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CAPD Statement for the Record to the Senate HELP Committee

The Coalition for Affordable Prescription Drugs (CAPD) appreciates the opportunity to submit the following statement for the record. 

The Coalition for Affordable Prescription Drugs (CAPD) represents a diverse group of large employers, labor unions, health plans, public sector employees and retirees, and other stakeholders who partner with pharmacy benefit managers (PBMs) to help manage costs so that they can continue to offer affordable, accessible health and drug benefit coverage to their employees and members. PBMs play a critical role in protecting consumers and keeping drug prices down by reducing pharmacy cost trends, decreasing overall health care costs, and improving quality.

CAPD shares the concerns of a majority of Americans, Congress, and the Administration about the rising prices of prescription drugs. Access to the most effective and affordable drugs is one of the most critical issues facing health care today.

As Secretary Azar said when he addressed the World Health Congress last month: “There’s little difference for a sick patient between a miracle cure that hasn’t been discovered and one that is too expensive to use.”[1]

We appreciate the Chairman and this Committee’s ongoing work to find solutions to ever-rising drug prices and the impact they have on patients, seniors, employers, taxpayers, and the health care system. The fact is that when it comes to the high cost of prescription drugs, it all starts with the list price set by pharmaceutical manufacturers. To be effective, any proposal must deal with the list price directly.

For years, drug companies have been raising prices of prescription drugs at an unsustainable rate, effectively pricing patients out of the medicines they need. In fact, a March 2018 analysis found that 20 drugs saw list price increases of more than 200 percent over the past 14 months. The list price for Humira, the best-selling drug in the world, increased by nearly 20 percent over 14 months.[2]

According to a report from the U.S. Senate Committee on Homeland Security and Governmental Affairs, prices increased in Medicare Part D for every one of the 20 most-prescribed brand name drugs each year for the past five years. The prices for these drugs increased by an average of 12 percent annually—approximately ten times the average annual rate of inflation.[3] Twelve of the 20 most commonly prescribed brand-name drugs for seniors saw price increases of more than 50 percent in the five-year period. Prices for six of the 20 drugs were increased by more than 100 percent.

A recent report the Department of Health and Human Services Report Office of the Inspector General (OIG) found that after taking rebates and discounts into account, over the course of five years, spending by Medicare Part D on brand-name medications rose by 62% despite a 17% decline in the number of prescriptions written.

Drug companies are able to set and raise prices as they choose to, in large part because they preserve their monopoly pricing power by manipulating the patent and regulatory process to block lower cost competition, often from generics and biosimilars, from coming to the market.

As Congress and the Administration look for sustainable solutions to bring down rising drug prices, it’s critical that action be taken to encourage greater competition and end drug manufacturers’ manipulation of the regulatory and patent system that has kept lower-cost prescription drugs, such and generics and biologics, from reaching consumers more quickly.  Closing loopholes to prevent drug companies from continuing to game the system will restore competition in the marketplace and prevent big drug companies from continuing to raise drug prices without consequence.

Action should be taken to prevent drug companies from deploying the following tactics:

1. Pay for Delay: Brand drug manufacturers routinely delay lower-cost alternatives from coming to market by engaging in anticompetitive patent settlements with potential generic competitors so that they can continue to set prices unilaterally. It is estimated that this practice costs consumers and taxpayers $3.5 billion each year in higher drug costs.[4]

In 2017, the Federal Trade Commission challenged Allergan’s anticompetitive reverse-payment agreement with generic manufacturer Endo Pharmaceuticals to obstruct lower-cost generic competition to its lidocaine patch, known as Lidoderm.  The agreement paid Endo $825 million in 2011, which was 30% of its total revenue that year. In exchange, Endo committed not to sell an authorized generic version of Lidoderm for up to 7½ months.[5]

2. REMS Abuse: Brand drug manufacturers manipulate the U.S. Food and Drug Administration’s (FDA) Risk Evaluation and Mitigation Strategies (REMS) program to prevent generic drug manufacturers from obtaining the samples they need to prove bioequivalence, which is required to bring a generic drug to market. It is estimated that REMS abuse costs the health care system $5.4 billion a year.[6]

In March 2018, the FDA said that it had received over 150 inquiries from generic manufacturers who reported having difficulty obtaining samples of brand-name drugs to satisfy REMS requirements.[7]

3. Evergreening: Brand drug manufacturers prevent lower cost alternatives from reaching patients by seeking additional patents on minor variations to the original drug in order to extend the patent period; by introducing an “extended release” version, for example. These tweaks don’t increase or enhance clinical benefits to the patient, but they do extend the period of time for which a drug manufacturer can continue to control pricing by preventing competition.

