Unaffordable Drugs? Millions Buy Medicine Outside U.S.

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pill-bottles-in-pharmacyAs drug prices have spiraled upward in the past decade, millions of generally law-abiding Americans have committed an illegal act in response: They have bought and imported prescriptions outside the U.S. 

One was Debra, of Collinston, Louisiana, who traveled to Mexico four times a year for 10 years to get diabetes and blood pressure medicine. She quit going in 2011 after the border patrol caught her returning to the U.S. with a three-month supply that had cost her $40. The former truck driver drew a stern warning not to do it again, but got to keep her pills.

“I didn’t know what I did wrong,” said Debra, 51, who now pays $120 a month at Walmart for her five medications while she waits to join Medicaid.

It is no secret that some Americans regularly buy prescription drugs on the Internet or while traveling abroad. But the popularity of the approach is underscored by the results of a Kaiser Family Foundation poll conducted in November 2016. 

Eight percent of respondents said they or someone in their household had imported a drug at some point, a figure that would translate to about 19 million adults in the U.S. based on current Census population estimates.

Even the proportion found in the poll may be low, said Andrew Zullo, a clinical pharmacist and a doctoral student at the Brown University School of Public Health who has researched the subject. “People are uncomfortable talking about the cost of their own health care, and they do not want to admit they are struggling to pay for their own medicines,” he said. Some may also be reluctant to reveal they have broken the law.

Still, 8 percent is far higher than in surveys conducted by government interviewers, which suggested the number was about 2 percent in 2011 — though the government survey focused only on purchases in the previous 12 months. The Kaiser poll queried a nationally representative sample of 1,202 adults.

The Internet has made it easier for Americans to buy prescription drugs abroad, frequently from disreputable sources, according to Jaime Ruiz, a spokesman for U.S. Customs and Border Protection.

The Food and Drug Administration has cautioned that many online pharmacies are not what they portray. An international crackdown in 2014 found that many packages of medicines purportedly from Australia, Canada, New Zealand and the U.K. contained drugs from other countries, including India, China and Laos.

Zullo acknowledged that imported medications could be inferior or expired. Some could be counterfeits. But many medicines purchased from another country are the same as the ones patients buy in the U.S.

When purchased outside the country, many prescription medicines cost half or less than they do in the U.S.

According to the FDA’s website, it is generally illegal for Americans to import drugs into the U.S. for personal use. The law is not rigorously enforced, in part, because it is difficult to monitor the entry of medicine in luggage and small packages. But in 2015 the FDA implemented a rule that would give government border inspectors expanded authority to destroy drugs imported for personal use at their point of entry.

In the poll, people who had imported medicines ranged from college students in their 20’s to retirees in their 80’s. They bought medications to treat chronic conditions — such as high blood pressure and thyroid problems — as well as acute problems such as sinus infections and acne.

Amanda, a 27-year-old graphic designer in St. Paul, Minnesota, was stressed out by the murky legality of the situation when she tried buying migraine medication while in college five years ago. “That was the most difficult part, trying to be an honest citizen but also getting an affordable prescription,” she said. She could not afford to pay $150 a month for her medicine, but found an online Canadian pharmacy that sold her a three-month supply for $60.

Robert, of Los Angeles, has relied on foreign pharmacies for seven years to get medicine for his friend’s severe asthma. Robert, 38, travels internationally for his job producing live shows. Each time he is in Mexico or France, he buys 10-packs of inhalers and 20-packs of nebulizer solution for a fraction of what they would cost in the United States.

His friend’s asthma would require inhalers costing $300 a month if she purchased them in the United States. Robert estimates that he saves at least $2,500 a year by buying the drugs overseas.

“I love her to death,” he said. “I will do whatever I can to take her stress away.”

Fraud Emerges as Compounding Drug Sales Skyrocket

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PharmacistsWhat the government is spending on “compounded” drugs that are mostly handmade by retail pharmacies has skyrocketed, drawing the attention of federal investigators who are raising concerns of fraud and overbilling.

Spending on these medications in Medicare’s Part D program, for example, rose 56 percent last year, with some of the costliest products, including topical pain creams, priced at hundreds or thousands of dollars per tube. The federal workers’ compensation program has also seen a recent spike in spending.

