CMS` Transparency Push Could Revolutionize Drug Pricing
20.10.2011
While the FDA`s efforts at transparency have had little impact on industry, a push for more transparency at the Centers for Medicare & Medicaid Services (CMS) could prove revolutionary.
CMS is rolling out a number of initiatives that will, for the first time, provide real-time public updates of drug pricing and what pharmacies are paying for single- and multiple-source drugs and biologics.
In the past, the public saw, at the most, a snapshot of drug pricing, and much of it didn`t affect biologics, Alice Valder Curran, a partner at Hogan Lovells, told BioWorld Today. But all of that is changing.
As part of its national average drug acquisition cost (NADAC) program, CMS will be receiving monthly invoices from retail and specialty pharmacies that will show the invoiced cost to pharmacies for various drugs and biologics. That information, which will not reflect rebates, will be made public.
CMS also is proposing publicizing the monthly weighted average of the average manufacturer price (AMP) for drugs. Under the Affordable Care Act, the federal upper limit, or Medicaid reimbursement cap, is to be set at 175 percent of the AMP, which is an average of innovator, generic and noninnovator pharmaceutically and therapeutically equivalent drugs.
Since AMP is used only with multiple-source drugs, it has not been much of an issue for biologics, Valder Curran said. As biosimilars hit the market, AMP may become part of the pricing equation for biologics.
States also are seeking more transparency in drug pricing. California, for instance, is looking at what clinics and doctors pay for physician-administered drugs and vaccines to determine reimbursement rates for the state`s Medicaid program, Medi-Cal. Clinics and doctors will be required to submit certified reports that reflect rebates and discounts for the drugs and vaccines, Valder Curran said.
Having much of that pricing information public could have significant ramifications for the biopharma industry. While it`s too early to predict the consequences, Valder Curran advised companies to "stay on top of this and watch it. You need to know these data are coming."
Firms should be ready to analyze and use the data to see what their competitors are doing and spot trends. They also should be aware that customers, competitors and payers likely will be evaluating the information. For example, consumer advocacy groups and payers could use the data to push for lower prices and set reimbursement levels, Valder Curran said.
"The more you think about it, the more you can start seeing interesting aspects to it," she noted, adding a company that is prepared for this new category of public information will be in a better position to deal with it.
FDA`s Transparency Efforts
CMS` efforts at transparency are producing useful information that will have a real impact on industry. That`s not true with the FDA`s stabs at transparency, Dave Fox, a Hogan Lovells partner, said at a roundtable Wednesday on the state of the life sciences industry.
In response to biopharma`s pleas for more regulatory predictability, the FDA has become more transparent about its performance goals and is pushing industry for more disclosure on why drugs fail in early development. (See BioWorld Today, Oct. 7, 2011.)
"This is a classic case of government and industry really talking past each other," Fox said.
What industry needs is not transparency in performance goals but more concrete guidance on what data the agency wants to evaluate the risks and benefits of a product, he added, noting that the FDA`s science is "completely fluid" until it gets data from a company.
John Smith, a partner in the device sector at Hogan Lovells, said the biggest difficulty is when the agency changes its mind during the development of a product. He cited examples of companies that did exactly what the FDA requested and then were told it wasn`t enough for approval.
Too often, the agency review team isn`t transparent about its reasoning, so the company doesn`t understand the decision or have anything to contest. In one case, Smith said, a review team denied an application, referring to an internal memo issued three years earlier. The memo was never shared with the company.
The agency needs to make its review process more predictable, if not more transparent, Smith said.
