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Medicare Payment Data Raises Questions About Drug Costs

Even though the just-released Medicare data on payments to individual doctors doesn’t provide specifics on prescription drug outlays, it opens the door to sharp scrutiny of Medicare reimbursement for medicines delivered in physician offices. The Centers for Medicare and Medicaid Services (CMS) has released data on payments to some 880,000 healthcare providers who collectively received $77 billion in Medical Part B fee-for-service payments in 2012. It’s part of the government’s “transparency” campaign to better inform the public and healthcare entities about spending and

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costs in the delivery system. The American Medical Association blasted this “data dump” as likely to confuse the public and “destroy careers,” which may be valid complaints as journalists, analysts, and plaintiffs’ attorneys begin to troll the data set.

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FDA Wants You!

A number of top management positions at the Center for Drug Evaluation and Research (CDER) need to be filled, and CDER leaders are looking for experienced industry managers to help rebuild its staff.

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Many experienced FDA staffers are ending their careers or taking on new challenges, creating a need for “renewal and replenishment of the agency,” explains Richard Moscicki, deputy director for science operations at CDER, who is leading its executive recruitment campaign. Moscicki formerly headed clinical development at Genzyme before coming to FDA in February 2013 and hopes to attract more people with similar backgrounds to public service. While some positions may be filled by internal candidates, Moscicki is looking to bring in people with leadership and management experience that may not exist at the agency.

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Drug-Diagnostic Development Stymied by Payer Concerns

The shift to personalized medicine, which supports medical treatment tailored to individual patient characteristics, has been hindered by uncertainty over the value, accuracy, and clinical utility of companion diagnostic tests. Even for the handful of drugs approved by FDA with labeling that links prescribing to specific biomarker measures, health plan operators, providers, and payers frequently question the need to cover the added testing, according to analysis by Joshua Cohen of the Tufts Center for the Study of Drug Development (CSDD). Cohn noted at a recent CBI conference on “Precision Medicine and Companion Diagnostics” that only a few therapies have been approved by FDA

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co-developed tests to inform prescribing; several more drugs gain links to specific diagnostics post- approval.

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Obama Administration Halts Attack on Medicare Drug Plans

In an abrupt about-face, the Obama administration halted its ill-timed effort to launch an overhaul of the Medicare Part D program and announced it would not pursue changes in some key rules as proposed earlier this year. The Centers for Medicare and Medicaid Services (CMS) had issued a proposed rule Jan. 10, 2014 to drop “protected” class status for antidepressants and immunosuppressants in 2015 and antipsychotics in 2016, and to limit the number of Part D plans an insurer can offer in each Medicare region. Insurers and pharmacy benefit managers (PBMs) backed the reduction in protected drug classes as a way to gain leverage in negotiating lower prices from manufacturers.

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Obama Budget Takes a Slap at Pharma

Despite a slight boost in funding for FDA and stronger

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tax incentives for investment in R&D, significant changes in Medicare drug reimbursement and coverage policies have biopharmaceutical companies up in arms. The biggest hit comes from the Obama administration’s proposal to impose rebates on drugs provided to low-income Medicare patients in Part D plans. That change plus added rebates on drugs that experience price

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hikes faster than inflation would cost pharma companies $117 billion over 10 years. The 2015 budget plans also seeks to encourage greater use of generic drugs by these “dual eligible” beneficiaries and for pharma companies to provide discounts to cover 75% of the cost of drugs

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prescribed to patients in the Part D coverage gap—up from 50% discounts today. And reimbursement would reduce “excessive” payment for certain drugs covered by Medicare Part B by revising the formula for calculating reimbursement.

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Track-and-Trace Not Enough to Halt Drug Counterfeiters

Despite recent legislation to establish a more secure pharmaceutical supply chain to deliver high quality, approved medicines to American patients, efforts to block the import of substandard, fraudulent, and counterfeit drugs remains an uphill fight. Criminals are expanding from “lifestyle” drugs to widely used anti-cholesterol and cancer medicines, attracted by huge profits and low risks from drug counterfeiting activities, noted Marcia Crosse, director

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for healthcare at the Government Accountability Office, testifying at a Feb. 27, 2014 hearing before the House Energy and Commerce, Oversight and Investigations subcommittee.

A main problem is that penalties for distributing counterfeit drugs are too low to spur prosecution and to deter illegal operators, explained Howard Sklamberg, FDA deputy commissioner for global regulatory operations and policy. FDA is working with other federal agencies to identify and take action against illegal operators, with a focus on fraudulent Internet pharmacy sites that sell low-cost “Canadian” medicines. But most counterfeiters end up facing charges of “misbranding” or importing “unapproved foreign-made drugs,” which carry minor fines and minimal jail terms.

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Drug Shortages Continue to Plague Healthcare System

Despite notable successes in preventing and mitigating short supplies of important medicines, the drug shortage crisis still disrupts medical treatment and gives drug manufacturers a bad name. FDA is doing

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continue to limit treatment options for doctors and patients. A severe shortage in intravenous saline solutions has generated outcries from hospitals, dialysis centers, and physicians. The situation is aggravated by increased hospitalizations due to flu outbreaks. Some states are taking extreme measures for executing felons facing the death penalty due to difficulties obtaining supplies of drugs for lethal injections. Recent vaccine shortages have forced physicians to delay immunizations.
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New Guidances, Investigations to Shape Drug Manufacturing, Regulation in 2014

The Food and Drug Administration plans to issue a number of new guidances in 2014 that will address drug development and manufacturing practices. There will be more advice on establishing a quality system approach to current good manufacturing practice (GMPs) and on quality agreements with contract manufacturers, according to the 2014 guidance agenda for the Center for Drug Evaluation and Research. Other documents will address use of cloud computing systems in manufacturing, interim GMPs for drug compounding outsourcing facilities, submission of field alert reports and biological product deviation reports, and electronic filing of information on manufacturing establishments.

