Trump ad­min­is­tra­tion sinks teeth in­to par­ing down drug prices, on 5 key points

Three months af­ter Pres­i­dent Don­ald Trump an­nounced his blue­print to bring down drug prices, ad­min­is­tra­tion of­fi­cials have be­gun putting some teeth be­hind the rhetoric.

Many de­tails have yet to be an­nounced. But ex­perts who pay close at­ten­tion to fed­er­al drug pol­i­cy and Medicare rules say the ad­min­is­tra­tion is prepar­ing to in­cre­men­tal­ly roll out a mul­ti­pronged plan that tasks the Cen­ters for Medicare & Med­ic­aid Ser­vices (CMS) and the Food and Drug Ad­min­is­tra­tion with pro­mot­ing com­pe­ti­tion, at­tack­ing the com­pli­cat­ed drug re­bate sys­tem and in­tro­duc­ing tac­tics to low­er what the gov­ern­ment pays for drugs.

Mark Mc­Clel­lan

Mark Mc­Clel­lan, di­rec­tor of the Duke-Mar­go­lis Cen­ter for Health Pol­i­cy in Durham, NC, and a for­mer CMS ad­min­is­tra­tor, said that al­though none of the ini­tial steps has “fun­da­men­tal­ly trans­formed drug prices,” there is “a lot go­ing on in­side the ad­min­is­tra­tion.”

Two HHS of­fi­cials who are rolling out the plan, Dan Best and John O’Brien, de­scribed their ef­forts to Kaiser Health News not as a pub­lic re­la­tions strat­e­gy but a push to re­form the sys­tem.

“This ad­min­is­tra­tion is try­ing to go af­ter root caus­es” of high drug prices, said Wells Far­go an­a­lyst David Maris.

But oth­ers are not so op­ti­mistic.

Ameet Sarpat­wari, an in­struc­tor in med­i­cine at Har­vard Med­ical School in Boston, said poli­cies the ad­min­is­tra­tion has rolled out thus far “alone will not trans­late in­to mean­ing­ful cost sav­ings for most Amer­i­cans.”

Broad­ly, the strat­e­gy falls un­der a hand­ful of steps:

1. At­tack­ing The Re­bates

Health and Hu­man Ser­vices Sec­re­tary Alex Azar has said Amer­i­cans “do not have a re­al mar­ket for pre­scrip­tion drugs” be­cause drug mid­dle­men and in­sur­ers get a wide range of hid­den re­bates from drug­mak­ers, but those sav­ings may not be passed on to con­sumers or Medicare. In Ju­ly, the ad­min­is­tra­tion sub­mit­ted a pro­posed rule that could change the way re­bates are han­dled.

De­tails of the pro­pos­al have not been made pub­lic. But O’Brien, a deputy as­sis­tant sec­re­tary at HHS, ex­plained dur­ing a re­cent con­fer­ence on fed­er­al drug spend­ing spon­sored by the Pew Char­i­ta­ble Trust: “You don’t have to use mar­ket pow­er to get re­bates, you can use mar­ket pow­er to ob­tain dis­counts, to ac­tu­al­ly low­er the price of the drug on the front end.”

Umer Raf­fat, an in­vest­ment an­a­lyst with Ever­Core ISI, said “it’s not clear [that drug prices are go­ing down]” but the “re­bate struc­ture is chang­ing.”

2. Bring­ing More Ne­go­ti­a­tion To Medicare

This week, CMS Ad­min­is­tra­tor Seema Ver­ma an­nounced that Medicare Ad­van­tage in­sur­ers can use a step-ther­a­py ap­proach to ne­go­ti­ate bet­ter prices for Part B drugs — those ad­min­is­tered in hos­pi­tals and doc­tors’ of­fices. These pri­vate plans will be al­lowed to re­quire pa­tients to first se­lect the least ex­pen­sive drug be­fore step­ping up to more cost­ly drugs if the orig­i­nal med­ica­tions aren’t work­ing.

The ad­min­is­tra­tion is al­so look­ing at ways to in­tro­duce more com­pe­ti­tion in­to Part B drug pur­chas­ing. That idea was men­tioned deep in­side the an­nu­al Medicare out­pa­tient pay­ment rule re­leased last month.

