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Generic Drug Pricing Media Report 9/16/16
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Some Generic Drugs See Huge Price Increases
Sep 15, 2016 | Medscape
By Ken Terry
The prices of generic drugs covered under the Medicare Part D program dropped overall from 2010 to 2015, but a group of 315 drugs saw extraordinary price increases during that period, according to a new report from the US Government Accountability Office (GAO). The study was requested by members of Congress who were concerned about reports of spiking generic drug prices. -
Pharma Pricing, Non-Profit Ties Get Increasing Scrutiny From Prosecutors
Sep 14, 2016 | Pink Sheet
By Brenda Sandburg
Off-label marketing and kickbacks may no longer be the top targets of government healthcare fraud investigations as more companies are being hit with subpoenas for pricing information. Drug makers have been unable to shake free of government investigations of their marketing and sales practices. But the focus of the probes has shifted in the last few years and one word now routinely pops up – pricing. -
Pharma Deals With The DOJ
Sep 14, 2016 | Pink Sheet
By Brenda Sandburg
A look at the settlement agreements pharma companies have struck with the Department of Justice in the last three years; the size of the deals has declined dramatically since 2012.
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Some Generic Drugs See Huge Price Increases
Sep 15, 2016 | Medscape
By Ken Terry
The prices of generic drugs covered under the Medicare Part D program dropped overall from 2010 to 2015, but a group of 315 drugs saw extraordinary price increases during that period, according to a new report from the US Government Accountability Office (GAO). The study was requested by members of Congress who were concerned about reports of spiking generic drug prices.
Prices for all generic drugs, including those that entered or exited the market during the study period, fell 59% from the first quarter of 2010 through the second quarter of 2015. This decline reflected a changing group of 2378 unique generic drugs.
GAO also analyzed the prices of 1441 "established" generic drugs that were available throughout the study period. The average prices of these drugs fell 14%. But the prices of established generics would have declined further, GAO said, if not for the "extraordinary" price increases of nearly a fifth of those drugs.
The price rises in this group of medications were at least 100% and, in some cases, 1000% or more. The number of drugs in this category shot up from 45 in 2010-2011 to 103 in 2014-2015. Altogether, the 315 drugs had 351 extraordinary price increases.
For example, erythromycin in 500-mg tablets had three increases of more than 100%. Its price increased from 24 cents per tablet in 2010 to $8.96 per tablet in 2015.
While most of the price hikes were between 100% and 200%, some were much higher. Forty-eight drugs had price increases of 500% or higher, and 15 had hikes of 1000% or more.
For example, the price of 50-mg capsules of the antidepressant clomipramine HCL, which is used to treat obsessive-compulsive disorder, increased over 2000% in 1 year, jumping from 34 cents per capsule in 2013 to $8.43 per capsule in 2014.
Similarly, the price of 20-mg capsules of piroxicam, used to treat arthritis, increased by over 2000% from 9 cents per capsule in 2010 to $1.94 in 2011. By 2015, the price was $1.82.
Nearly all of the extraordinary price increases remained in place for at least 1 year, GAO pointed out.
Some drugs kept increasing in price. For instance, a glaucoma drug, methazolamide, first experienced a price increase of 454%, from 33 cents per 50-mg tablet in 2010 to $1.85 in 2011. By 2015, the drug's price was $5.47 per tablet, 1538% above the original cost.
Most drugs with extraordinary price increases were not among the 100 most utilized generic drugs under Medicare Part D. Except for 2013-2014, when there were four, no more than one of those drugs was in the top 100 in any given year.
Overall, the percentage of generic drugs dispensed under Medicare Part D increased from 71.9% to 85.7% during the study period. The private drug plans that contracted with Medicare have long incentivized doctors and patients to use generic drugs through higher cost sharing for branded medications. Reacting to the price increases of some generic drugs, some health plans have created a nonpreferred generic drug tier that has higher copays than do preferred generic medications, GAO said.
Is Competition the Reason?
Pharmaceutical companies told GAO that competition is the primary driver of generic drug prices. For example, if a company introduces a new generic drug into the market, it typically offers it at a lower price than the current market price to build sales. Other firms then cut their prices to meet the new competition.
According to GAO, an analysis by the US Food and Drug Administration (FDA) has shown this to be the case. For products that attract a large number of generic manufacturers, the average price falls to 20% of the branded price or lower.
