December 12, 2017 The Sixth Annual Health Law Year in P/Review symposium featured leading experts discussing major developments during 2017 and what to watch out for in 2018. The discussion at this day-long event covered hot topics in such areas as health policy under the new administration, regulatory issues in clinical research, law at the end-of-life, patient rights and advocacy, pharmaceutical policy, reproductive health, and public health law. For more information, visit our website at: http://petrieflom.law.harvard.edu/events/details/sixth-annual-health-law-year-in-p-review

1. PORTAL
Program On Regulation, Therapeutics, And Law
Health Law Year in P/Review:
Prescription Drug Prices
Aaron S. Kesselheim, M.D., J.D., M.P.H.
Associate Professor, Harvard Medical School
Director, Program On Regulation, Therapeutics, And Law (PORTAL)
December 12, 2017
akesselheim@partners.org

2. PORTAL
Program On Regulation,
Therapeutics, And Law
Prescription Drug Spending in the US
• Rose 12% in 2015, 6% in 2016 to $450 billion
– 22% of health care spending
– 19% of Medicare spending
– 19% of employer-based insurance benefits
– More than half of change in 2016 from increases in
prices of existing drugs
• Retail spending
– Increased 8.9% in 2015 and 1.3% in 2016 to $330
billion
• Projections for 2017:
– 6-8% increase in total drug expenditures
– 11-13% increase in clinics
– 3-5% increase in hospital drug spending
Sources: IMS, MedPAC, Kaiser, CMS, Schumock et al, AJHSP

3. PORTAL
Program On Regulation,
Therapeutics, And Law
Agenda
• Review selected drug pricing initiatives,
policies, proposals from
– States
– Congress
– Executive branch

4. PORTAL
Program On Regulation,
Therapeutics, And Law
States: New legislation
• California SB 17
– Price justification
• Notify state and health insurers when plan to raise the
price of a medication by 16% or more over 2 years
– Outlaw drug coupons when FDA-approved lower
cost generic drugs are available
Ross and Kesselheim, NEJM, 2013

5. PORTAL
Program On Regulation,
Therapeutics, And Law
Price gouging
• Maryland HB 631
– Medicaid alerts AG if generic drug manufacturers or
wholesale distributors raise price of a drug by 50% or
more in a year
• Also drug-device combinations
– Must justify within 45 days
• AG can require manufacturer to produce relevant materials
to determine whether the increase was excessive
– “Unconscionable increase”: AG can stop increase,
restore excess payments to patients and payers,
impose penalties
Greene, NEJM, 2017

6. PORTAL
Program On Regulation,
Therapeutics, And Law
Diabetes drug transparency
• Nevada SB 539
– If increase prices by more than the previous year’s
medical inflation, or by double medical inflation over
the previous two years, must provide production
costs, marketing costs, profits, information about
patient assistance programs, the price, and
aggregate amount of any rebates
– Publish an annual report based on these disclosures
with information about price increases, the reasons
for those increases, and the price increases’ effects
on prescription drug spending

7. PORTAL
Program On Regulation,
Therapeutics, And Law
NY budget legislation
• Identify high-cost drugs, determine value-based
price with a review board, negotiate
supplemental rebates for Medicaid
• Trigger if the rate of drug spending growth
exceeds the 10-year average inflation rate plus
either 5% in 2017-2018 or 4% in 2018-2019
Hwang Kesselheim Sarpatwari, JAMA, 2017
NY Medicaid
spending
WAC (May
2017)
ICER value-
based price
range
Estimated
rebate %
Incremental
discount
required
Ledipasvir/so
fosbuvir
$243M $63,000 (8
wks)
$34,000-
$42,000
0 10%-23%
Dimethyl
fumarate
$32M $6820 per
package
$982-$3340 31 0-32%

8. PORTAL
Program On Regulation,
Therapeutics, And Law
Challenges to state laws
• Commerce clause claims
– MD: Directly regulates drug prices in other states
– NV: Burdens interstate commerce by indirectly
influencing prices in other states
• Patent-based challenges
– Recalling BIO v DC (2007)
• Trade secret
Lee, Kapczynski, Kesselheim, JAMA, forthcoming 2017

