Pharma Challenges to State Rx Policy for Families USA Threats Pharma Challenges 2 Pharma drug prices are the fault of others Pharma blames PBMs and insurers and the federal 340B program ID: 927250
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January 24, 2020Jane Horvath
Pharma Challenges to State Rx Policy
for Families USA
Slide2Threats
Pharma Challenges
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Slide3Pharma: drug prices are the fault of others
Pharma blames PBMs and insurers, and the federal 340B program
Pharma created the rebate system that they hate now
Rebates compensate for market prices that pharma knows are too high
Insurers get rebates to reduce impact of Rx costs on premiums
Giving rebates to patients can drive up premiumsRebates can be given to pharmacist, which would not drive up premiumsPharma does not really want rebates to go to point of service – then the actual cost of the drug would be public – anathema to pharma.The PBM rebates are so large, perhaps because rebates to PBMs can be exempt from Medicaid best price
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Horvath Health Policy, Innovations in Health Care Financing
Slide4Pharma: We Will Take Our Jobs and Leave Your State
NIH funding by state
Compare to industry R&D dollars state by state
Clinical Trials by State and funder
Sort query by ‘industry’ and ‘non-industry’ funding
Clinical Trials US v ex US
Shows that 58% of registered trials occur outside US and 36% in the USIn MD we found that NIH was responsible for much more R&D funding than pharmaBe alert for PhRMA publication: Pharma in [your state name]
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Slide5Pharma: We Will Not Sell Drugs in Your State
Highly unlikely: a sale is a sale. Germany, France, Great Britain, Japan, Canada, China……..
Manufacturers provide additional discounts to Veterans Administration and to 340B program beyond federally required price concessions. A sale is a sale.
Leaving a state would cede the market to a competitor product.
Look to your state business laws and consumer protection laws to fend off retaliation
Illegal to advertise without intent to sell
Illegal to withhold sales in order to drive up priceIllegal to fail to renew contracts without cause (i.e. retaliation)Governor has price control powers in emergency [drug shortage] situationState may need new state law provision
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Horvath Health Policy, Innovations in Health Care Financing
Slide6Lawsuits
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Pharma Challenges
Slide7Basics of Pharma Lawsuits
Rule: Must sue a state in state court
unless
violations of Constitutional rights are alleged
Rule: A violation of a federal law (such as patent protections) triggers a violation of the Supremacy Clause of the Constitution
State law cannot contradict federal law
PhRMA and BIO lawsuits sue on multiple constitutional violations in any one challengeState and local government purchasers and payers can do things about price directly without a legal challenge because state is a ‘market participant’ in this instanceBut there is not much they can do to get at manufacturer prices
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Horvath Health Policy, Innovations in Health Care Financing
Slide8Dormant Commerce Clause
Feds regulate interstate commerce
States regulate intrastate commerce
What happens when regulated industry is regional, national, international?
Made more sense when businesses were local
Prices are national, costs are local
State authority and responsibility to protect health and safety of residentsCourt decisions for DCC violation intimidate state policymakersAAM v Frosh. MD HB 631, anti-price gougingState policy cannot dictate out of state manufacturer prices PhRMA v WDC price controlsState policy cannot dictate out of state manufacturer prices
State policy cannot tie in-state prices to other prices out of state DC referenced-price. Capped Rx prices to the average of 5 EU countriesDCC lawsuit in process in CA re SB17 and OR re HB4005
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Horvath Health Policy, Innovations in Health Care Financing
Slide9Due Process and Free Speech
Due Process –Manufacturer allegations
MD HB631 punished ‘unconscionable’ price increases which is an unknown
Court did not rule on this issue
Free Speech – Manufacturer allegations
CA SB 17 requiring manufacturers to say if price increase results from drug improvement forces speech that the manufacturer would not choose to speak. If no improvement, implication that manufacturer price increase is not justified or wrong.