The spending jump, along with a sharp increase in the number of patients getting the compounded drugs “may indicate an emerging fraud trend,” said Miriam Anderson, who helped oversee a June report on the Medicare spending by the inspector general’s office at the Department of Health and Human Services.

Some of the prescriptions may not have been medically necessary — or even dispensed at all, notes the report, which also details recent fraud cases brought by U.S. attorneys in several states.

The practice of compounding drugs, which is done by mixing drugs in pharmacies or special compounding centers by licensed pharmacists, is as old as the pharmacy profession itself. By creating specifically tailored medications, compounding is aimed at patients who cannot take commercially available, FDA-approved medications.

But use among Medicare beneficiaries and federal employees in workers’ compensation insurance plans has recently soared, according to Anderson’s report and a separate Postal Service inspector general’s study of the workers’ compensation program released last spring.

Similar run-ups in spending for compounded drugs were also noted by private-sector benefit managers in recent years.

In Medicare’s drug program, known as Part D, the number of Medicare beneficiaries getting compounded drugs has grown 281 percent since 2006 to nearly 280,000 in 2015. Spending on such drugs in Medicare’s Part D grew 625 percent between 2006 and 2015, to $509 million, according to the OIG report. That is still a tiny fraction of the program’s total spending on drugs.

The fastest-growing category of compounded drugs are topical creams and gels, often used for pain. Spending on those increased 3,466 percent in the Medicare program since 2006, the report said, while the average cost per prescription hit $331, up from $40 in 2006.

A large spike in spending for compounded drugs led the U.S. Postal Service to try to hold back payments for its share of federal workers’ compensation costs last year, saying the agency overseeing the program had failed to more strictly police the use of such drugs. It eventually paid.

Overall, the federal government’s worker’s compensation program, which includes the Postal Service, saw the spending on compounded medications grow from $2.35 million in fiscal 2011 to $214 million in fiscal 2015, according to the Department of Labor, which oversees the program.

New rules from the Department of Labor went into effect July 1, aimed at slowing the spending. Among other changes, the agency will now limit initial prescriptions to 90 days.

While legitimately prescribed compounded drugs “can dramatically improve a patients’ quality of life,” it is also important to have “proper controls around billing,” said John Voliva, executive vice president of the International Academy of Compounding Pharmacists. The HHS inspector general’s report demonstrated that such controls “are not in place,” he said.

Benefits vs. Drawbacks

The studies come amid ongoing scrutiny of the drug compounding industry, particularly following a meningitis outbreak that killed 64 Americans in 2012. Those deaths were linked to a Massachusetts pharmacy that sold tainted injectable medications.

Following that outbreak, some states tightened their oversight of such pharmacies, particularly those producing products that must be sterile.

Compounding pharmacies are generally overseen by state boards of pharmacy, and the drugs they produce are not considered FDA approved. The agency does get involved, however, when it is concerned that pharmacies might not be making medications properly or have started to mass produce treatments, rather than preparing them for individual patients.

When prescribed appropriately, compounded drugs allow patients who can’t take or tolerate commercially prepared products to have special formulations mixed just for them. Patients who can’t swallow pills, for example, can get liquid formulations or those allergic to certain dyes can get products made without them.

And sometimes such drugs can be more cost-effective.

When Turing Pharmaceuticals raised the price of a drug used for patients with compromised immune systems from $13.50 a pill to $750 last year, for example, one of the nation’s largest pharmacy benefit managers partnered with a compounding pharmacy to produce its own version for $1 a pill, said Glen Stettin, senior vice president for clinical research of Express Scripts.

Nationally, since 2012, pharmacies have been required to report all the ingredients they used to make a compounded drug. The idea was to provide insurers with more information about what they were being billed for and to make sure there were no hidden ingredients.

The effect that had on drug prices is up for debate. Stettin and others say a few unscrupulous pharmacies began adding more ingredients so they could charge more.

“They are [creating] combinations of things that have never been tested together,” said Stettin. “We saw a diaper cream that was billed at $1,000, where a patient could get one over the counter for $2.50.”

