government insurance programs, and private health plans. We believe that market-based solutions are an important alternative approach to stimulating competition in generic-drug markets. One such solution is to establish a nonprofit generic-drug manufacturer with the explicit mission of producing affordable versions of essential drugs and ensuring a stable supply of such products. A consortium of hospitals and health plans, including Intermountain Healthcare, Trinity Health, SSM Health, and Ascension, in collaboration with the Department of Veterans Affairs and philanthropists, is following this approach and developing a nonprofit generic-drug manufacturer code-named Project Rx. Citation: Liljenquist D, Bai G, Anderson GF. Addressing Generic-Drug Market Failures -The Case for Establishing a Nonprofit Manufacturer. N Engl J Med. 2018;378 (20):1857-1859.
Pharmaceutical Industry Financial Penalties, 1991-2017. Credit and source
A new report from Public Citizen concludes that the number and size of federal and state settlements against the pharmaceutical industry remained low in 2016 and 2017, with federal criminal penalties nearly disappearing. Financial penalties continued to pale in comparison to company profits, with the $38.6 billion in penalties from 1991 through 2017 amounting to only 5% of the $711 billion in net profits made by the 11 largest global drug companies during just 10 of those 27 years (2003-2012). To our knowledge, a parent company has never been excluded from participation in Medicare and Medicaid for illegal activities, which endanger the public health and deplete taxpayer-funded programs. Criminal prosecutions of executives leading companies engaged in these illegal activities have been extremely rare. Much larger penalties and successful prosecutions of company executives that oversee systemic fraud, including jail sentences if appropriate, are necessary to deter future unlawful behavior. Otherwise, the illegal but profitable activities will continue to be part of companies’ business model.
Reuters reports that U.S. Food and Drug Administration chief, Scott Gottlieb, criticized pharmacy benefit managers, health insurers and drug makers for “Kabuki drug-pricing constructs” that profit the industry at the expense of consumers. The comments, made at a conference organized by a leading U.S. health insurer lobbying group, stoked speculation over what steps the administration of U.S. President Donald Trump may take to rein in lofty prescription drug costs. “Patients shouldn’t face exorbitant out-of-pocket costs, and pay money where the primary purpose is to help subsidize rebates paid to a long list of supply chain intermediaries,” Gottlieb said at the meeting of America’s Health Insurance Plans (AHIP). “Sick people aren’t supposed to be subsidizing the healthy.”
As journalistic and legislative scrutiny of the role of the pharmaceutical industry in the opioid epidemic continues, several new reports focus on the potential of litigation to curb Big Pharma abuses.
In The New England Journal of Medicine, Rebecca Haffajee and Michelle Mello, two public health lawyers, examine drug companies’ liability for the opioid epidemic. They describe five legal rationales for litigation against opioid makers and distributors that federal and state government agencies have used:
- Blaming the industry for unreasonably interfering with public health by oversaturating the market with drugs and failing to guard against misuse and diversion,
- Charging the industry with deceptive marketing that makes false claims about effectiveness and addictiveness,
- Accusing the industry for lax monitoring of suspicious opioid orders, a potential violation of the federal Controlled Substance Act,
- Asserting that the industry continued to promote opioid use despite mounting evidence lining the product to adverse health outcomes,
- Alleging that the industry accrued profits at the government’s expense through unfair business practices.
The authors outline some of the challenges facing litigation against opioid manufacturers but conclude that “litigation could help alleviate the opioid epidemic by changing industry practices and building public awareness.”
In an Oklahoma lawsuit recently described in The New York Times, a lawyer is using the Cherokee Nation tribal court to sue Walmart, Walgreens and CVS Health, as well as McKesson and other major drug distributors, for violating federal drug monitoring laws(reason 3 above) and enabling prescription opioids to flood into the Cherokee nation. “I believe these companies target populations” Todd Hembree, the Cherokee Nation attorney general, told The New York Times. “They know Native Americans have higher rates of addiction. So when they direct their product here, they shouldn’t be surprised to find themselves in a Cherokee court.”
The Washington Post and 60 Minutes investigated the failure of the U.S. Department of Justice to follow the recommendation of a Drug Enforcement Agency task force working across 11 states to revoke registrations to distribute controlled substances at some of the 30 drug warehouses of The McKesson Corporation, the nation’s largest drug company. The DEA team wanted to fine the company more than $1 billion and bring the first criminal case against a drug distribution company. Instead, reports The Post, “top attorneys at the DEA and the Justice Department struck a deal earlier this year with the corporation and its powerful lawyers, an agreement that was far more lenient than the field division wanted…. Although the agents and investigators said they had plenty of evidence and wanted criminal charges, they were unable to convince the U.S. attorney in Denver that they had enough to bring a case.”