Pe­ter Bach

Pe­ter Bach, di­rec­tor of Memo­r­i­al Sloan Ket­ter­ing’s Cen­ter for Health Pol­i­cy and Out­comes in New York, point­ed to the pos­si­ble in­tro­duc­tion of a com­pet­i­tive pur­chas­ing pro­gram in which a firm ne­go­ti­ates with drug­mak­ers to buy their drugs and then sells them to the doc­tors and hos­pi­tals that will ad­min­is­ter the med­ica­tions. Bach said that helps en­sure that hos­pi­tals and doc­tors can’t make more mon­ey by pre­scrib­ing more ex­pen­sive drugs.

Cur­rent­ly, Medicare pays the av­er­age sales price plus 6 per­cent to doc­tors or hos­pi­tals when they pur­chase drugs, a pric­ing mech­a­nism that can ben­e­fit the providers if the drug costs go up. If there were a third par­ty buy­ing the drugs, it would “have a huge ef­fect,” Bach said.

3. Pay­ing For Val­ue

Trump’s blue­print calls for CMS to en­cour­age “val­ue-based care” to low­er drug prices, shift­ing from pay­ing a set fee for drugs to bas­ing pay­ments on how well the pa­tient does on them.

Louisiana’s Med­ic­aid pro­gram could show the way. The state is work­ing with CMS to ex­plore a sub­scrip­tion-based mod­el to pay for he­pati­tis C med­i­cines. Louisiana would pay a fixed price to a drug man­u­fac­tur­er that would then get un­lim­it­ed ac­cess to treat pa­tients en­rolled in Louisiana’s Med­ic­aid pro­gram or in prison.

The pro­gram would move “from a big pay­ment up­front to pay­ing less over time based on ac­tu­al out­comes,” said Mc­Clel­lan, who al­so serves on the boards of health care gi­ant John­son & John­son and in­sur­er Cigna.

CMS al­so ap­proved a Med­ic­aid waiv­er from Ok­la­homa in June. Med­ic­aid pro­grams are al­lowed to ne­go­ti­ate drug prices. Ok­la­homa’s plan would ex­pand that to ne­go­ti­ate ad­di­tion­al pre­scrip­tion price re­duc­tions based on val­ue-based pur­chas­ing agree­ments.

Still, CMS’ re­cent re­jec­tion of a re­lat­ed Mass­a­chu­setts pro­pos­al makes it dif­fi­cult to be­lieve ne­go­ti­at­ing drug prices will re­al­ly hap­pen, said Sara Rosen­baum, a pro­fes­sor of health law and pol­i­cy at George Wash­ing­ton Uni­ver­si­ty.

That pro­pos­al would have al­lowed Mass­a­chu­setts’ Med­ic­aid pro­gram to choose drugs based on cost and how well the med­i­cines work.

“They have been very good and quite care­ful with their [Med­ic­aid] pro­gram and so why not let them try this?” Rosen­baum said.

4. Tack­ling For­eign Drug Costs

Phar­ma­ceu­ti­cal mak­ers of­ten sell their drugs at sub­stan­tial­ly low­er prices in many for­eign coun­tries than they do in the Unit­ed States. Trump em­pha­sized in May that “it’s time to end the glob­al free­load­ing once and for all,” say­ing U.S. con­sumers were pay­ing part of the cost of the med­i­cines that pa­tients in oth­er coun­tries use.

He di­rect­ed US Trade Rep­re­sen­ta­tive Robert Lighthiz­er to ad­dress the sit­u­a­tion. Lighthiz­er’s of­fice de­clined to com­ment.

When Sen. Todd Young (R-Ind.) asked dur­ing a Sen­ate health com­mit­tee hear­ing in June whether trade agree­ments with oth­er coun­tries should be used to “lev­el the play­ing field,” Azar’s re­sponse was swift: “We ab­solute­ly be­lieve we should be us­ing our trade agree­ments to get them to pay more even as we have our job to pay less.”

Avalere Health Pres­i­dent Matt Brow, who has been in­volved in talks with the ad­min­is­tra­tion, said it’s clear the fo­cus on over­seas pric­ing isn’t go­ing away and the ad­min­is­tra­tion is “talk­ing a lot about how to get the pres­i­dent what he wants.”

5. In­creas­ing Com­pe­ti­tion

Scott Got­tlieb

FDA Com­mis­sion­er Scott Got­tlieb has be­come the Trump ad­min­is­tra­tion’s lead pro­po­nent for in­creas­ing com­pe­ti­tion among drug­mak­ers.

