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Prescription Drugs

Overview of Prescription Drug Issues

Access and Coverage

Costs and Prices—what are the drivers?

Medicaid

Experimental Drugs

Manufacturing and Compounding Safety

States Roles

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Prescription Drugs and

Health Care Spending

16.7% of overall personal health care spending went toward prescription drugs in 2015.

10% of all health care spending went to Rx drugs

53% of that goes to brand-name prescription drugs

7.6% of all drug spending goes to specialty drugs

15% of Medicaid spending goes to prescription drugs

10% for brand-name

5% for generics

What drives prescription drug costs

and spending?

High cost of bringing drugs to market

Increased incidence of chronic disease

Aging population

Medication Non-adherence $100—$289 billion annually

Over-prescribing

https://www.theatlantic.com/health/archive/2012/09/the-289-billion-cost-of-medication-noncompliance-and-what-to-do-about-it/262222/

http://www.nytimes.com/2010/05/20/health/20chen.html

https://www.theguardian.com/commentisfree/cifamerica/2011/jun/20/healthcare-drugspolicy

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Generics

Approximately 86% of prescriptions are filled using generic drugs.

Generic prices are increasing—why?

Consolidation of generic drug manufacturers (lack of market competition)

Demand for generic drugs exceeding supply

High expense of complying with FDA drug manufacturing standards

Medicaid

Large purchasers of prescription drugs

60% of adult Medicaid beneficiaries have been diagnosed with at least one chronic disease or disabling condition

25% have multiple chronic conditions

Dually eligible beneficiaries—people who are eligible for both Medicaid and Medicare—account for 15% of Medicaid enrollees and account for 36% of Medicaid spending.

Source—Kaiser Family Foundation

http://www.chcs.org/media/Wisconsin1.pdf

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Access and Consumer Protections

Coverage Mandates

Consumer appeals for

restrictions/denials

Manufacturing and Compounding

Safety

The FDA regulates drug manufacturers

State boards of pharmacy regulate all in-state pharmacies, including compounding pharmacies

But—some compounding pharmacies produce enough drugs that they begin to approach the output of drug manufacturers and ship them across state borders.

State and federal rules and guidelines attempt to regulate these types of facilities.

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Experimental Drugs

Experimental drugs and drugs that are still in the clinical trial phase of development are not FDA-approved.

FDA has a “compassionate use” provision allowing individuals to apply for use.

31states try to allow patients with terminal illnesses to purchase experimental drugs under Right-To-Try Laws.

These drugs are typically notcovered by insurance.

State Actions To Address Costs

Cost and Price Transparency

Discount programs

Utilization Review

Tier levels and formularies

Step-therapy requirements

Bulk purchasing

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Enacted Transparency Laws

RI S 2467 (2016): Prescription Drug Benefits

Summary: Regulates business relationships among pharmacy services providers,

group health insurers, and health service organizations by providing department of

health oversight. Pharmacy benefit manager (PBM) are required to disclose prices

with respect to multi-source generic pricing and provide updates on prices to

pharmacies every 10 days.

SD S 118 (2015): Additional Transparency for Prescription Drug Plans

Summary: Provides additional transparency for prescription drug plans, requires

health insurers to provide plan information to enrollees regarding prescription drugs

and drugs administered in a physician office or clinic, an online list of providers and

facilities, drug formularies and a description of an easily accessible method to obtain

a prior authorization or step edit requirement for each specific drug included on the

formulary, excludes plans that are not actively marketed by a carrier.

VA H 308 (2015): Health Insurance and Prescription Drugs

Summary: Relates to health insurance, prescription drugs and formularies,

requires any health insurer, corporation providing individual, group accident,

and sickness subscription contracts, or health maintenance organization that

applies a formulary to prescription drug benefits provided under its policy,

contract, or plan to provide prior written notice to each insured of a formulary

modification that results in the movement of the drug to a tier with a higher cost.

VT S 216 (2016): Prescription DrugsSummary: Provides for pharmaceutical cost transparency, requiring the state to do an annual identification of up to 15 state purchased prescription drugs ''on which the State spends significant health care dollars and for which the wholesale acquisition cost has increased by 50 percent or more over the past five years or by 15 percent or more over the past 12 months, creating a substantial public interest in understanding the development of the drugs' pricing.'' The state attorney general "shall require the drug's manufacturer to provide a justification for the increase in the wholesale acquisition cost of the drug" in an understandable and appropriate format. Requires that rules be adopted requiring certain insurers to provide information about the State Health Benefit Exchange plan's drug formularies, provides further for drug dispensing fees, reimbursement, a related report and out-of-pocket drug limits.

