pharmaceuticals conference
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Pharmaceuticals Conference. National State Attorney General Program at Columbia Law School. May 11, 2007. John Rother, JD. Director Policy & Strategy. Rx Drugs in Context. Costs for National Health Expenditures. Projections. Billions. - PowerPoint PPT PresentationTRANSCRIPT
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National State Attorney General Program atColumbia Law School
Pharmaceuticals Conference
May 11, 2007
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DirectorPolicy & Strategy
John Rother, JD
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Rx Drugs in Context
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Costs for National Health Expenditures
Bill
ions
Overall Medicare Costs compared to Overall Health Costs
Projections
Source: CMS, National Health Accounts
$0
$600
$1,200
$1,800
$2,400
$3,000
$3,600
1993 1998 2002 2004 2006 2014
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Rx Drug Increases in 10 years (1995 thru 2004) Big Portion of Rising HC Bill
4.3%
14.9%
0.9%
4.8%
3.5%
9.1%
2.9%
2.4% 4.3%
0.8%2.8%1.5%
26.8%
20.9%
Hospital Care
Physician and Clinical Services
Dental Services
Other Prof. Services
Home Health Care
Other Non-Durable Medical Products
Rx Drugs
Durable Medical Equipment
Nursing Home Care
Other Personal Health Care
Admin. & Net Cost of Priv. HealthInsurancePublic Health Activity
Research
Structures & Equipment Sou
rce:
Cal
cula
tions
by
PP
I AA
RP
usi
ng C
ente
rs fo
r Med
icar
e &
Med
icai
d S
ervi
ces,
Offi
ce o
f the
Act
uary
, CY
196
0-20
04 N
atio
nal H
ealth
Exp
endi
ture
Dat
a
Hospital CareHospital Care
Rx DrugsRx Drugs
Physician &Physician &Clinical Clinical ServicesServices
27%
21%15%
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U.S. Total Drug Expenditures as Percent ofNational Healthcare Expenses: 1988 to 2010
23.8%
10.7%
19.2%
16.6%
8.1%
0%
5%
10%
15%
20%
25%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
% of NHE
Source: Compiled by the PRIME Institute, University of Minnesota from data found in Pharmaceutical Benefits Under Medical Assistance Programs, National Pharmaceutical Council, 1975 to 2002 and in HCFA Form 64.
Doubled share in 10 years
Projected
Will havetripled share
22.1%
Today
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0%
10%
20%
30%
40%
50%
60%
Cumulative Rise 2000 thru 2006
Average Rx Manufacturers’ Price Increases Far Outpacing Inflation
Yea
rs re
fer t
o ch
ange
from
pre
viou
s ye
ar. S
ourc
e: A
AR
P P
ublic
Pol
icy
Inst
itute
Apr
il, 2
007
Ave
rage
% C
hang
e
Inflation 20.3%
53.6%
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$13
$31
$30
$20
$0
$20
$40
$60
$80
$100
Out of Every $100
Distribution of Gross Revenues for U.S. Drug Companies by Expense Type
Net ProfitTaxes & Other Costs
Cost of Production
Research & Development
Marketing, Advertising, & Administrative Costs
Source: Compiled by the PRIME Institute, University of Minnesota from data found in DHHS, CMS, Jan 2003, andfrom Bloomberg, analysts models, & corporate annual reports. Presented by AARP Rx Watchdog Forum February 2005
$6
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Generic Substitution Rates in USA, 1984-2006
•More than half of Rx drugs dispensed in USA are GENERIC•Yet they account for only 13% of total Rx costs
Per
cent
of R
x Fi
lled
0%
10%
20%
30%
40%
50%
60%
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USA in a Global Context
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-$500
$0
$500
$1,000
$1,500
$2,000
$2,500B
illio
ns o
f dol
lars
Above ESAWESAW
Excesses, Gaps in US HC Spending
ESAW = Estimated Spending According to WealthSource: OECD; MGI analysis McKinsey & Company
28%
40%36%
27%-57%
-70%82%
15%
Below ESAWOverall
Rx
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Lessons from Europe
• Price transparency - a precondition for good policy and fair competition
• U.S. prescription drug pricing now takes place in a black box
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The “Black Box” of U.S. Pharmaceutical Pricing
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U.S. Pharmaceutical Supply & Payment
DrugManufacturer Consumer
Pharmacy
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Pharmacy Benefit Manager(PBM)
Employer/Plan Sponsor
or Health Insurer
WholesaleDistributor
U.S. Pharmaceutical Supply & Payment
Source: AARP---Based on work of The Health Strategies Consultancy (now Avalere Health) for the Kaiser Family Foundation
DrugManufacturer Consumer
Pharmacy
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Pharmacy Benefit Manager(PBM)
Employer/Plan Sponsor
or Health Insurer
WholesaleDistributor
U.S. Pharmaceutical Supply & Payment
DrugManufacturer
Pharmacy
M.D.