But this is not always the case. For instance, a recent Los Angeles Times article noted that the prices of some generic drugs can rise sharply even if multiple manufacturers compete for market share. Ursodiol for gallstones, for instance, is produced by eight companies. Two years ago, the drug could be purchased for as little as 45 cents a capsule. In May 2014, one manufacturer, Lannett Company, Inc, increased its price to $5.10 a capsule, and its competitors soon followed suit.
One of these competitors, the article added, is Mylan, which recently stirred national outrage by steeply raising the price of its EpiPen device, which is used to counter life-threatening allergic reactions.
In a commentary on The Health Care Blog, Uwe Reinhardt, PhD, a health economist at Princeton University, said that few economists would have predicted the price increases for ursodiol. The theory of oligopoly, he noted, holds that prices may rise when just a few competitors control a market. But with eight companies making this drug, he said, that should not have happened.
According to GAO, the drug manufacturers "noted that the level of competition in the generic drug market is influenced by a variety of factors, including raw material shortages, production difficulties, consolidation among manufacturers, and a backlog of new generic drug applications awaiting federal review."
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Pharma Pricing, Non-Profit Ties Get Increasing Scrutiny From Prosecutors
Sep 14, 2016 | Pink Sheet
By Brenda Sandburg
Off-label marketing and kickbacks may no longer be the top targets of government healthcare fraud investigations as more companies are being hit with subpoenas for pricing information.
Drug makers have been unable to shake free of government investigations of their marketing and sales practices. But the focus of the probes has shifted in the last few years and one word now routinely pops up – pricing.
That has been the hot button issue roiling industry the past year as several companies have been excoriated by Congress and the media for their steep price hikes. The Department of Justice has also honed in on the issue. It is investigating firms for details about their patient assistance programs, contractual agreements with pharmacy benefit managers, support of non-profit organizations, and calculation of average manufacturer and best prices.
A look at recent Securities and Exchange Commission filings of more than a dozen pharma companies shows the practices that have drawn government attention. At least four companies – Biogen Inc., Celgene Corp., Gilead Sciences Inc. and Jazz Pharmaceuticals PLC – have received subpoenas for information about their relationships with charitable organizations. Mylan NV was subpoenaed for material about the pricing of its generic doxycycline and communications with competitors. And Valeant Pharmaceuticals International Inc. is facing several probes about its pricing and patient assistance programs (see chart below).
Mylan's doxycycline price increases were called out by Sen. Bernie Sanders, I-Vt., and Rep. Elijah Cummings, D-Md., in October 2014 when they sent letters to 14 generic drug makers about the pricing of their products. They noted that from October 2013 to April 2014, the average price charged for a 500-count bottle of 100 mg tablets had risen from $20 to $1,829, an 8,281% increase. (Also see "Mylan Joins Firms Facing DOJ Probe On Price Hikes; Senate Plans Industry-Free Hearing" - Pink Sheet, 7 Dec, 2015.)
Mylan is now under fire for repeatedly raising the price of its severe allergy treatment EpiPen (epinephrine), which has increased from about $100 for a two-pack in 2008 to more than $600. Members of Congress sent a flurry of letters to the company requesting an explanation for the price hikes. (Also see "Mylan's EpiPen Nightmare Not Over Yet, But Will Congress Just Write?" - Pink Sheet, 30 Aug, 2016.)
And on Sept. 6, New York Attorney General Eric Schneiderman announced that his office has begun an investigation into Mylan with regard to EpiPen, saying a preliminary review revealed that Mylan may have inserted potentially anticompetitive terms into its EpiPen sales contracts with numerous local school systems.Going Beyond Misbranding Cases
The government has subpoenaed several other generic companies about their pricing. Most recently, Sun Pharmaceutical Industries Ltd. reported that it had received a subpoena for information pertaining to the pricing of its generic drugs.
In previous years, the DOJ has concentrated on claims of off-label marketing and payment of kickbacks. These investigations resulted in a slew of settlements, many topping $1bn. (Also see "The Era Of Billion Dollar Pharma Settlements" - Pink Sheet, 11 Jun, 2012.)
Hogan Lovells partner Meredith Manning said she thinks the government is trying to avoid cases alleging misbranding under the federal Food, Drug, and Cosmetic Act and is looking for other theories of liability.
"They run into First Amendment issues when they go down the misbranding route, and juries don't want to convict individuals," Manning, a former attorney in FDA's Office of Chief Counsel and a former assistant US attorney, said.
