Trump ad­min­is­tra­tion pro­pos­es new rules that strip away many of the re­bate deals be­tween phar­ma and PBMs, push­ing dis­counts to con­sumers

Af­ter threat­en­ing for the past 2 years to do some­thing dra­mat­ic to change the steady up­ward tra­jec­to­ry of list drug prices and slash out-of-pock­et costs, the Trump ad­min­is­tra­tion has just fired a broad­side straight in­to one of the key dri­vers that has stoked pub­lic anger against the bio­phar­ma in­dus­try.

Alex Azar

HHS Sec­re­tary Alex Azar is­sued a re­lease Thurs­day evening say­ing that the gov­ern­ment will change the safe har­bor pro­vi­sions that al­low drug com­pa­nies to pay re­bates to the phar­ma­cy ben­e­fit man­agers that man­age their ther­a­peu­tics. That sys­tem of re­bates has con­tin­ued to shove up list prices while the rev­enue from drug port­fo­lios has flat­tened or in­creased at on­ly a frac­tion of what we’ve seen in pre­vi­ous years.

In­stead, the Trump ad­min­is­tra­tion is propos­ing that the safe har­bor pro­vi­sion will al­low drug com­pa­nies to hand dis­counts di­rect to con­sumers, so they get the di­rect ben­e­fit of the dis­counts that drug com­pa­nies had been pass­ing along to the PBMs like Ex­press Scripts. In place of the re­bates PBMs would earn a fixed price fee.

That should par­tic­u­lar­ly ad­van­tage se­niors on Medicare, said Azar. In fact, the an­ti-kick­back rules are aimed di­rect­ly at the pub­licly fund­ed health plans in the US, but the rules would like­ly spread in­to the pri­vate in­sur­ance mar­ket giv­en the mar­ket heft of Medicare and the Med­ic­aid plans that would be af­fect­ed. Al­so, if every­one knows what mem­bers of Medicare and Med­ic­aid are be­ing charged, then the whole opaque process around re­tail drug prices that’s ex­ist­ed for decades could pre­sum­ably be elim­i­nat­ed or ex­posed.

The dev­il, as al­ways in Wash­ing­ton DC, will be in the de­tails. Here’s the full de­scrip­tion of what the ad­min­is­tra­tion is propos­ing.

Re­bates have long been a thorn in the side of in­dus­try crit­ics, and in­creas­ing­ly the phar­ma com­pa­nies them­selves. These se­cret deals be­tween drug mak­ers and PBMs — which the gov­ern­ment says amount to 30% of drugs’ list price — are used to arrange fa­vor­able po­si­tions on the for­mu­la­ries used to steer mem­bers to par­tic­u­lar drugs. They al­so dic­tate the co-pays that are charged to mil­lions of mem­bers.

For the phar­ma in­dus­try, which has been the tar­get of grow­ing pub­lic anger, the move will be wel­comed as the at­ten­tion shifts to PBMs.

Stephen Ubl, PhRMA CEO

“We ap­plaud the Ad­min­is­tra­tion for tak­ing steps to re­form the re­bate sys­tem to low­er pa­tients’ out-of-pock­et costs,” not­ed PhRMA chief Stephen Ubl. “Our cur­rent health care sys­tem re­sults in pa­tients of­ten pay­ing cost-shar­ing based on the list price, re­gard­less of the dis­count their in­sur­er re­ceives. We need to en­sure that the $150 bil­lion in ne­go­ti­at­ed re­bates and dis­counts are used to low­er costs for pa­tients at the phar­ma­cy.”

“This pro­pos­al would al­so fix the mis­aligned in­cen­tives in the sys­tem that cur­rent­ly re­sult in in­sur­ers and phar­ma­cy ben­e­fit man­agers (PBMs) fa­vor­ing med­i­cines with high list prices.”

“This his­toric ac­tion, com­bined with oth­er ad­min­is­tra­tive and leg­isla­tive ef­forts on pre­scrip­tion drug pric­ing, is a ma­jor de­par­ture from a bro­ken sta­tus quo that serves spe­cial in­ter­ests and moves to­ward a new sys­tem that puts Amer­i­can pa­tients first,” Azar said in a state­ment. “De­moc­rats and Re­pub­li­cans look­ing to low­er pre­scrip­tion drug costs have crit­i­cized this opaque sys­tem for years, and they could pass our pro­pos­al in­to law im­me­di­ate­ly.”

Next up: Will both par­ties be able to set aside their dra­mat­ic dif­fer­ences and reach a bi­par­ti­san deal? How­ev­er this plays out, to­day’s pro­pos­al now takes cen­ter ring in the de­bate over drug prices.

There’s a lot more dis­cus­sion to come.

Im­age: Pres­i­dent Trump. Shut­ter­stock

Novotech CRO Ex­pands Chi­na Team as Biotech De­mand for Clin­i­cal Tri­als In­creas­es up to 79%

An increase in demand of up to 79% for clinical trials in China has prompted Novotech the Asia-Pacific CRO to rapidly expand the China team, appointing expert local clinical executives to their Shanghai and Hong Kong offices. The company is planning to expand their team by 30% over the next quarter.