AdvertisingRxRxRx
Consumer
Payment for Marketing and Advertising
Source: AARP---Based on work of The Health Strategies Consultancy (now Avalere Health) for the Kaiser Family Foundation
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Lessons from Europe (con’t)
• Comparative Effectiveness information held by the industry and by other governments; using effectiveness as a basis for pricing has been successful in Europe.
• Truly innovative medicines should receive high reimbursement; “me-too” drugs required to show cost savings
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State & Federal Strategies to Lower Rx Drug Costs
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State Strategies
• Large purchasing pools • Comparative Effectiveness
[Oregon Evidence-based Practice Center]
• Transparency [e.g. NY program requiring that pharmacies post prices online]
• NH court case on physician profiling
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Federal Strategies
• Secretarial negotiation for Medicare– Very narrow rejection in Senate –
needed 60 votes– With no formulary – CBO estimates no
savings– Veto threat
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S. 1082, the Prescription Drug User Fee Amendments sponsored by Senator Kennedy– Reauthorize Prescription Drug User Fees that help fund FDA– Also includes some Rx drug safety provisions and other
amendments– Currently on the Senate floor (and will likely pass by today)
S. 316 – the Kohl-Leahy bill – Would prohibit generic manufacturers from accepting
anything of value as part of a patent settlement with a brand name company
– Offered as an amendment to PDUF– Unclear whether will pass as part of that measure
Federal Strategies
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S. 1088 – the Stabenow-Lott bill– “Lower Prices Reduced with Increased
Competition and Efficient Development of Drugs” Act
– Many of its provisions on PDUFA, offered as part of a “managers’ amendment”
– Expected to pass
S. 623 – the Clinton-Schumer biologics bill.– As part of PDUFA, there was a “sense of the
Senate” amendment that essentially said that the Senate HELP Committee should report out a generic biologics bill by June 13
– Key players are working on proposals
Federal Strategies
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HR 1038 –– Waxman-Emerson biologics proposal -
identical to the Clinton-Schumer proposal - issue moving more slowly in the House, though two hearings already held
HR 380 –– Emanuel-Emerson importation proposal– This is the House companion to Dorgan-
Snowe
Federal Strategies
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PDUFA Reauthorization in the House– The House moving more slowly than Senate;
hasn’t drafted language yet, just starting process
– Expected to move in the House, get conferenced with the Senate bill over the summer
– Unknown at this time whether the House will try to include Rx safety and other measures on the PDFUA reauthorization or whether it will simply move a “cleaner” piece of legislation.
Federal Strategies
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HR 1902 – the Rush-Waxman legislation– similar to the Kohl-Leahy bill– Energy & Commerce Committee held a hearing on this
issue last week– Unknown at this time whether sponsors will try to attach
this to PDUFA
HR 2184 – Comparative effectiveness research – Monday, Rep. Allen (D-ME) introduced legislation to
expand comparative effectiveness research (including a significant increase in funding)
– Senator Clinton working on similar legislation
Federal Strategies
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Federal Strategies
S. 242 – the Dorgan-Snowe importation legislation– Co-sponsored by 33 Members of Senate– Allows for safe importation of Rx drugs from abroad– Offered as amendment, the
measure passed by voice vote Monday– However, “poison pill” amendment sponsored by
Senator Cochran also passed by a vote of 49-40• Requires that before any importation system can be
implemented the Secretary of HHS must certify safety of imported drugs
• Similar provision already part of current law
• Stronger political support possible if Canada does industry negotiating for us
• Unlikely to produce much in short-term savings• Plays off of public anger in being played for fools
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Longer-Term Agenda
• Generic biologics • Continuing Comparative Effectiveness
studies • Focus on marketing costs
– DTC advertising– Physician detailing– Payments to physicians
• “Date certain” patent expiration policy
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Consumer StrategyConsumer campaign for “Wise Use”
– Counters detailing, DTC and other questionable marketing
– Promotes use of generics
– Fosters full compliance• Continue taking full prescription until finished• Continue on with maintenance drugs
– Encourages shopping around for price
– Has patient proactively inform physician about every health and Rx substance taken
– Focuses patients on knowing side effects to watch for
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Pharmaceuticals Only Part of Reform
• Rx pricing, patent, advertising, and detailing practices only one component of broader health reforms needed
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Future Agenda
• The AG’s nationwide have great opportunities to influence pharmaceutical pricing by creating:
– Better market rules– More effective consumer protections
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National State Attorney General Program atColumbia Law School
Pharmaceuticals Conference