Indeed, in the last six months the government has struck out in two trials against individuals and got a limited conviction in a third. In March, a Texas jury found Vascular Solutions Inc. and its CEO Howard Root not guilty of off-label marketing of its Vari-Lase vein ablation device. (Also see "Vascular Solutions Not-Guilty Verdict Another Challenge To FDA Off-Label Oversight" - Medtech Insight, 1 Mar, 2016.) In June, a Boston jury cleared Carl Reichel, former president of Warner Chilcott PLC's pharmaceutical division, of conspiring to pay kickbacks to physicians. (Also see "Acquittal Of Former Warner Chilcott Exec May Make Future Prosecutions More Difficult" - Pink Sheet, 17 Jun, 2016.)
And in July, another Boston jury acquitted former executives of Johnson & Johnson's Acclarent Inc. division of felony charges while convicting them on misdemeanor counts in a case involving marketing a sinus dilation device for use with a steroid. (Also see "Off-Label Convictions Of Device Execs Could Impact Pharma Sales Reps" - Pink Sheet, 23 Jul, 2016.)Will Individuals Be Prosecuted?
King & Spalding partners John Richter and Michael Pauzé, who represented Vascular Solutions in the government's case, said they expect the DOJ to continue to prioritize the investigation and prosecution of individuals. They noted that there has been increasing pressure on the department to go after individuals, which culminated in a September 2015 memo from Deputy Attorney General Sally Quillian Yates to assistant attorneys general and all US attorneys outlining steps to overcome challenges to pursuing individuals in corporate misconduct.
However, Richter, a former US Attorney and former Acting Assistant Attorney General in charge of the criminal division at DOJ, said that there is a big difference between issuing policy and standing in front of a judge and trying to prove culpability. As a prosecutor, there is a "big distance between what you wish in the case and what can be proven in the case," he said. "If you get enough bad outcomes it will make you gun shy."
As for the focus of government investigations, both emphasized that the growth in federal regulation has meant and will continue to mean growth in federal enforcement. Pauzé, a former assistant US attorney, said that because there is so much talk about pricing it can lead to government scrutiny. Richter added that despite the significant setbacks the government has faced in off-label cases recently that area of inquiry is not dead.Government Closes Novartis, Teva Inquiries
Many government investigations evolve from False Claims Act complaints in which private individuals, known as relators, file suit on behalf of the federal government alleging fraudulent claims have been submitted for government payments. If the government intervenes in the case the relator receives up to 30 percent of the recovery.
Richter said there has been a tremendous increase in plaintiff law firms representing alleged whistleblowers, which has led to an uptick in FCA cases being brought to the Justice Department for consideration.
However, the government frequently declines to intervene in these complaints. For example, Novartis AG reported that in the third quarter of 2015, the US Attorney's Office for the Western District of Kentucky declined to intervene in a relator's complaint and closed an investigation it had initiated in 2012 relating to marketing practices for several Novartis products.
The US Attorney for the Southern District of New York declined to intervene in a False Claims Act case against Teva Pharmaceutical Industries Ltd. It had issued a civil investigation demand to the company in 2014 for documents related to the sales and marketing of Copaxone (glatiramer) and Azilect (rasagiline). The government also declined to intervene in two complaints alleging Cephalon (now Teva) promoted the sleep disorder drugs Nuvigil (armodafinil) and Provigil (modafinil) off-label. The whistleblowers in these cases are pursuing the actions on their own.
Several other investigations have resulted in DOJ settlements. Among the most recent, Pfizer Inc. agreed to pay $784.6m to resolve allegations that its Wyeth subsidiary paid hospitals steep discounts if they purchased both oral and IV formulations of the acid-suppressant Protonix (pantoprazole). And Roche and OSI Pharmaceuticals LLC reached a $67m settlement to resolve claims they misrepresented the effectiveness of the non-small cell lung cancer drug Tarceva (erlotinib) (see sidebar for list of settlements).Pharma Deals With The DOJ
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Sep 14, 2016 | Pink Sheet
By Brenda Sandburg
A look at the settlement agreements pharma companies have struck with the Department of Justice in the last three years; the size of the deals has declined dramatically since 2012.
