By: Nick Bonds, Esq.
Pharmaceutical companies and rapidly rising drug prices have been eating up a lot of the oxygen in the conversation around healthcare costs. From pharmaceutical executives and PBMs testifying before Congress to President Trump’s May 9 remarks from the Roosevelt Room calling for Democrats and Republicans to unite in a legislative effort to end surprise medical bills.
But Congress and the White House are not alone in their endeavors to tamp down prescription drug costs, HHS Secretary Alex Azar and the CMS recently promulgated a new rule requiring pharmaceutical manufacturers to include the list prices of their drugs in their television ads. This push for transparency is the latest tactic in a multi-pronged strategy deployed by the Trump Administration to lower drug prices in the United States, including moves to change the system of rebates paid to PBMs and to restructure Medicare Part B. Outraged drug manufacturers cried foul, arguing that patients almost never pay their list prices and disclosing them in their commercials would lead to customer confusion.
Perhaps one of the most interesting components of this CMS rule is its enforcement mechanism. Instead of the CMS itself going after drug manufacturers who fail to comply, the rule allows other manufacturers to pursue damages and injunctions against them for claims of false or misleading advertising under Section 43(a) of the Lanham Act. Also known as the Trademark Act of 1946, this federal law relies on a “likelihood of confusion” standard for adjudicating trademark disputes. The Lanham Act and its remedies have been refined over the last 70 years to combat the very customer confusion pharmaceutical companies insist this new CMS rule will cause.
Whether you agree with drug manufacturers or the CMS, it’s worth noting that this is not the only situation where the government has turned to intellectual property law as a versatile tool to lower drug costs. A bi-partisan group of Senators, including Republicans Chuck Grassley and John Cornyn along with Democratic Presidential Candidate Amy Klobuchar, are working together on a package of legislation targeting drug pricing issues which they hope to have ready by summer. Cornyn’s bill takes a machete to the “patent thickets” crafted by drug manufacturers to artificially extend the monopolies on high-value “blockbuster” drugs granted them by their patents. These patent thickets make it all but impossible for cheaper generic drugs to reach the market, keeping the price of name brand drugs higher for longer. Legislators are coming to see these patent thickets as an abuse of our patent system, a system intended to spur and reward innovation.
It may be too early to say how effective intellectual property law will be in lawmakers’ fight against high drug prices, but it certainly looks like a trend to keep our eyes on. At the very least, it shows that Democrats and Republicans are willing to get creative, using every weapon in their arsenal in their fights with Big Pharma. And they’re willing to reach across the aisle to do it.
By: Patrick Ouellette, Esq.
In a move geared toward making drug prices more visible to consumers, the Department of Health and Human Services (HHS) recently released a proposed regulation that would force drug companies to include prices in their television advertisements of prescription drugs and biological products. HHS focused the proposal on drugs in which payment is available through or under Medicare or Medicaid to include the Wholesale Acquisition Cost (WAC, or “list price”) of that drug or biological product.
There are some drug price components of WAC to note, as WAC is generally the manufacturer’s price for drugs before the supplier of the product offers any rebates, discounts, allowances or other price concessions. True pricing involves a number of other variables to determine what the final drug costs are to patients beyond the WAC, such as what their insurance covers or whether their deductible has been met. These proposed regulations are also limited only to drugs covered under Medicare or Medicaid. However, it will be instructive in the long-term to see whether the inclusion of pricing in advertisements will actually lower final drug payments for patients. Similar to CMS requiring (starting in 2019) hospitals to make public a list of their standard charges via the Internet in a machine-readable format, there are no assurances that patients armed with new information will reduce final costs.
If these regulations prove to be successful, it will be interesting to see whether HHS would extend them to drugs payable by private insurers. In particular, HHS regulations could affect pharmacy benefit manager (PBM) rebates in the self-funded health plan space:
Because the list price of a drug does not reflect manufacturer rebates paid to a PBM, insurer, health plan, or government program, obscuring these discounts can shift costs to consumers in commercial health plans and Medicare beneficiaries. Many incentives in the current system reward higher list prices, all participants in the chain of distribution, e.g., manufacturers, wholesalers, pharmacy benefit managers, and even private insurers, gain as the list price of any given drug increases. These financial gains come at the expense of increased costs to patients and public payors, such as Medicare and Medicaid, which ultimately fall on the backs of American taxpayers.