In California, federal investigators say a marketer for one pharmacy paid doctors to write prescriptions for compounded pain creams formulated to include a “five-pack” of the most expensive ingredients. Then the pharmacy could bill California’s worker’s compensation program $3,000 per tube for creams it cost about $20 to make, according to a federal indictment filed in June.

In Florida, federal prosecutors also in June unsealed an indictment against a doctor who allegedly was given kickbacks — including a $72,000 BMW — for sending prescriptions to a particular pharmacy, which then billed Tricare, Medicare and other government health programs for compounded creams. Prices ranged from about $900 to $21,000 for a one-month supply, according to court documents.

To combat rising spending, Express Scripts in 2014 drew up a list of about 1,000 ingredients used by compounders for which it would no longer pay, saying they were high priced and were not any safer or more effective than other treatments. Many of its clients, including the military health program Tricare, have incorporated that list into their health plans.

Since the limit, Express Scripts says it has seen its clients’ spending on pharmacy-made drugs fall sharply. The list has also prompted two antitrust lawsuits filed against Express Scripts in federal court by compounding pharmacies.

Awaiting Action

What actions Medicare will take — and the effectiveness of a July 1 2016 change in how such medications are paid for in the federal compensation program — remain unclear. The Medicare report does not make any recommendations, although investigators expect to issue a follow up report that will.

In its March 2016 report, the inspector general criticized a lack of action by the Labor Department to address the growing spending, saying that it estimated the Postal Service “has incurred over $81.8 million in excessive compound drug costs and nearly $4.1 million in excessive administrative fees” for the past two fiscal years.

Following that, the Labor Department issued new rules it says will “contain the cost of compound drugs … but still allow for appropriate medical treatment,” according to Leonard J. Howie III, director of the Office of Workers’ Compensation Programs.





High Prescription Drug Spending – The New Normal?

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drug_prices_1024x620Lately it seems as if specialty drugs are everywhere. While it used to be that only a small number of patients were treated using these expensive medications, manufacturers are increasingly developing specialty products to treat conditions that affect a much larger population over a longer period of time. 

One example is PCSK9 inhibitors, a new type of cholesterol-lowering drug that costs more than $14,000 per year. Although this product is currently indicated for those with familial hypercholesterolemia and certain patients with heart disease, the patient population is expected to eventually expand to possibly 15 million people. 

These high cost projections have understandably raised alarms and unfortunately, there is no indication that we can expect a market correction soon.

The time has come to stop viewing drug products with remarkably high prices as isolated incidents. Instead, we should acknowledge that we are moving into a troubling “new normal” of dramatic and persistent escalations in prescription drug prices and spending — and we should consider a remedy.

The Rise Of Specialty Drugs

One of the primary drivers of this “new normal” is specialty drugs. Because of their extremely high costs, specialty drugs account for a disproportionate share of overall drug spending and have a corresponding effect on spending growth. 

Specialty drugs often experience substantial price growth every year they are on the market. Such price increases raise the cost of therapy. The average annual cost of therapy for widely used specialty prescription drugs used on a chronic basis exceeds $53,000. This amount is higher than the median U.S. household income and almost three and a half times higher than the average Social Security retirement benefit.

Lack Of Meaningful Price Competition For Biologics

Another factor contributing to our “new normal” of high prescription drug prices and spending is the lack of meaningful competition for expensive biologic drugs. Congress gave the Food and Drug Administration (FDA) the authority to approve follow-on biologics, or biosimilars, as part of the Affordable Care Act. 

According to the National Conference of State Legislatures, at least 31 states have considered legislation that would establish standards for biosimilar substitution in the past two years. The bills’ provisions vary from state to state, but typically require (1) patient consent for the substitution; (2) the pharmacist to notify the prescriber of the switch; and (3) the pharmacist and prescriber to maintain written records of the switch for several years. These requirements would likely be burdensome on patients and providers, leading FDA to raise concerns about their effects on access to biosimilars.

It remains unclear whether the U.S. health care system is even ready for biosimilars. A QuanticaMD survey of nearly 300 primary care physicians and specialists found that, although they believe biosimilars will bring value to health care, they might be reluctant to prescribe them. Further, patient awareness of biosimilars remains low.

