Gottlieb Challenges Payors on Drug Prices
Addressing healthcare payors at the America’s Health Insurance Plans National Health Policy Conference, FDA commissioner Scott Gottlieb said payors are going to have to decide whether they want to continue to receive the short-term profit that comes with drug rebate programs or are willing to support a system that functions better for patients, providers, and those who pay for care. No prior FDA commissioners have directly addressed economic issues raised by agency-regulated products as Gottlieb now has. “Payors are going to have to decide this as well: Do they want to continue to benefit from monopoly rents today, or help generate a vibrant biosimilar market that can help reset biologic pricing, and drug pricing more generally, through competition,” he declared. “These are binary choices. You can’t have your cake, or in this case your rebates, and a vibrant market for biosimilar competition too.”
In his speech, Gottlieb said that robust competition expands patient access to more affordable products like generics and biosimilars, and widens public health benefits. “I’m concerned about that balance today,” he said, “because while we see a growing number of sponsors pursuing biosimilar development programs, the economics of development are currently unstable, and the pipeline of biosimilar products that we hope for could be dramatically affected by the weakening of market incentives to bring these products to patients.”
The commissioner said that current drug rebating and contracting practices, combined with an increased consolidation in many segments of the drug supply chain, has produced some misaligned incentives. “Too often,” he said, “we see situations where consolidated firms — the pharmacy benefit managers, the distributors, and the drug stores — team up with payors. They use their individual market power to effectively split some of the monopoly rents with large manufacturers and other intermediates rather than passing on the saving garnered from competition to patients and employers. The consolidation and market concentration make the rebating and contracting schemes all the more pernicious. And the very complexity and opacity of these schemes help to conceal their corrosion on our system, and their impact on patients. In the long run, the interests of patients, providers, and manufacturers are not well served by these arrangements, precisely because these practices encourage large list price increases to fuel the pricing schemes.”
Gottlieb discussed initiatives FDA is taking to encourage biosimilar competition. He said the agency will better integrate policy and review functions that can provide greater scientific and regulatory clarity for sponsors, and greater efficiencies in the review of biosimilar and interchangeable applications. And it is developing information resources and tools to assist biosimilar sponsors in developing high quality biosimilar and interchangeable products using state of the art analytical techniques.
He also raised the issue of “pay-for-delay” that slows the entry of generic drugs into the market and the “rebate trap” that has the same impact on biologics.
“I have been on the record as advocating companies move away from rebate-based contracts,” Gottlieb declared. “I think they actively harm patients in high deductible health plans, or patients who are forced to utilize products on non-preferred tiers. They can find themselves paying coinsurance based on a list price that no insurer pays. In fact, in some cases, a non-insured cash paying patient would pay less [and] this is certainly not the purpose of having insurance. Money from rebates paid by sick patients who need medicines is used to subsidize everyone in the system. More transparent pricing signals would encourage the rapid market uptake of lower-cost products, and force manufacturers to better establish the real value of their products relative to price, including through innovative payment contracts.”
If the nation is serious about seeking the market for biosimilars take shape, Gottlieb said, it will require a payment system that gives products that are currently in the pipeline a chance to enter the market once they’re approved. “The more that biosimilar makers see that the current system is stacked against them, the fewer new entrants that will cross in this space,” he said. “FDA will do its part by laying out an efficient path for showing how biosimilar products can demonstrate interchangeability with their branded counterparts. But we can only solve one part of this equation. Payors can also lead the way in formulary design by making biosimilars the default option for newly-diagnosed patients. They can share the savings with patients, maybe by waiving co-insurance. Or they can reduce administrative barriers when patients and providers use biosimilars, like lifting prior authorization requirements on physicians. FDA has a strong interest in seeing the biosimilar market grow. But some of that is going to be up to the choices you all make.”