Note to Corporations and Health Watch readers: Our next post will be on January 3,2018. Happy New Year!
Has the growing reliance of the U.S. Food and Drug Administration on industry user fees changed how the pharmaceutical and medical device industries influence FDA regulation? A review in The New England Journal of Medicine charts changing industry influence from the Prescription Drug User Fee Act (PDUFA)of 1992 to the recent sixth re-authorization of PDUFA by President Trump this year. The authors conclude that although 25 years of industry funding have shortened regulatory timelines, the user-fee model has fundamentally changed the way the FDA interacts with the drug industry. These changes may increase the risk that unsafe or ineffective drugs or medical devices enter the market.
Consumer access to effective and affordable medicines is an imperative for public health, social equity, and economic development, but this need is not being served adequately by the biopharmaceutical sector, says a new report from the National Academies of Sciences, Engineering, and Medicine. The report offers recommendations to improve the affordability of prescription drugs without discouraging the development of new and more effective drugs for the future. “Over the past several decades, the biopharmaceutical sector in the United States has been successful in developing and delivering effective drugs for improving health and fighting disease, and many medical conditions that were long deemed untreatable can now be cured or managed effectively,” said Norman Augustine, chair of the committee that conducted the study and wrote the report. “However, high and increasing costs of prescription drugs coupled with the broader trends in overall medical expenditures … are unsustainable to society as a whole. Our report seeks to address the market failures that currently permeate the biopharmaceutical sector, such as lack of competition due to distortions in the application of the patent protection process, the imbalance between the negotiating power of suppliers and purchasers, and the convoluted structure of the supply chain. Although changes within the current system will be demanding, they are likely to better serve the nation.”
A Washington Post 60 minutes investigative expose revealed that Trump’s nominee to head the Drug Enforcement Agency, Tom Marino, a Republican from Pennsylvania had led a successful effort in the House of Representatives to strip the DEA of its most potent weapon against large drug companies suspected of spilling prescription narcotics onto the nation’s streets. The revelation forced Marino to withdraw and Trump to start again in pursuing his long-promised campaign against opioid misuse. The story suggests two lessons. First, corporate influence in Congress is so strong that even in an opioid epidemic, the drug industry can persuade Congress to deregulate to protect its profits. Second, the power of investigative journalism continues to be an important check on abuses of authority.
A report released by the minority members of the US. Senate Homeland Security and Governmental Affairs Committee provides new information regarding the significant efforts the pharmaceutical company Insys has undertaken to reduce barriers to the prescription of Subsys, its powerful fentanyl product. These efforts include actions to mislead pharmacy benefit managers (PBMs) about the role of Insys in the prior authorization process and the presence of breakthrough cancer pain in potential Subsys patients. An internal Insys document suggests Insys apparently lacked even basic measures to prevent its employees from manipulating the prior authorization process and received clear notice of these deficiencies.
In May, Maryland became the first state to take action against the alarming trend of price gouging of off-patent brand-name and generic drugs, writes Jeremy Greene in an op-ed in The Washington Post. The state’s concise new law, which permits the attorney general to argue in front of a court when the price of an older essential medication increases so precipitously as to “shock the conscience,” passed with overwhelming bipartisan votes and broad popular support. The generic pharmaceutical industry would prefer to see it overturned. While the problem of pharmaceutical pricing is felt most keenly in newer specialty drugs that can cost more than $30,000 a year, interpretations of federal patent law limit the ability of states to protect residents from price increases in these newer drugs whose monopolies are protected by patents.
Novo Nordisk (Denmark) has agreed to pay $58.65 million to end a federal investigation by the US Department of Justice (DoJ) related to the company’s diabetes medication marketing practices, reports Bloomberg News. The investigation was launched in February 2011 into sales and marketing activities concerning Novo Nordisk’s leading type 2 diabetes drug Victoza. The financial terms of the agreement mean that Novo Nordisk will pay about $46.5 million as settlement to the federal government and to US states responsible for reimbursing Victoza under the Medicaid program. Furthermore, Novo Nordisk has agreed to pay $12.15 million to resolve complaints lodged by the US administration on behalf of the FDA. The alleged off-label marketing unnecessarily increased the costs for government healthcare programs while allegedly endangering patients, according to the whistleblower complaints and the government.