HealthCare Roundtable e-News – June 9, 2017

Supreme Court Sides with Generic Company in Biologics Case

The U.S. Supreme Court ended attempts by brand-name manufacturers of biologic drugs to obtain an additional six months of exclusive product sales.

Biologic drugs are highly advanced medicines derived from biological, rather than chemical, processes. They are among the most innovative of drug treatments and, as such, are also among the most expensive, potentially costing tens, even hundreds, of thousands of dollars each year for a single patient. Generic biopharmaceuticals, known as biosimilars, offer lower-cost alternatives, as with generic versions of traditional drugs. There was no “pathway” allowing their approval by the Food and Drug Administration (FDA) until passage of the 2010 Patient Protection and Affordable Care Act, which included the “Biologics Price Competition and Innovation Act” (BPCIA), establishing 12 years of exclusivity for brand-name biologics.

The FDA in March 2015 approved its first biosimilar, Zarxio from Sandoz, which is intended to decrease the incidence of certain infections during chemotherapy. The reference product is Neupogen (filgrastim) by Amgen. In deciding a lawsuit filed by Amgen that unsuccessfully sought to block the release of Zarxio, a three-judge federal appeals court panel ruled that a biosimilar manufacturer must provide the brand-name company with 180 days pre-marketing notice, and this can only come after the FDA approves the biosimilar. Sandoz asked the Supreme Court to reverse this aspect of the ruling, stating in its filing that, “the Federal Circuit turned this mere notice provision into a grant of 180 days of additional exclusivity for all biological products beyond the exclusivity period Congress expressly provided – delaying the launch of all future biosimilars by six months.”

The Supreme Court unanimously agreed with Sandoz. The opinion written by Justice Clarence Thomas noted that the law “states that the applicant ‘shall provide notice to the reference product sponsor not later than 180 days before the date of the first commercial marketing of the biological product.'”

“Because the phrase ‘of the biological product’ … modifies ‘commercial marketing’ rather than ‘notice,’ ‘commercial marketing’ is the point in time by which the biosimilar must be ‘licensed,'” the opinion stated. “Accordingly, the applicant may provide notice either before or after receiving FDA approval. Statutory context confirms that [the law] contains a single timing requirement (180 days before marketing), rather than the two requirements posited by the Federal Circuit (after licensing, and 180 days before marketing). ‘Had Congress intended to’ impose two timing requirements in [the law], ‘it presumably would have done so expressly’ … Amgen’s contrary arguments are unpersuasive, and its various policy arguments cannot overcome the statute’s plain language.”

The global head of biopharmaceuticals for Sandoz said that the ruling “will help expedite patient access to life-enhancing treatments.”

Even if the Supreme Court had sided with Amgen, the issue would likely have disappeared over time, as fewer drugs that are already close to the 12-year mark lose their exclusivity. With newer drugs, generic companies can file for FDA approval long before the reference products are near that threshold, allowing the 180 days to pass before the 12 years are up.

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Senate Republicans Negotiating Health Care Bill in Secret

There are conflicting reports on how close Senate Republicans are to completing their first draft of a bill to replace the Patient Protection and Affordable Care Act (ACA), but it appears that, either way, details of the proposal will remain secret for a while.

The House of Representatives on May 4 narrowly passed the “American Health Care Act” (H.R. 1628), which would, among other things, eliminate or make major changes to the ACA’s individual and employer mandates, Medicaid expansion, subsidies for the purchase of health insurance in the exchanges created by the ACA, prohibition on setting premiums based on a person’s health status, and requirement that policies cover certain “essential health benefits,” all while cutting taxes by $883 billion over 10 years. Although Republicans have majorities in both chambers, the House bill has little support in the Senate, and GOP senators have been developing their own proposal.

A working group of Republican senators has been crafting a plan and, not surprisingly, have had difficulty trying to satisfy both moderates and conservatives in the party. Since Republicans have only a two-seat majority in the Senate, they will need near-unanimous support within their party to pass the bill. (Republicans plan to use a procedural maneuver that will avoid the possibility of a Democratic filibuster and require only a simple majority for passage.)

Politico on June 9 quoted a Republican who is working on the legislation as saying that the bill is “tipping toward the moderates.” The publication reported that, as a result, “Conservative senators and allied outside groups are on the verge of rebellion against the Senate’s Obamacare repeal effort.”

While moderate GOP senators have expressed concerns about stabilizing the ACA’s health insurance exchanges, preventing major cuts to Medicaid, and protecting people with preexisting conditions from sharp premium increases that could prevent them from being able to afford coverage, conservatives are seeking to reduce federal spending on, and involvement in, the health care sector.

Sen. Rand Paul, R-Ky., said Senate Republicans are not moving far enough away from the ACA.

“We promised the voters that we’d repeal Obamacare,” Paul said. “Instead, we want to repeal sort of a tiny bit of it and replace it with something that looks a lot like Obamacare.”

Vox, however, reported, also on June 9, that “the Senate is drawing closer to passing a health care bill that looks a lot like the widely disliked version that cleared the House.”

Sen. John Cornyn, R-Texas, the No. 2 Republican in the Senate, said, “Slowly but surely, I think we’re going to get there.” And, perhaps more significantly, Sen. Rob Portman, R-Ohio, who was one of four Republicans to sign a letter opposing the House bill’s Medicaid cuts, said, “I think we’re closer because theres a proposal out there, so that gives everybody an opportunity to weigh in. Whereas when it was just a wide open discussion, it was hard to come up with any consensus.”