In addition to US healthcare fraud queries, the government is also stepping up investigations of foreign bribery. This year the DOJ increased the number of prosecutors looking into potential violations under the Foreign Corrupt Practices Act and initiated a pilot program to give companies credit and a reduction in fines for their cooperation. At least six companies are the subject of ongoing FCPA-related investigations. (Also see "Foreign Bribery Investigations Ramping Up, Along With 'Carrot' For Cooperation" - Pink Sheet, 18 Apr, 2016.)
Earlier this year, Novartis and SciClone Pharmaceuticals Inc. reached settlements of $25m and $12.8m, respectively, for payments made to healthcare professionals employed at state health institutions in China to induce them to prescribe their products. And on Aug. 30, the SEC announced that AstraZeneca PLC agreed to pay $5.5m to settle charges that its subsidiaries in China and Russia made improper payments to foreign government employees.State Opioid Actions
In addition to federal government probes, pharma companies also face investigations and lawsuits from states. Most notably, several states and counties have sued opioid manufacturers alleging deceptive marketing of their pain products.
The City of Chicago filed a lawsuit against Purdue Pharma LP, Teva, Johnson & Johnson, Endo Pharmaceuticals Inc. and Actavis in June 2014 alleging they marketed their opioids to encourage people to use them beyond their approved indications. A district court judge dismissed the suit and terminated Teva as a party. However, the judge allowed Chicago to amend its claims and the city filed a second amended complaint in November.
California's Santa Clara County and Orange County filed a similar complaint against opioid manufacturers in 2014. Last year, the court stayed the case until FDA concludes its ongoing inquiry into the safety and effectiveness of long-term opioid treatment. In December 2015, the state of Mississippi filed a complaint against most of the same group of companies. And on Aug. 31, New York's Suffolk County filed a similar suit in New York Supreme Court against Purdue, Teva, J&J and Endo.
Other states are also pursuing actions against opioid makers. In August 2015, the New Hampshire Attorney General subpoenaed Janssen and other pharma companies related to their opioid marketing practices. J&J has challenged the subpoena.
A few companies have settled opioid state probes. In December, Purdue reached a $24m settlement with Kentucky's Attorney General to resolve allegations it misrepresented the addictive nature of OxyContin (oxycodone) and encouraged doctors who were not trained in pain management to overprescribe it. In March, Endo agreed to establish an opioid abuse and detection program in a settlement resolving the New York Attorney General's investigation of Opana ER (oxymorphone extended release) marketing. (Also see "Opioid Marketing Settlement: Endo Sales Reps To Become Abuse Watchdogs" - Pink Sheet, 3 Mar, 2016.) And in July, Pfizer inked an agreement with the City of Chicago that helped it avoid being a party to the city's litigation against other manufacturers. (Also see "Pfizer Opioid Marketing Agreement With Chicago Follows Help In Suit Against Other Firms" - Pink Sheet, 6 Jul, 2016.)
As for the future of government investigations, attorneys expect to see them continue to increase.
"Healthcare is such an important issue in this country politically and will be for the foreseeable future," King & Spalding's Pauzé said. "It will continue to be a focus of criminal investigations and prosecutions."
Pharma Companies Under Government Investigation
Company
Investigation
AbbVie
Alaska Attorney General's Office served a civil investigative demand, primarily seeking documents AbbVie produced in the Federal Trade Commission's suit against AndroGel patent litigation settlement; suit was dismissed in May 2015.
Allergan
In April 2015 Allergan's Forest subsidiary received a subpoena from HHS' Office of Inspector General requesting documents relating to average manufacturer and best price calculations for several of its products.
In June 2015 the company's Actavis subsidiary received a subpoena from DOJ seeking information relating to the marketing and pricing of certain generic products and its communications with competitors about the products (Teva assumed liability with its acquisition of Allergan's generic business).
Allergan has received investigatory subpoenas from the US Attorney's Office and various state agencies requesting information and documents relating to categories of drug pricing, including average wholesale price, wholesale acquisition cost, average manufacturer price and best price.
AstraZeneca
In May 2012 its MedImmune unit received a subpoena form the Office of Attorney General for the State of Florida Medicaid and Fraud Control Unit requesting sales and marketing documents for its respiratory tract disease treatment Synagis (palivizumab).
In June 2011 MedImmune received a demand from the US Attorney's Office for the Southern District of NY requesting documents related to Synagis and also received a court order to produce the documents for the Office of the Attorney General for the State of New York Medicaid and Fraud Control Unit.