NCSL Prescription Drug Database

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Prescription Drugs: Costs in Context

Scott LaGanga, Senior Vice President State Advocacy

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Together Series - Alzheimer's

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MORE THAN 7,000 MEDICINES ARE IN DEVELOPMENT Around the World

MEDICINES IN DEVELOPMENT

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Developing New Treatments and Cures

IS A COMPLEX AND RISKY UNDERTAKING

On average, it takes more than

10 years and $2.6B to research and develop a new medicine.*

BETWEEN 1998 AND 2014

Unsuccessful

Attempts

Successful

Attempts

123Alzheimer’s Disease**

96Melanoma***

167Lung Cancer***

4Alzheimer’s Disease

7Melanoma

10Lung Cancer

Just

12%of drug candidates that enter

clinical testing are approved

for use by patients

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COMPANIES RACE TO BE FIRST TO MARKET with a New Medicine

Competing brands generally launch within two years.

Time Between Approval of First and

Second Medicines in a Pharmacologic

Class Has Declined Dramatically

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Nearly 9 Out of Every 10 U.S. Prescriptions

ARE FILLED WITH GENERICS

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POWERFUL PURCHASERS NEGOTIATE DRUG PRICES

Negotiating power is increasingly concentrated among fewer pharmacy benefit managers (PBMs), with the

TOP THREE PBMS ACCOUNTING FOR THREE QUARTERS OF THE MARKET.

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List Prices Exclude Government Mandated Discounts, for Example…

As a condition of a drug being covered by Medicaid, drug manufacturers pay a rebate to the states and the Centers for Medicare & Medicaid Services based on a statutory formula.

*Certain brand medicines are subject to a different rebate percentage.

Sources: CBO4,5; The Menges Group analysis of CMS data6

Price Controls in Medicaid Are Manifested Through the Rebate Program

In FFY 2015, manufacturers paid states Medicaid rebates totaling $24 billion.

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2121

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BRAND MEDICINE NET PRICE GROWTH SLOWED IN 2015as Discounts, Rebates Negotiated by Payers Rose Sharply

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Medicines Account for a

STABLE SHARE OF HEALTH CARE SPENDING

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Multiple Data Sources Confirm

DRAMATIC SLOWDOWN IN PRESCRIPTION

MEDICINE SPENDING GROWTH

Accounting for discounts and rebates, net spending growth rates in 2016

dipped to between 2% and 5%

IMS reported that the 2016 net prescription medicine spending

growth rate was between 2% to 3%

CVS Health reported that net prescription medicine spending for its

clients grew by 3.3% in the first three quarters of 2016

Altarum Institute reported that the 2016 prescription medicine

spending growth rate of 4.0% was lower than the growth rates for

physician and hospital spending

Express Scripts reported that net prescription medicine

spending growth for its clients was 3.8% in 2016

CMS reported that the 2016 spending growth rate for prescription

medicines was 5.0%, which represented the largest decline in

spending growth of any category from 2015

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INSURERS DO NOT PASS ALONG DISCOUNTS TO PATIENTS WITH HIGH DEDUCTIBLES AND COINSURANCE

48%

39%

13%

Copay

Deductible

Coinsurance

More than half of commercially-insured

patients’ OOP spending for brand

medicines

is based on list price

Cost sharing for nearly 1 in 5 brand

prescriptions is based on list price

Amundsen Consulting Group

52%

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Patient Assistance Programs Can Play an Important Role in

MAINTAINING PATIENT ACCESS TO MEDICINES

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Prescription Drug Costs in the US

Chuck Shih, PhD, MHSSenior Officer, Drug Spending

The Pew Charitable Trusts

Why are prescription drugs an issue?

• Rising pharmaceutical costs– $310B in 2015

– 16.7% of total healthcare spend

• Specialty drugs are a key driver– 1% of all prescriptions but 37% of drug spending

– Est. 50% of prescription drug spending by 2020

– New drugs will increase spending by $91B (projected, 2016 to 2020)

• Some generic drug prices rising too

Source: IMS, ASPE

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Increasing Cost of MS Therapies

Source: Hartung (2015)

International Comparison (2015)

Source: Kesselheim (2016)

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FFS Medicaid Spending on Generics, 2014

Source: ASPE

The Drug Supply & Payment Chain

Source: Kaiser Family Foundation

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Americans are concerned…

A Balancing Act

• Ensure patient access to appropriate therapies

• Manage growth of premiums & out-of-pocket costs

• Maintain incentives for innovation

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Policy ideas in playIncreased competition

• Faster generic, biosimilar access

• Importation

Limits on price

• Thresholds

• Extend rebates (e.g. California Proposition 61)

Transparency

• R&D costs

• PBM/price transparency

Value

www.pewtrusts.org/drugpaymentpolicies

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Suggested Discussion Topics

What are the primary prescription drug issues in your

state?

Is your state doing anything new or innovative concerning

prescription drugs?

What else would you like to learn about drug

policies/options?

What do your constituents care about with regard to

prescription drugs? How do you respond to their concerns?

Cambridge, Massachusetts| April 28-30, 2017

HEALTH SEMINAR FOR NEWER LEGISLATORS