Vox reported that opponents of steep Medicaid cuts are willing to compromise on a plan that phases in the reductions more slowly.

Given the contentiousness of the intraparty negotiations, Republicans are expected to continue to work on the bill after the first draft is completed. Hence, the reluctance to unveil details. Senate Republicans do not even plan to hold committee hearings on the legislation.

“We aren’t stupid,” a Senate GOP aide said, according to Axios. “We are still in discussions about what will be in the final product, so it is premature to release any draft absent further member conversations and consensus.”

Democrats, not surprisingly, have expressed frustration with this process. Sen. Claire McCaskill, D-Mo., said at a hearing with Health and Human Services Secretary Tom Price, “I heard you, Mr. Secretary, just say, ‘We’d love your support.’ For what? We don’t even know. We have no idea what’s being proposed.”

“There’s a group of guys in a back room somewhere that are making these decisions,” McCaskill said. “There were no hearings in the House. You couldn’t have a more partisan exercise than what you’re engaged in right now. We’re not going to have hearings on a bill that impacts one-sixth of our economy.”

Once complete, the bill is to be submitted to the Congressional Budget Office (CBO) for an analysis of how it would affect insurance coverage and government spending. CBO concluded that the House bill would result in the number of Americans who have no health insurance increasing by 14 million next year and by 23 million in 2026. The agency also estimated that the bill would reduce federal deficits by $119 billion over a decade – about 1.3 percent of the combined $8.6 trillion in projected deficits during that time.

Republicans are reportedly aiming to hold a vote in the Senate before Congress’ July 4 recess.

Even if Senate Republicans are able to pass a bill, that legislation would have to go back to the House for another vote, and the changes made by the upper chamber could upset the delicate balance that was put together to get the bill through the House the first time.

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Generic Drugs Produced $253 Billion in Savings in 2016: Report

Generic prescription drugs produced $253 billion in savings in 2016, and $1.67 trillion in savings during the past decade, according to a report from the Association for Accessible Medicines (AAM).

Generics accounted for 89 percent of all prescriptions last year, but only 26 percent of all drug spending, AAM found.

The association, which until recently was known as the Generic Pharmaceutical Association, also reported that Medicare saved $77 billion through the prescribing of generics, while Medicaid saved almost $38 billion.

The biggest savings in 2016 came from generic substitutes for Lipitor, which produced savings of $14.4 billion. Generic versions of Prilosec and Zofran also resulted in savings of $10 billion or more each last year.

When measured by treatment area, generics to treat mental health produced the greatest savings ($44 billion) followed by hypertension ($29 billion) and cholesterol ($28 billion).

The report warned that savings from generics “are increasingly at risk.”

“Due to a number of factors, including consolidation in the payer market; brand company patent abuses and other anticompetitive actions; and the preponderance of ill-advised federal and state policy recommendations, barriers to generic market entry are increasing,” the report stated. “With patient access as a north star, policymakers need to understand the holistic and long term effects of efforts to burden a well-functioning market. Energies are best spent on initiatives that enhance and sustain competition which provides patients with greater choice of affordable medicines.”

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Groups Advocate for ‘Cadillac Tax’ Repeal

An association of large employer providers of health care is urging the Senate to repeal the tax on high-value insurance plans, which it warns would “disproportionately affect” first responders.

The Patient Protection and Affordable Care Act included a provision that will impose an excise tax – informally known as a “Cadillac tax” – of 40 percent on the cost of employer-provided insurance plans that exceed certain thresholds. The tax was to go into effect in 2018, but in December 2015, Congress passed, and then-President Barack Obama signed, legislation that postponed the effective date for two years. The baseline thresholds for the tax, which are subject to annual revision based on inflation, are $10,200 for employee-only coverage and $27,500 for family coverage. The tax is projected to raise $87 billion over the first 10 years, largely resulting from the presumption that employers will increase wages – which are taxable – to offset decreases in health benefits – which, apart from this tax, are exempt from taxation.

Many members of Congress, business groups, and advocacy organizations, including the Public Sector HealthCare Roundtable, have supported repealing the tax.

Republicans in the Senate are drafting a plan to replace the ACA, and the American Benefits Council sent a letter to Senate Finance Committee Chairman Orrin Hatch, R-Utah, to advocate for repeal of the Cadillac tax, which it referred to as an “economic gimmick.”

“The ‘Cadillac Tax’ was intended to address only overly generous plans, but the facts make clear that the tax will disproportionately affect certain populations and should be repealed,” the letter stated. “Health plans are often costly for reasons unrelated to the generosity of benefits. As a result, the ‘Cadillac Tax’ will apply to employer-sponsored health plans that may be expensive solely because they cover large numbers of older or disabled Americans, women, families suffering catastrophic health events or chronic conditions, or those who live in high-cost areas. Workers that protect our safety, like firefighters and police officers, are also disproportionately affected. Instead of reducing the actual cost of health care, the ‘Cadillac Tax’ is forcing employers to shift costs to workers to avoid exceeding the ACA’s arbitrary thresholds.”

A similar group, the ERISA Industry Committee wrote, also wrote to Hatch regarding the tax, calling it “the most dangerous tax in the ACA.”

“The Cadillac tax incentivizes employers to drop coverage or significantly reduce benefits, while also shifting significant costs to employees,” the group stated in the letter. “The Cadillac tax is actually a tax on everyone because the tax’s design and indexing ensure that after a requisite amount of time, every health plan is a Cadillac plan. This tax will inordinately disadvantage women, seniors, low-income families, the disabled, and traditional employers with diverse workforces.”

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