The Research Pipeline Is Full Of Expensive Products

Another factor that will continue to drive a “new normal” of high prescription drug spending is drug manufacturers’ increased focus on products that can command high prices. In 2010, specialty drug approvals exceeded traditional drug approvals for the first time and have continued to do so. In 2014, 27 of the 51 drugs approved by FDA were specialty drugs.

Orphan drugs—a subset of specialty drugs used to treat diseases that affect fewer than 200,000 people—seem to be particularly attractive to manufacturers. Such drugs typically come with high price tags due to their smaller patient populations, costing an average of $137,000 per year. Sixty-one orphan drugs were launched in the last five years, compared with 31 between 2005 and 2009. The population sizes for orphan drugs are also growing smaller, which will likely drive prices even higher. Of the 18 orphan drugs launched in 2014, half were for diseases afflicting fewer than 10,000 patients.

Getting Away From ‘What The Market Will Bear’

Another factor pushing us towards a “new normal” of high prescription drug prices and spending is the appetite (or lack thereof) for change. For example, there is broad consensus that prescription drug prices should be linked to their value. However, there is much less agreement on how this idea should be implemented. For now, drug manufacturers are free to set prices based on “what the market will bear.”

There has been some progress. For example, the Institute for Clinical and Economic Review (ICER) developed a conceptual framework to guide value assessments for medical services, including prescription drugs. They concluded there was value in these therapies but also raised concerns about whether their effects will translate into lower incidents of heart attack and stroke. Further, ICER concluded that a discount of 67 percent off the drugs’ list price would better represent their overall benefit. ICER’s assessment is still in draft form and it remains unclear whether the report will have any effect. Nevertheless, such work is a step in the right direction.

Some insurers and pharmaceutical benefit managers are also exploring pay-for-performance deals. For example, Harvard Pilgrim recently announced it would provide exclusive formulary access to one of the PCSK9 inhibitors approved by FDA in exchange for a price discount as well as additional rebates if the drug is unable to achieve certain performance targets  While new to the U.S. system, other countries have been entering into pay-for-performance agreements for several years.

Where Do We Go From Here?

Unfortunately, we can no longer rely on less expensive generic drugs to moderate prescription drug spending. The substantial savings from a large number of recent patent expirations for popular traditional drugs—also known as the patent cliff—peaked in 2012 and is slowly subsiding. Further, with generic dispensing rates reaching 90 percent, the health care system may be close to maximizing the savings associated with generic drugs.

Spending increases driven by high and growing drug prices will eventually affect all Americans in some way. Higher prescription drug spending is usually passed along to everyone with health coverage in the form of increased health care premiums, deductibles, and other forms of cost sharing. Prescription drug spending growth also increases costs for taxpayer-funded health programs like Medicare and Medicaid; this translates to higher taxes, cuts to public programs, or both.

More importantly, an increasing number of Americans will be unable to afford the prescription drugs that they need, which will lead to poorer health outcomes and higher health care costs in the future.

A number of steps can help address these trends. These include:

Increase Transparency

Before FDA approval, manufacturers should be required to disclose information on the estimated pricing for their product and a corresponding rationale for that price. This will help reduce uncertainty and vulnerability for the government, employers, and insurers, which often do not learn a new drug’s price until it comes on the market. In addition, manufacturers should be required to report on subsequent price increases over a specific threshold, or when a drug’s price increases multiple times during a year.

Increase Competition

An important first step toward increasing competition would be to decrease the market exclusivity period for biologics from 12 years to no more than seven years. In addition, policymakers should ensure that only truly innovative products receive additional market exclusivity.

Too often, manufacturers extend the monopoly protections for their products by introducing a “new” version that is essentially the same as the original drug. Extended release formulations or combination therapies are common examples. Policymakers should take steps to limit such tactics, commonly known as “evergreening,” and reward only true innovation with additional exclusivity protections.

Increase Information On Treatment Value

Patients, providers, and payers want usable information about the safety and effectiveness of prescription drugs. This requires much larger investments in research, particularly as more treatments enter the market with price tags in the tens of thousands of dollars. At least part of this research could come from existing sources.