Novotech China has seen considerable demand recently which is borne out by research from GlobalData:
A global migration of clinical research is occurring from high-income countries to low and middle-income countries with emerging economies. Over the period 2017 to 2018, for example, the number of clinical trial sites opened by biotech companies in Asia-Pacific increased by 35% compared to 8% in the rest of the world, with growth as high as 79% in China.
Novotech CEO Dr John Moller said China offers the largest population in the world, rapid economic growth, and an increasing willingness by government to invest in research and development.
Novotech’s 23 years of experience working in the region means we are the ideal CRO partner for USA biotechs wanting to tap the research expertise and opportunities that China offers.
There are over 22,000 active investigators in Greater China, with about 5,000 investigators with experience on at least 3 studies (source GlobalData).

Daniel O'Day [via AP Images]

UP­DAT­ED: Gilead un­leash­es a $5B late-stage cash al­liance with Gala­pa­gos — lay­ing out O'­Day's R&D strat­e­gy

Daniel O’Day is executing his first major development deal since taking over as CEO of Gilead $GILD. And he’s going in deep to ally himself with a longstanding partner.

O’Day announced today that he is spending $5 billion in cash to add new late-stage drugs to Gilead’s pipeline, picking up rights to Galapagos’ $GLPG Phase III IPF drug GLPG1690 alongside adoption of the biotech’s Phase IIb drug GLPG1972 for osteoarthritis. And Gilead is also putting billions more on the table for milestones, gaining options for everything else in Galapagos’ pipeline, with a shot at all rights outside of Europe.

Altogether, Gilead is gaining rights to 6 clinical-stage assets, 20 preclinical programs and everything else being hatched in translation.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,600+ biopharma pros reading Endpoints daily — and it's free.

Hal Barron [File photo]

Hal Bar­ron's team at GSK scores a win with pos­i­tive Ze­ju­la PhI­II front­line study — now comes the hard part

Score one for Hal Barron and the new R&D team steering GlaxoSmithKline’s pipeline.

The pharma giant reported this morning that its recently acquired PARP, Zejula (niraparib), hit the primary endpoint on progression-free survival in a frontline maintenance setting for women suffering ovarian cancer — following chemo and regardless of their BRCA status.

GSK bet $5 billion on the Tesaro buyout primarily to get this drug, drawing the shaking heads of biopharma. Why pay a big premium for a drug like this when AstraZeneca was going from strength to strength with Lynparza, ran the argument, having won a hugely important accelerated approval to jump out ahead — way ahead — of the rest of the PARP players? Lynparza — now co-owned by a powerhouse cancer team at Merck — won the first approval in frontline maintenance in ovarian cancer.

Alk­er­mes adds bipo­lar I dis­or­der to its FDA wish­list; Con­go con­firms first Ebo­la case in large city

→ An ever-ambitious Alkermes $ALKS team plans to add bipolar I disorder to its list of conditions for ALKS-3831, which it plans to pitch to the FDA in Q4. Alkermes says they were persuaded to add bipolar I disorder after a pre-NDA meeting with the agency, which came about 7 months after the biotech reported positive data for schizophrenia. The drug is a combo using olanzapine/samidorphan, which they hope will be shown to be as effective as olanzapine without the substantial increase in the risk of weight gain.

Pe­ter Kolchin­sky and Raj Shah raise a $300M fund de­vot­ed to biotech star­tups

Peter Kolchinsky and Raj Shah have another $300 million-plus to play with on the biotech venture side of their investment business. 

The two announced Monday morning that they’ve put together their first pure-play venture fund at RA Capital Management, which has been known to bet on just about every angle in healthcare investing — from rounds to follow-on investments at public companies. This new fund of theirs arrives well into a go-go era of new startup financing, with a particular focus on building new biotechs.

Boehringer buys Swiss biotech in its lat­est M&A deal, go­ing the next-gen can­cer vac­cine route

Boehringer Ingelheim has snapped up a Swiss biotech startup and added their group as a new platform for the oncology pipeline. 

The German biopharma company has bagged Geneva-based AMAL Therapeutics, paying out an unspecified upfront in a $358 million deal — cash, milestones and everything else, all in. Plus there’s 100 million euros on the line for commercial milestones.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,600+ biopharma pros reading Endpoints daily — and it's free.

Ab­b­Vie beefs up the on­col­o­gy pipeline, bag­ging an up­start STING play­er with its own unique ap­proach

AbbVie isn’t letting its $63 billion buyout of Allergan stop its M&A/deals team from continuing their work.

Monday morning we learned that the pharma giant is snapping up tiny Mavupharma out of Seattle, a Frazier-backed startup that has its own unique take on STING — which is on the threshold of their first clinical trial.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,600+ biopharma pros reading Endpoints daily — and it's free.

Billing it­self as the first AI biotech to launch hu­man tri­als, Re­cur­sion adds $121M C round

Billing itself as the first AI biotech with programs in the clinic, Salt Lake City-based Recursion now has a $121 million bankroll to start gathering human data to see if it’s on the right track. 

“We’re trying to build this discovery engine,” Recursion CEO Chris Gibson tells me ahead of the C round news. “We now have the first two programs in the clinic.” And that, he adds, qualifies as a first for any AI establishment “that actually have something in the clinic.”

FDA bats back As­traZeneca's SGLT di­a­betes drug for Type 1 di­a­betes — block­ing a class on safe­ty fears

The FDA has just fired its latest salvo at the SGLT class of diabetes drugs, blowing up some commercial opportunity at AstraZeneca as part of the collateral damage.

The pharma giant reported early Monday that the FDA has rejected its blockbuster drug Farxiga for Type 1 diabetes that can’t be controlled by insulin. And while the pharma giant maintained its usual grim silence in the face of a setback, this one should be easy to interpret.