Humira, the best-selling drug in the world, is protected by more than 100 patents filed. While FDA-approved biosimilar alternatives to Humira exist, they are barred from the market because of Humira’s patent shield.[8]

4. Authorized Generics: Once the patent expires on a brand name drug, the manufacturer of that drug will often introduce the exact same product under a generic name in order to extend its ability to maintain high prices, creating a false competitor. The first generic alternative to market often comes with a 180-day exclusivity period.

Mylan increased the list price of a two-pack EpiPen by 500 percent between 2009 and 2016. In December 2016, it launched its own “authorized generic” for $300 per two-pack.[9]

5. Citizen Petition Process. Citizen petitions are meant to be a way for the public to bring their concerns to the FDA. Instead, drug companies choke the system and use the citizen petition process to delay generic alternatives from being approved by asking the FDA to delay action on a pending generic drug application.

Between 2006 and 2012, ViroPharma filed 24 citizen petitions with the FDA to delay the approval of generic versions of Vancocin, an antibiotic that was first approved in 1986.[10]

6. Orphan Drug Designation. In order to entice drug manufacturers to develop treatments for rare diseases, the government provides tax breaks and exclusivity incentives. The policy was intended to help patients suffering from diseases that afflict fewer than 200,000 people, but many orphan drugs are also approved to treat more common conditions, allowing drug manufacturers to reap federal tax and exclusivity benefits, while also making record profits from high prices. Humira, for example, the best-selling drug in the world, has received orphan drug designation.

Eleven drugs to treat rare seizure conditions have received orphan drug designations. None of those were new drugs; rather compounds that were already approved to treat more common conditions, such as epilepsy, or were new methods to administer the medication.[11]

One common sense solution to stop drug companies from gaming the system is the CREATES Act, which CAPD continues to support. The CREATES Act is a targeted, market-based, bipartisan solution to the longstanding problem of brand name pharmaceutical companies denying generic manufacturers access to the samples they require to conduct necessary equivalence testing to bring their product to market.

Additionally, CAPD was encouraged by last week’s announcement by the FDA of new policies to curb drug company abuses of the REMS program. We believe those policies, combined with the passage of the CREATES Act, will be an important step toward ensuring patients are able to access safe, effective alternatives to high-priced brand name drugs.

CAPD looks forward to working with Congress, the Administration, and other stakeholders to help foster greater competition in the marketplace. We need solutions that will help American patients, consumers, and taxpayers, and this will only happen if we tackle the problem where it starts – at the list price.

[1] “HHS secretary: Trump drug pricing plan will go ‘much further’ than budget proposal,” The Hill, May 2, 2018 http://thehill.com/policy/healthcare/385805-hhs-secretary-trump-drug-pricing-plan-will-go-much-further-than-budget
[2] Pharmacy Benefit Consultants Analysis, Jan. 2017-March 2018, http://www.pharmacybenefitconsultants.com/wp-content/uploads/2018/03/AWP-Comparison-20161231-to-20180301.pdf
[3] “Manufactured Crisis: How Devastating Drug Price Increases are Harming America’s Seniors,” March 26, 2018, https://www.hsgac.senate.gov/imo/media/doc/Manufactured%20Crisis%20-%20How%20Devastating%20Drug%20Price%20Increases%20Are%20Harming%20America’s%20Seniors%20-%20Report.pdf
[4] “Pay for Delay: How drug company payoffs cost consumers billions,” Federal Trade Commission, Jan. 2010
[5] “FTC continues crackdown on pay for delay agreements,” Regulatory Affairs Professionals Society, Jan. 23, 2017
[6] “Lost prescription drug savings from use of REMS programs to delay generic market entry,” GPHA (now AAM), July 2014
[7] “A drug program that keeps patients safe (and profits too),” Bloomberg, July 26, 2017.
[8] “Pharma’s pervasive evergreening is driving prices up, study says,” Fierce Pharma, November 3, 2017.
[9] “The $300 Epipen is here,” Business Insider, December 16, 2016.
[10] “How pharma companies use ‘citizens’ petitions’ to keep drug prices high,” The Atlantic, March 8, 2017.
[11] “Thirty years of orphan drug legislation and the development of drugs to treat rare seizure conditions: A cross sectional analysis,” PLOS One, Aug. 2016.