by John J. Otrompke, JD
With
pharmaceutical companies entering a bidding process for inclusion onto the
formularies of PBMs over the next few months, the drug industry may be entering
a historically chaotic time, according to speakers on a May 14 panel at New
York BIO, “The Impact of Pricing and Policy on the Next Decade of Therapeutic
Intervention.”
Discussants speculated that the
change might come January 1 of 2020.
“Nobody’s quite sure how the rule
will shake out, so there’s a dual-bidding process going on for Medicare D
contracts, with a deadline in June, with one bid under the old rule, and
another bid if the proposed rule passes,” said Jeff Berkowitz, JD, CEO of Real
Endpoints.
Inflationary Forces
Some on
the panel opined that the rebate system, in which drug manufacturers compete
for PBM formulary access by offering larger rebates, means that competition raises
prices, not lowers them.
“The details of the PBM contracts
are proprietary, unless there is a lawsuit, like when there were dueling
lawsuits in 2017 between Express Scripts and Kaleo, which makes narcan pens,”
explained Madelaine Feldman, MD, a rheumatologist and clinical assistant
professor of medicine at Tulane University Medical School in New Orleans.
“When attorneys can go in and look
at the contract, they found that the PBM was passing back only 7% of the rebate
to the plan in the private market, and only 20% to Medicare. The rebate was
only 7% of the price concession, 93% of which was held onto by the middleman,” she
added.
The proposed regulation would take
away the safe harbor under the Anti-Kickback Statute for PBM rebates, and
create a safe harbor for a flat, market rate administrative fee. It would also
create a safe harbor for patients, noted Feldman, who pointed out that some of
her rheumatology patients who take very expensive drugs for incurable diseases
rely on rebates for their drugs.
“It would certainly be a change to
PBM’s cost structure,” said Berkowitz. “All the PBMs say they could live in a
world without rebates, but that they do valuable administrative work, and they
would charge an administrative fee for it.”
Will
PBMs Have a Role in Innovation Decisions?
That said, PBMs, too, are an
evolving industry. Five large insurers own or intend to own PBMs, such as
CIGNA, which recently purchased ExpressScripts, and the Humana-Walmart merger.
Last summer, Amazon bought Pillpack, which has pharmacy licenses in 49 states.
In addition to regulatory
proposals, other market solutions proliferate.
“In addition to re-aligning
financial incentives among supply chain intermediaries so that they do not
encourage higher prices, I favor
value-based
pricing, particularly for treatments that have no branded or unbranded
competitors,” said Anna Kaltenboeck, senior health economist at Memorial Sloan
Kettering Cancer Center in New York, who also spoke on the panel.
“Value-based reimbursement is one
way to get to the answer,” said Berkowitz. “Although it has taken on a negative
connotation, it is a term of art in the industry. Now it’s time for pharma to
put it on the line. If you don’t get to your outcome, that’s going to have
repercussions,” he said.
“In Louisiana, where we have a
large prison population, and so a very large hepatitis C problem, the Netflix
model was proposed. The state would contract for an unlimited supply of the
hepatitis C drug, and the contract also assures the manufacturer of a minimal
amount of money,” said Feldman.
“Policy needs to have an effect on solving
Alzheimer’s. There’s no capital going into this, and we’re all aging,” he gave
as an example.
“In disease areas like COPD,
cardiovascular disease and diabetes, there’s not a tremendous amount of
continued innovation going on right now,” agreed Berkowitz. “But you’re seeing
therapies like CAR-Ts in the pipeline, where you get a one-shot deal. People
take it once and get cured. The industry would develop a treatment for a rare
disease, and treat seven people for a million dollars each.
“So people in the audience should
travel to Louisville, Kentucky, or Minnesota, and sit down with the PBMs, and
ask them, ‘What kind of innovation do you want to fund?” he suggested.
© 2019 John Otrompke