For example, drug manufacturers could be required to conduct comparisons of their products with existing treatment regimens much like they do for other countries. Once such information is more widely available, it will become easier to develop payment arrangements that encourage the use of high value treatments in the public sector and the private sector.

The United States is entering a “new normal” in which high prescription drug spending is the rule, not the exception. It is up to policymakers and voters to decide whether this shift—and the inevitable trade-offs that will accompany it—is worth the price.


Secret Deals and Paying More For Prescriptions

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Doctor talking to patient

Several prescription drug pricing experts say that secret deals often prompt drug benefit companies to cover brand-name prescriptions when equally effective generic, or even over-the- counter medications, are also readily available. 

These companies, known as pharmacy benefit managers (PBMs), negotiate deals with drug makers that include rebates and other compensation to encourage certain drugs and come up with lists of drugs that their insurance plans will cover. Employer unions and insurance companies then determine which drugs to encourage on these formularies.

The process is so convoluted that even the United States’ largest insurer, Anthem, discovered $3 billion in overcharges by Express Scripts and filed suit Monday, March 21 2016 against the PBM for damages.

In their deals with drugmakers, PBMs agree to favor the higher cost drugs on the PBMs’ formularies and agree that they won’t place quantity limits — or prior authorization rules — on the drugs, even though doing so would help health plans save money and make medical sense, says Linda Cahn, founder and president of Pharmacy Benefit Consultants, which audits PBM contracts.

Generic drugs get lower rebates or none at all, while the brand-name drugs can command rebates of as much as 40%, says Mel Brodsky, president of Keystone, a Philadelphia area buying group for small pharmacies that is suing the pharmacy benefit manager Catamaran for “unfair business practices” and to require more transparency.

As drug prices fall under greater scrutiny following the disclosure of the massive price increases by drugmakers including Turing Pharmaceuticals and Valeant, the role of PBMs is also being more closely examined.

The Centers for Medicare and Medicaid Services is considering whether to require more transparency in the Medicare Part D prescription drug program. Representative Doug Collins, RGa., reintroduced legislation [February 2016] that would require more public disclosure in how PBMs determine their reimbursements, especially with government drug benefit programs including Medicare Part D.

Mark Merritt, CEO of the PBMs’ trade group, said more regulation wasn’t the answer. In March 2016, PCMA launched a national campaign to emphasize that PBMs are part of the solution to high drug prices and not part of the problem. The group says its members cut drug prices by 30%.

But those who audit PBM contracts for a living disagree.

“What really gets me started is when PBMs sell the insurance companies on programs that increase costs by encouraging brands so that the PBM can collect rebates,” says Susan Hayes, a principal in Pharmacy Outcomes Specialists, which represents plan sponsors and audits their PBM contracts. “And many insurance companies do not know the cost implications when they sign off on these programs.”

Few companies or other plan sponsors, such as unions, contract with auditors like Hayes and do not drill down into the complicated details of their formularies. Hayes says she has realized that a group of union funds had agreed to require a step therapy program requiring patients to take pricey brand-name drugs before generics to get guaranteed rebates.

PBMs pass along some of the rebates to their employer unions, but Hayes says they seldom make brand-name drugs cheaper than generics for employer unions, based on contracts she has audited.

Unless a PBM proves that the use of a brand-name drug is bringing the cost down to lower than the generic through rebates passed along to the employer unions, Hayes says she tells companies “you can assume it’s not.”

When PBMs are pushed to be more transparent about their deals, PBMs and the drug companies “start arguing that they can’t give as good of deals” if they have to start disclosing the details, says Stephen Schondelmeyer, a pharmaceutical economics professor at the University of Minnesota.

That argument, he says, “ignores the basic premise of economics,” namely that consumers need to know all the alternatives and the pricing, he says.

When generic versions of drugs are introduced, it can lower the price of a drug by up to 85%, according to the Food and Drug Administration. Published by researchers online in the Journal of the National Cancer Institute [March 2016], say that if all patients with a chronic form of leukemia started on the generic form of the drug Gleevec when they were diagnosed, the cost of treatment per patient over five years would be nearly $100,000 less than it is now. Most of these patients need lifelong, daily medication.