9. PORTAL
Program On Regulation,
Therapeutics, And Law
2018 trend?: Medicaid waivers
• Public health insurance for patients with low
incomes and disabilities
– 60 million lives, 10% of total drug spending
– Officially optional, but all states provide drug coverage
– OBRA of 1990: If offer, must cover virtually all drugs, but
receive mandatory statutory rebate of 15.1%; ACA
increase to 23.1%
• States have few other ways to address rising costs
• MA seek waiver under §1115 of Social Security Act
– Propose closed formulary, at least 1 drug per therapeutic
area
– Propose to exclude drugs with limited or inadequate
benefit until incremental clinical value is proven

10. PORTAL
Program On Regulation,
Therapeutics, And Law
Blocked state action
• Ohio “Issue 2”
– Would mandate that state agencies pay for drugs at the
same price as the VA
– Similar to California “Proposition 61” (2016)
• California analysis
– Examine differences in net prices paid by the VA and
Medi-Cal for the top 200 brand-name drugs by spending
in the Medi-Cal fee-for-service program in 2014
– Medi-Cal net price after statutory rebates exceeded the
negotiated VA price for 65 (33%) drugs by 30% on avg
– Price parity=cost savings in 2014 of $100-$125M
• Voted down, 79%-21%
Hwang and Kesselheim, BMJ, 2016

11. PORTAL
Program On Regulation,
Therapeutics, And Law
Congress
• 21st Century Cures Act (Dec 2016)
• FDA Reauthorization Act
– 2018 goals: new drugs ($879 million), biosimilars
($45 million), generic drugs ($494 million)
Kesselheim & Avorn, JAMA 2017
Darrow, Avorn, Kesselheim, NEJM, 2017

12. PORTAL
Program On Regulation,
Therapeutics, And Law
CREATES Act
• Civil penalties for failure to provide sufficient
quantities of a covered product
• Give FDA flexibility to approve generic drugs
with different, comparable Risk Evaluation and
Mitigation Strategies
Vokinger, Kesselheim, Avorn, Sarpatwari, JAMA IM, Sept 18 2017

13. PORTAL
Program On Regulation,
Therapeutics, And Law
Affordable and Safe Prescription Drug
Importation Act
• Canadian pharmacies and wholesale distributors can become
“certified foreign” sellers by paying a user fee and:
– Being in Canada
– Being a distributor of prescription drugs offered for importation
– Being established for 5 years or more
– Providing medications only if there is a valid prescription
– Being in compliance with applicable Canadian laws and regulations
– Conducting regular quality assurance
– Allowing regular laboratory testing
– Notifying all parties of product recalls
– Having a process for resolving rule violations
– Not selling products that are illegal in Canada
– Meeting additional criteria implemented by the Health and Human Services secretary
• GAO study of outcomes after 18 mos, expand to include other
OECD countries after 2 years
Fralick, Avorn, Kesselheim, NEJM, 2017

14. PORTAL
Program On Regulation,
Therapeutics, And Law
Improving Access to Affordable Rx
Drugs Act
 Transparency provisions
 Negotiating prices for Medicare Part D, accelerate closing the gap
 Anti-price gouging
 Importing safe drugs
 Move dual-eligibles back to Medicaid drug pricing
 Cap on prescription drug cost-sharing
 Reductions in statutory market exclusivities
 Pay for delay illegal

15. PORTAL
Program On Regulation,
Therapeutics, And Law
Executive branch

16. PORTAL
Program On Regulation,
Therapeutics, And Law
Draft Executive Order
• Cut regulations
• Direct FDA to “advance the timely development of medical
products, increase drug competition, enable generic entry for
complex drugs, and address unintended consequences of existing
rules that may reduce competition”
• “Facilitate, where appropriate, the ability of Federal health
programs to enter into reimbursement arrangements for medical
products that are based on the value of such products to patients
rather than the volume of such products purchased”
• Directs US trade rep to conduct study of price differences
between US and other countries
– Review trade agreements that may need to revised “to promote greater IP
protection and competition in the global market”
• Cut 340B reimbursement

17. PORTAL
Program On Regulation,
Therapeutics, And Law
FDA
• Facilitating entry of generic drugs, robust generic
competition
– Guidances on complex generic drug development
– Improve first-cycle approval rate
– Expedited development if 3 or fewer manufacturers
in the market
• However…
– Approving drugs for cancer, other diseases based on
limited evidence
– Not adequately ensuring post-approval trials
completed
Naci, Smalley, Kesselheim, JAMA, 2017

18. PORTAL
Program On Regulation,
Therapeutics, And Law
Preview of 2018
• Oil States v. Green Energy Group case before
Supreme Court
• Biosimilars
• More state action
• More tweets
• The first $1 million therapy?