Biogen
In March 2016 received a subpoena from the federal government for documents relating to the company's relationship with non-profit organizations that provide assistance to patients taking Biogen drugs.
In July received civil investigative demands from the federal government for documents and information relating to treatment of certain service agreements with wholesalers when calculating and reporting average manufacturing prices in connection with the Medicaid drug rebate program.
Celgene
In December 2015 received a subpoena from the US Attorney's Office for the District of Massachusetts requesting documents related to its support of 501(c)(3) organizations that provide financial assistance to patients.
Eli Lilly
US Attorney's Office for the Eastern District of Pennsylvania and the DOJ are conducting an inquiry of Lilly's treatment of certain distribution service agreements with wholesalers when calculating and reporting average manufacturer prices in connection with the Medicaid drug rebate program. Lilly was notified of the probe in September 2015.
Gilead
In February 2016 received a subpoena from the US Attorney's Office for the District of Massachusetts requesting documents related to its support of 501(c)(3) organizations that provide financial assistance to patients and its provision of financial assistance to patients for hepatitis C virus products.
Massachusetts Attorney General served Gilead with a civil investigative demand in February requesting documents related to its HCV products and in July suspended Gilead's obligations under the CID until further notice.
GlaxoSmithKline
In February 2016 the US Attorney's Office for the Southern District of New York issued a subpoena requesting documents related to GSK's vaccine business and in March 2016 it issued a subpoena requesting documents relating to US contracts for its migraine treatments Imitrex (sumatriptan) and Amerge (naratriptan).
Jazz Pharmaceutical
In May 2016 received a subpoena from the US Attorney's Office for the District of Massachusetts requesting documents related to the company's support of 501(c)(3) organizations that provide financial assistance to Medicare patients and for documents regarding financial assistance to Medicare patients for its narcolepsy drug Xyrem (sodium oxybate).
Johnson & Johnson
In March 2016 its Janssen Pharmaceuticals unit received a civil investigative demand from the US Attorney's Office for the Southern District of New York related to Janssen's contractual relationships with pharmacy benefit managers from Jan. 1, 2006 to the present with regard to certain products.
In August 2015 the New Hampshire Attorney General subpoenaed Janssen and other pharma companies related to opioid marketing practices. In March 2016 New Hampshire Superior Court denied the state's motion to enforce the subpoena and granted a protective order on grounds the state had not obtained approvals to retain private counsel. The parties appealed the ruling and the AG's office obtained approvals for private counsel.
Mylan
In December 2015 received a subpoena from DOJ's antitrust division seeking information relating to the marketing, pricing and sale of its generic doxycycline products and any communications with competitors about them. The company also received a subpoena from the Connecticut Office of the Attorney General seeking information about doxycycline and its other generic products. And in September the New York Attorney General's Office began an investigation of its EpiPen sales contracts.
Novartis Pharmaceuticals
In 2013 the government filed a civil complaint intervening in a False Claims Act action involving marketing practices for several cardiovascular medicines. The probe is related to a 2011 investigation by the US Attorney's Office for the Southern District of New York.
In 2013 received a civil investigative demand from the US Attorney's Office for the Southern District of New York requesting documents and information related to marketing practices for its multiple sclerosis drug Gilenya (fingolimod), including the remuneration of healthcare providers.
Sanofi
In June 2012 DOJ began investigating disclosures to the FDA regarding the variability of response to the blood thinner Plavix (clopidogrel).
Valeant
In March 2016 received an investigative demand from the North Carolina Department of Justice for materials relating to Nitropress (nitroprusside), Isuprel (isoproterenol) and Cuprimine (penicillamine), including documents regarding production, marketing, distribution, sales and pricing, and patient assistance programs.
In October 2015 received subpoenas from the US Attorney's offices for the District of Massachusetts and the Southern District of New York for documents relating to patient assistant programs; its former relationship with Philidor and other pharmacies; accounting treatment for sales by specialty pharmacies; information provided to the Centers for Medicare and Medicaid Services; pricing, including discounts and rebates, marketing and distribution of its products; its compliance program; and employee compensation.
In September 2015 received a letter from DOJ's civil division and the US Attorney's Office for the Eastern District of Pennsylvania regarding investigation of Biovail Pharmaceutical's treatment of certain service agreements with wholesalers when calculating and reporting average manufacturer prices in connection with the Medicaid drug rebate program.
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