Furthermore, consumers who have not met their deductible or are subject to coinsurance, pay based on the pharmacy list price, which is not reduced by the substantial drug manufacturer rebates paid to PBMs and health plans. As a result, the growth in list prices, and the widening gap between list and net prices, markedly increases consumer out-of-pocket spending, particularly for high-cost drugs not subject to negotiation.
Though the proposed regulations only affect companies in which their drugs covered by public payers, Medicare and Medicaid, all payers across healthcare should keep track of this initiative. The Pharmaceutical Research and Manufacturers of America (PhRMA) has already argued that such rules would violate the First Amendment and not affect patient costs.
By: Ron Peck, Esq.
For those who did not tune into the “Empowering Plans” podcast, wherein I revealed why I’ve been absent from other recent Phia Group podcasts and webinars, please do check it out. In that recording, I describe my wife’s diagnosis (the specific type of Non-Hodgkin’s Lymphoma she’s fighting), and early lessons learned through her diagnosis. Key among them is the need for second (and even third opinions) to ensure the right diagnosis is ultimately achieved. I implore plan sponsors to pay for – and advocate for – second (and third) opinions. The funds expended on these opinions more than pay for themselves when we avoid unnecessary (and possibly dangerous) treatments for the wrong conditions.
The next lesson learned has been about and orbits around communication. Communication is comprised of more than just what we say, but how we say it. To effectively communicate, it’s necessary to put ourselves in the shoes of the ones with whom we’re communicating. Empathy is the greatest Rosetta Stone. With that in mind, my wife experienced a failure in communication not because the communicator was unclear, but rather, their focus, medium, and other elements missed the mark.
For instance, there were specific instructions she needed to follow to secure certain medications in accordance with rules set forth by the PBM. Nothing was withheld, and the coverage is great – but only if the rules are obeyed. The issue, however, was that the rules were communicated via US Mail (a/k/a “snail mail”). I love my mail carrier as much as the next red blooded American, but – if we’re being empathetic – we need to accept that a cancer patient is likely falling behind on their mail, and are unlikely to rush to open a letter that doesn’t look like a bill. To ensure the patient knows about the particulars of the program, we should notify them when the first dose is filled by notifying the pharmacist (so the message can be conveyed at the point of sale), and electronically (via phone call, text, e-mail, etc.). This is one silly little example of things we may not spot from the payer perspective, but as a patient, suddenly it’s clear.
Likewise, case management. Again, the benefit plan attempts – in its estimation – to go above and beyond in its servicing of the patient, assigning a case manager to the patient’s case. This person, the patient believes, is supposed to offer advice, act as a second set of eyes on proposed care, and generally look out for the patient’s best interest. In our mind, that would include financial interests too, right? Yet, when a conflict arose between the provider and plan representative, the case manager was quick to report to my wife – the patient – that the conflict was raging, claims would likely be denied, and she – the cancer patient – should encourage her oncologist (the person, the patient believes, that stands between her and certain death) to work with the plan.
Now, from the case manager’s perspective, they foresee the patient enduring financial hardship if the matter isn’t resolved, and they are trying to act preemptively to avoid it. This is not a bad thing! Yet, from the patient’s perspective, they are being dragged into matters of money – irrelevant and unimportant – compared to their own battle to survive.
Again, we need to step into the shoes of the patient and ask: “How would I feel if I received a call, threatening to deny my claims and saddle me with debt, unless I turn on my doctor and become their adversary on the plan’s behalf?” We know this isn’t the purpose of the case manager’s efforts, but this is how the patient (and if we’re honest – even we) may interpret it during such a time of stress and grief.
Moreover, if the patient is enraged by this turn of events, they may take this “heads up” from the case manager to be a directive from the plan administrator – and suddenly the case manager is looking like a final, fiduciary decision maker. I worry here, because we do not want this independent third party case manager to suddenly be a fiduciary, or impact the actual fiduciary, by “making decisions” on the plan’s behalf – without the plan’s authorization.
As my wife continues to battle cancer, my eyes continue to be opened as it relates to the patient perspective, and how they may interpret things we in the benefits industry often say without concern. I look forward to continuing to share my observations with you.