Another egregious example of the problem, according to Cahn, is the class of ulcer drugs known as “protonpump inhibitors” or PPIs. The best known of these drugs is Nexium, which costs several times the price of generics, which often cost far more than many over-the-counter options.

Most drug benefit plans, including Medicare and Medicaid, are “spending an absurd amount of money” on prescription PPIs, says Cahn.

Cahn says all of the players are contributing to the problem. Drugmakers do a disservice when they get FDA approval for higher cost “copycat PPIs ” that add no additional value. Doctors should stop writing PPI prescriptions and tell their patients to use over-the-counter versions. And PBMs should remove brand PPIs from their standard formularies and educate their employer unions and insurance companies to stop coverage for brand PPIs.

Cahn adds that pharmacists could also suggest to consumers that they stop using prescription versions and use over-the-counter PPIs instead.

CVS Caremark [the drugstore chain’s PBM] doesn’t exclude brand-name ulcer drug Nexium from its 2016 formulary, but spokeswoman Christine Cramer says “in some cases, although less expensive over-the-counter versions of drugs may be available, some patients will still require access to a prescription drug to treat their condition.”

“We offer a variety of formulary options that help deliver lower costs for beneficiaries…,” she said.

Sanjay Sandhir, a Dayton, Ohio, gastroenterologist, says he has a patient who was spending $140 a month for her share of the cost of Nexium, which was on her insurance plan’s drug formulary, so he told her to just buy one of the nonprescription over-the- counter versions, which saved her $100 a month.

“The prices are too high for patients and there’s a lack of transparency,” says Sandhir. And there’s no discernible difference between the over-the-counter drugs and pricey brand-name ones.

Douglas Dykman, an Annapolis, Maryland, gastroenterologist, says it “doesn’t matter to me” which version of the medications patients with ulcers use as they all work the same. He seldom knows what out-of-pocket costs patients are facing — only whether a drug is or isn’t on their formulary.

Cahn says drugmakers should stop selling “copycat PPIs,” doctors should stop writing prescriptions for PPIs and PBMs should educate their employer unions and insurance companies on how to cut waste. Pharmacists should suggest patients stop using the prescription versions.



Drug Makers Sidestep Price Barriers

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Couple Medicare Surprises

The pain reliever Duexis is a combination of two older drugs, the generic equivalents of Motrin and Pepcid. If prescribed separately, the two drugs purchased together would cost no more than $20-$40 per month. By contrast, Duexis which contains both older drugs in a single pill, costs about $1500 per month.

Needless to say, many insurers do not want to pay for Duexis. Yet sales of the drug are growing rapidly, in large part because its manufacturer, Horizon Pharma, who has figured out a way to circumvent efforts of insurers and pharmacists to switch patients to the generic components, or even to the over-the-counter versions.

It is called “Prescriptions Made Easy.” Instead of sending their patients to the drugstore with a prescription, doctors are urged by Horizon to submit prescriptions directly to a mail-order specialty pharmacy affiliated with the drug company. The pharmacy mails the drug to the patient and deals with the insurance companies, relieving the doctor of the reimbursement hassle that might otherwise discourage them from prescribing such an expensive drug.

Horizon is not alone. Use of specialty pharmacies seems to have become a new way of trying to keep the health system paying for high-priced drugs. Valeant Pharmaceuticals International, which has attracted government and media scrutiny for its huge price increases, does much the same thing for its dermatology products with a specialty pharmacy called Philidor Rx Services.

“They are all trying to get rid of the sticker shock of using their drugs,” said Dr. Kenneth Beer, a dermatologist in West Palm Beach, Fla. “They become the drugstore now,” he said.

He said Valeant’s program, which he had used, buffered physicians from insurers and complaints from their patients about high prices.

“It lowers one barrier to using their products,” he said.

Valeant revealed in October 2015 that it had received subpoenas from federal prosecutors in Manhattan and Massachusetts seeking information about its financial assistance programs for patients, pricing decisions and the distribution of its products. It is not clear if the probes are related in any way to Valeant’s relationship with Philidor.