Specifically related to chemistry, manufacturing and controls (CMC), FDA plans to provide advice on analytic procedures and methods validation, appropriate packaging for injectables drugs, CMC information in comparability protocols, evaluation of near infrared spectroscopy methods, CMC and other documentation for liposome drug products, and labeling vial fill size.

Further information is expected on developing biosimilars, including the hot topic of demonstrating interchangeability to a reference product. There

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also will be advice on developing pharmacology data, on labeling biosimilars, and on reference product exclusivity. Other guidances will clarify approaches for developing new analgesics, drugs for rare diseases, and treatments for chronic fatigue syndrome and infectious diseases. FDA also plans to clarify best practices in developing drug proprietary names and on distributing drug samples. And there will be advice on identifying suspect products and tracking drugs, as required by the Drug Quality and Security Act.

More guidance on Internet/social media communications is expected this year – one on presenting risk and benefit information in limited space, another on correcting independent/third party misinformation about a drug or medical device, and

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a third on appropriate use of website links. And a long-anticipated document on using the “brief summary” to disclose drug risk information may finally emerge.

At the same time, the Office of the Inspector General (OIG) of the Department of Health and Human Services will be busy investigating a number of issues related to drug regulation and costs, according to the 2014 OIG work plan. The investigators plan to examine how often and how well FDA inspects generic drug manufacturing facilities and what enforcement actions result – a new probe evidently generated by concerns over drug shortages and

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Medicare Part D drug benefits face considerable scrutiny, as seen in a long list of investigations into plan billing and payment practices. The OIG also will examine whether retail pharmacies provide appropriate discounts on generic drugs; if rebates on brand-name drugs reduce plan spending sufficiently; and if Part D plans prevent the use of manufacturer co-pay coupons, as required by the rules.

FDA Gets More Funding

After two years in budget limbo, Congress finally enacted federal spending legislation for fiscal year 2014. In this period of ever-tighter government outlays, the Food and Drug Administration did fairly well in

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gaining additional funds, along with user fee revenues that had been put on hold.

The legislation appropriates $2.552 billion to FDA, an increase of $217 million over actual 2013 funding levels, which were reduced by last year’s budget sequester. Total funding for FDA, including user fees, is $4.4 billion for the current year. In addition, the legislation restores $80 million to the agency, that portion of user fees set aside under sequestration.

The actual appropriations bill is brief and largely authorizes collection of numerous user fees: $760 million in prescription drug

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fees, $306 million for generic drugs, $115 million for medical devices, and $20 million for biosimilars. The latter is important because up until now, the agency did not have access to that portion of fees due up front from sponsors to support the extensive advisory activities involved in helping manufacturers navigate the complex biosimilar development and application process.

Under the new budget, the Center for Drug Evaluation and Research will receive nearly $1.3 billion for its operations and for field force activities related to drugs. The Center

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$338 million. Some of the agency’s added funds will support FDA consolidation at its White Oak campus and help maintain current buildings and facilities.

The Centers for Disease Controls and Prevention (CDC) similarly benefits from a budget increase of about 8 percent. CDC gains added funds to support biodefense programs that combat infectious disease and build national stockpiles of critical medicines.

But the National Institutes of Health (NIH) continues to suffer on the funding front. Congress set the NIH budget at nearly $30 billion, an increase of about $1 billion over its previous level. But the new amount is below the agency’s peak 2010 funding level that exceeded $31 billion. The Senate summary notes that added funding will support NIH’s new BRAIN initiative and research related to Alzheimer’s disease. But with inflation, NIH will be hard-pressed to fund much new research, let alone continue many of the discovery programs underway.

Under pressure to stop the funding logjam, Republicans stepped back from using the budget bill to take major whacks at Obamacare. The legislators pulled $1 billion from a new prevention fund established by the Affordable Care Act to support various health programs, and they cut funding by $10 million to the much criticized Independent Payment Advisory Board (IPAB), which may never become operational. The legislation also retains provisions that ban federal funding of abortions and of creating embryos for research purposes.

The higher budget level for FDA puts the agency in a good position to negotiate the appropriations process for fiscal year 2015, notes

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the Alliance for a Stronger FDA, which has led the fight to bolster FDA’s resources so it can meet its ever-growing mandates and assignments. The late action on the 2014 budget, though, may delay the administration’s 2015 budget roll-out for a month or so.

Waxman retirement, tip of the iceberg

The Washington health policy world is headed for a major shake-up next year, as more long-time leading legislators opt for retirement. The recent announcement that Rep. Henry Waxman (D-Calif) will leave marks the end of a 40-year career on Capitol Hill, highlighted by engineering enactment of legislation that established the generic drug industry, supported treatment for AIDS and promoted development of orphan drugs.

The Senate faces even more substantial changes, with the departure of leading Democrats Max Baucus of Montana, who currently

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