CA lawsuit ongoingHHS rule to post Rx prices on TV ads violated manufacturer free speech rightsCourt did not rule on free speech but found HHS exceeded its authority
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Horvath Health Policy, Innovations in Health Care Financing
Slide10Trade Secrets
States have trade secret protection laws, federal law since 2016
Legal Challenges
NV law specifically exempted Rx company data from state trade secrets law
CA data FOIA’d by advocates for information on upcoming price increases. Industry sued to keep information confidential.
OR enacted a 60-day price increase advance notice law (same a CA)
Pharma claims even public information about a company is a trade secret
Proposed states collect only public info which would become a trade secret once the state collected it. (true)
Most of what pharma refuses to provide can be ascertained through publicly available sources, thus not a trade secret (a lot of effort required)
Cost of JAMA ads, cost of TV prime time ads, and the # ads….
R&D is in SEC 10-K if spending is relevant for investors
Competitors are not clueless about what they each spend on operations because their operations are similar
Competitors raise prices similar amounts once the first company announces its increase – nothing secret after that among competitors
Launch prices are predictable too, based on market price of competitors already in the market.
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Slide11Patent Law Violations/Supremacy Clause
PhRMA BIO v WDC
Court discussed that price caps limited innovator’s rights to unfettered profits
DC law contrary to federal patent scheme created by congress
No discussion in the trial of 340B program as very clear example of congressional intent to limit profits through direct price controls – federal government not a 340B market participant
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Slide12How Court Rulings Affect State Policy
Price gouging legislation limited to generics and off-patent brands in response to earlier DC Circuit ruling on supremacy clause/patent law
But then 4
th
circuit found that limiting price gouging to generics was not fair…..
Drug Affordability Boards limited to state/local government purchasers and payers (ME and MD)
Limit PDAB to government payers immunizes the state from DCC lawsuitGovernment as market participant rather than regulatorSuch limitations undermine the intent and effectiveness of the PDAB and viability of upper payment limitsNeed a pathway from application to government payers to application statewide – protect all residentsWe need some strong laws in different federal circuits to get stronger decisions that support state consumer protection authority.
We have just one-off decisions in two circuits to which every state is responding. State Attorneys General need to be facile with federal healthcare policy, laws, rules and know how the industry operates in order to maximize effectiveness
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Horvath Health Policy, Innovations in Health Care Financing
Slide13R&D Myth Busters
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Pharma Challenges
Slide14Lots of Room for Lower US Prices
& continued
R&D
Pharma return on investment is $14:1 for cancer drugs
(World Health Organization 2018)
R&D of $7.2B for 10 cancer drugs, revenue of $67B
JAMA 9/2017US-based Rx companies earned 176% of their worldwide R&D budget from just the portion of US prices that are above the prices charged in other countries
(Health Affairs Blog 3/2017)large pharmaceutical manufacturers could face an 11% profit reduction and still have a more effective return on capital compared to other industries; a 21% profit reduction would leave these manufacturers more competitive than 75% of other industries. (West Health, 11/2019)
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Horvath Health Policy,
Innovations in Healthcare Financing Policy
Slide15Off Topic But Important
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Pharma Challenges
Slide16Importation briefly
No constitutional basis for industry lawsuit against a state
Need change in federal law:
Allow importation from EU, Great Britain, Japan, Israel
Allow state wholesale programs to import biologics (insulins, vaccines, anti-cancer products)
if your state has an import law or a bill
Get your governors or legislators to contact your congressional delegationUS Senate Finance Drug Price legislation could move to the floor this Spring, vehicle for import amendmentsSenator Grassley (R-IA, Chair of Finance) supports drug importation (co-sponsor of import legislation)State importation programs will not get off the ground if supply limited to Canada once the big states participate (NY Governor announced recently, Florida has a law)
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Slide17Thank You!
Jane Horvath
Horvath Health Policy,
Innovations in Healthcare Financing Policy
Linkedin.com/in/horvathhealthpolicy
www.horvathhealthpolicy.com
HorvathHealthPolicy@gmail.com202/465-5836
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