Philidor, based in Hatboro, Pa., reveals little about itself on its website. It was denied a license in California in 2014 because, the state said, its application had not truthfully identified its owners and financial officers. Phone calls asking to speak to Philidor executives were not returned.

Valeant had said little about Philidor until J. Michael Pearson, Valeant’s chief executive, revealed the company’s quarterly earnings that Valeant had purchased an option to acquire Philidor in late 2015. He said that Valeant consolidated Philidor’s results in its own financial reports.

Mr. Pearson also said that the pricing environment had changed, and that the industry was “being aggressively sort of attacked for past pricing actions.” He said that Valeant was considering divesting the division selling neurological drugs where, he said, the biggest price increases had occurred.

He also said that in the future, price increases would be “more modest,” probably not more than 10 percent a year. Last year, he said, increases in list prices averaged 36 percent for the branded drugs sold by Valeant in the United States.

Specialty pharmacies are most known for providing patient assistance with complex drugs, many of them requiring refrigeration and injections for serious diseases and rare genetic disorders. But the drugs dispensed through the specialty pharmacies used by Horizon and Valeant are for common ailments like arthritis pain, acne and toenail fungus.

The programs do offer advantages to patients. The drugs are delivered quickly and co-pays are subsidized. Horizon said 98 percent of patients getting Duexis have co-payments of no more than $10, less than the co-pays would be for generics in many cases.

Moreover, if the insurer refuses to pay, the patient already has the drug and the manufacturer absorbs the cost. A spokesman for Horizon said that happened for a large number of Duexis prescriptions. Still, Horizon and Valeant apparently come out ahead because enough insurers do pay.

The practice is legal,  providing that co-pay assistance is not used for patients covered by Medicare or other federal programs. For federal programs, co-pay assistance is considered an illegal inducement to get someone to use a drug. Both Horizon and Valeant say they confine their programs to commercially insured patients.

In August 2015, one analyst asked the company to discuss the positive points of the Prescriptions Made Easy program.

“I think simply, the positive is we drove over $100 million in net revenue in the second quarter and rapidly increased prescriptions,” Timothy P. Walbert, the chief executive, replied. He then said the program was “doing the right thing for patients.”

Duexis is a combination of ibuprofen, an anti-inflammatory drug, and famotidine, the ingredient in Pepcid, which is supposed to prevent the serious and even lethal gastrointestinal problems that can result from chronic use of ibuprofen or similar drugs. Both drugs are available as generics, and over-the-counter. Horizon says that by combining the two drugs into one pill, taken three times a day, makes it more likely that patients will get the benefit of the stomach protection.

Horizon has increased the price of Duexis about tenfold since the drug was introduced in late 2011. In 2013, it acquired the main competitor to Duexis, a drug called Vimovo, which is a combination of the pain reliever naproxen and the stomach protector Nexium. Horizon immediately raised the price of Vimovo about 600 percent, and has roughly doubled it again since then, so both drugs now cost about the same amount per month.

It has become common in the last several years for pharmaceutical companies to offer co-payment assistance to make sure patients are not deterred from using a drug by out-of-pocket costs. Once the patient uses the drug, the pharmaceutical company is paid by the insurance company. Insurers say co-pay assistance circumvents their efforts to encourage the use of cheaper drugs by setting lower co-pays for them, thereby driving up overall medical spending.

Starting this year, the nation’s two largest pharmacy benefit managers, Express Scripts and CVS Health, said they would not pay for Duexis and Vimovo.

Despite that, Horizon said in its regulatory filing for the second quarter, “with the successful adoption of our Prescriptions Made Easy program by physicians,” sales volumes for Duexis increased by 72 percent in the first half of this year compared to the first half of 2014. In dollars, sales of Duexis rose 131 percent in the first half to $73.1 million. In the second quarter, 71 percent of Duexis prescriptions and 61 percent of those for Vimovo went through the Prescriptions Made Easy program.

Horizon targeted physicians whose patients had strong commercial coverage. “Patients whose insurance covers Horizon’s medications serve to support co-pay buy-downs for patients with less generous coverage.

