Radar on Drug Benefits

In January 2021, the outgoing Trump administration approved a Medicaid waiver that would have allowed Tennessee to do something novel: implement a “commercial-style” closed drug formulary while still receiving statutory Medicaid rebates for covered drugs. In the year that’s followed, however, it has become clear that the demonstration program faces long odds regarding whether it will ever actually be implemented.

First, the waiver program — known as TennCare III — is the subject of a lawsuit filed in April 2021 by the National Health Law Program, the Tennessee Justice Center and King & Spalding LLP on behalf of Tennessee Medicaid enrollees. The lawsuit challenges the demonstration program on procedural grounds, arguing that the Trump administration did not provide the required public comment period when it approved Tennessee’s waiver, and on substantive grounds, saying CMS exceeded its authority under Section 1115 of the Medicaid statute in approving the waiver.

Under the Biden administration, federal drug regulators have homed in on misleading or imbalanced claims on social media, and early evidence shows those efforts will be a key focus in 2022. According to legal experts, pharmaceutical companies and medical device manufacturers that turn to influencers, celebrities and popular social media channels to promote their products should heed compliance warnings.

The FDA, through its Office of Prescription Drug Promotion (OPDP), issued six enforcement letters — two warning letters and four untitled letters — to pharmaceutical companies in 2021. While drugmakers continue to operate in an era of relatively low-volume enforcement (the FDA also issued six enforcement letters in 2020, down from more than 50 warnings a decade before) the areas of focus are evolving, according to a Jan. 25 webinar hosted by law firm King & Spalding LLP.

While the average price that pharmacies pay for a common hepatitis B treatment has seen a steep drop as more generics entered the market, the list price for the drug — which helps determine patient cost sharing — has stayed stubbornly high, according to new research published in JAMA. The study’s authors say their findings “highlight the need for policies that improve transparency around generic drug financing and pharmaceutical benefit manager practices,” but one industry expert points out that there are also private-sector solutions to the problem arising.

“In my view, the high out of pocket costs for entecavir and other generics is something that, given Good­Rx and companies like it…patients can do something about themselves directly, bypassing their PBM and pharmacy benefits altogether,” says Elan Rubinstein, Pharm.D., principal of EB Rubinstein Associates. GoodRx, which went public in 2020, offers an app-based drug price comparison tool, aggregates drug coupons and contracts with several PBMs, which allows the firm to offer patients the cheapest price for a drug among its partners’ negotiated network rates.

The price of the average brand-name drug has increased by 18.3% annually on average over the last five years, according to research firm GlobalData. Floriane Reinaud, research and analysis director at GlobalData, said in a statement that this price growth is unique to the U.S. “While drug list prices have only been increasing in the US, major markets in the rest of the world are seeing declines. Japan, for example, saw drug prices decline by more than 9% while Germany declined by around 7.5%,” Reinaud said.

The business strength of “speculative grade” pharmaceutical companies varies considerably, mainly due to differences in their produce concentration and drug development pipelines, according to S&P Global Data. S&P analysts Patrick Bell and David A. Kaplan also wrote that “although speculative-grade companies are frequently more aggressive in pricing and life cycle management strategies, legislators and the media primarily focus criticism on well-known investment-grade peers and their more widely prescribed blockbuster drugs. Similarly, we believe pharmacy benefit managers place more attention on controlling spending on blockbuster drugs than those with narrower patient bases such as orphan drugs. Nevertheless, with a higher proportion of revenues generated in the U.S. and higher leverage, we believe drug price reform could hurt speculative-grade pharma companies disproportionately.”