Horizon said in its regulatory filing that prescriptions filled through the program “are less likely to be subject to the efforts of traditional pharmacies to switch a physician’s intended prescription of our products to a generic or over-the-counter brand.” It said that if it were unable to get physicians to direct prescriptions to Prescriptions Made Easy, “We may experience a significant decline in Duexis and Vimovo prescriptions as a result of formulary exclusions.”

This article is for informational purposes only; no personal advice or recommendation is intended.


Novel Plan to Curb Drug Costs

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This is about consumer-friendly ratings regarding the benefits of new drugs, the limits on what patients pay for drugs, and requiring drug companies to disclose how much they actually spend on research.

With the public concerned about the high cost of new medications, these are some of the proposals offered today [September 18, 2015] by a policy center often aligned with the Obama administration.

The multistep plan from the Center for American Progress aims to get the attention of the 2016 Democratic presidential candidates. Hillary Rodham Clinton and Vermont Senator Bernie Sanders are both on record advocating action against overpriced medications.

In a break from standard liberal solutions, the proposal refrains from urging that the government be empowered to negotiate drug prices for Medicare patients. By law, Medicare’s prescription drug program can’t do that now. Topher Spiro, the center’s health policy expert, said he hopes the new emphasis on paying for value and consumer education will attract at least some Republican support.

“We’ve been talking about Medicare negotiation … for many, many years and gotten nowhere,” said Spiro. “We wanted to change the dynamic.” While some of the proposals require legislation, others could be green-lighted by the administration.

But the Pharmaceutical Research and Manufacturers of America strongly criticized the plan, saying in a statement it would impose “arbitrary caps” on prices, “thwart innovation, impede the development of new medicines for patients and cost countless jobs.” Industry says the cost of drugs reflects investment in research as well as the uncertainties of developing a new medication.

Nevertheless, insurers, employers, and state and federal policymakers may be interested in the new proposals. A poll this summer found that 72 percent of Americans think the cost of prescription drugs is unreasonable. The outcry gained momentum after the introduction last year of a $1,000-a-pill cure for hepatitis C.

The 45-page plan seeks to rein in the overall cost of drugs while ensuring that patients get to share in the savings.

Among its recommendations:

—Requiring drug companies to disclose how much they spend on research and development, production, and sales and marketing. If a manufacturer fails to meet a threshold for research spending, it could be required to make payments to a new fund to support the National Institutes of Health. Taxpayer-funded NIH research provides the springboard for some new drugs.

—Commissioning an independent research organization to evaluate new drugs for effectiveness. In a strategy similar to safety testing of cars, patients and doctors would get easy-to-understand ratings of whether a new drug provides no added benefit, minor added benefits or significant added benefits when compared to existing medications. The ratings would be included in advertising and would become the basis for pricing recommendations from the independent evaluator. The price guidelines would not be arbitrary, but based on evidence, said Spiro.

—If a new drug is priced more than 20 percent above the recommended price, and if the manufacturer relied on taxpayer-funded research to develop it, the government would be allowed to license that medication’s patent to generic competitors. The center claims a 1980 federal law known as Bayh-Dole provides this authority.

—Protecting people covered through employer plans and other private insurance by capping cost-sharing for drugs at $3,250 annually and setting monthly limits as well.

—Granting exemptions from antitrust laws so insurers and pharmacy benefit managers together could negotiate prices for the highest cost drugs with manufacturers.

—Changing Medicare’s payment policy for medications administered in a doctor’s office, including many cancer drugs. Physicians currently get an added administrative fee of 6 percent of the drug’s price. Critics say that creates financial incentives to prescribe the most expensive medication.

A prominent doctor and researcher said the plan has the potential to shift drug company pricing from a hunt for profits to a search for value.

The pharmaceutical industry is currently enjoying “a rising tide in prices that is carrying everything along,” said Dr. Peter B. Bach of Memorial Sloan-Kettering Cancer Center in New York City.

“But the bull’s eye we want them to be aiming at is higher,” added Bach. Under the plan “you would maximize your profits by winning on creating the best medicine.”

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