Com­pe­ti­tion res­onates with Amer­i­cans “be­cause peo­ple see it every day in their ex­pe­ri­ence in Cost­co and oth­er places,” said Re­na Con­ti, an as­sis­tant pro­fes­sor at the Uni­ver­si­ty of Chica­go.

Got­tlieb has an­nounced plans to bol­ster the use of gener­ic drugs and an “ac­tion plan” to en­cour­age the de­vel­op­ment of biosim­i­lars, which are copy­cat ver­sions of ex­pen­sive bi­o­log­ic drugs made from liv­ing or­gan­isms.

And to com­bat an­ti-com­pet­i­tive be­hav­ior in the mar­ket, Got­tlieb said the FDA has passed along in­for­ma­tion to the Fed­er­al Trade Com­mis­sion and hint­ed at po­ten­tial ac­tion to come: “I think we’ve hand­ed them some pret­ty good facts.”

By Sarah Jane Trib­ble.  Orig­i­nal­ly post­ed at Kaiser Health News, a na­tion­al health pol­i­cy news ser­vice that is part of the non­par­ti­san Hen­ry J Kaiser Fam­i­ly Foun­da­tion.

Norbert Bischofberger. Kronos

Backed by some of the biggest names in biotech, Nor­bert Bischof­berg­er gets his megaround for plat­form tech out of MIT

A little over a year ago when I reported on Norbert Bischofberger’s jump from the CSO job at giant Gilead to a tiny upstart called Kronos, I noted that with his connections in biotech finance, that $18 million launch round he was starting off with could just as easily have been $100 million or more.

With his first anniversary now behind him, Bischofberger has that mega-round in the bank.

Once again Bischofberger and his old boss, former Gilead chief John Martin, added their own money to the new $105 million raise aimed at building up their R&D engine and the team who’s doing the drug discovery work — on both coasts. Also coming back is Arie Belldegrun, the biotech builder who sold Kite to Gilead for $12 billion, and now plays the role of global wheeler dealer who’s taking a shot at cracking the off-the-shelf CAR-T challenge at Allogene.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

Part club, part guide, part land­lord: Arie Bellde­grun is blue­print­ing a string of be­spoke biotech com­plex­es in glob­al boom­towns — start­ing with Boston

The biotech industry is getting a landlord, unlike anything it’s ever known before.

Inspired by his recent experiences scrounging for space in Boston and the Bay Area, master biotech builder, investor, and global dealmaker Arie Belldegrun has organized a new venture to build a new, 250,000 square foot biopharma building in Boston’s Seaport district — home to Vertex and a number of up-and-coming biotech players.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

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).

H1 analy­sis: The high-stakes ta­ble in the biotech deals casi­no is pay­ing out some record-set­ting win­nings

For years the big trend among dealmakers at the major players has been centered on ratcheting down upfront payments in favor of bigger milestones. Better known as biobucks for some. But with the top 15 companies competing for the kind of “transformative” pacts that can whip up some excitement on Wall Street, with some big biotechs like Regeneron now weighing in as well, cash is king at the high stakes table.

We asked Chris Dokomajilar, the head of DealForma, to crunch the numbers for us, looking over the top 20 deals for the past decade and breaking it all down into the top alliances already created in 2019. Gilead has clearly tipped the scales in terms of the coin of the bio-realm, with its record-setting $5 billion upfront to tie up to Galapagos’ entire pipeline.

Dokomajilar notes:

We’re going to need a ‘three comma club’ for the deals with over $1 billion in total upfront cash and equity. The $100 million-plus club is getting crowded at 164 deals in the last decade with new deals being added towards the top of the chart. 2019 already has 14 deals with at least $100 million in upfront cash and equity for a total year-to-date of over $9 billion. That beats last year’s $8 billion and sets a record.

Add upfronts and equity payments and you get $11.5 billion for the year, just shy of last year’s record-setting $11.8 billion.

Endpoints Premium

Premium subscription required

Unlock this article along with other benefits by subscribing to one of our paid plans.

UP­DAT­ED: With loom­ing ‘apoc­a­lypse of drug re­sis­tance,’ Mer­ck’s com­bi­na­tion an­tibi­ot­ic scores FDA ap­proval on two fronts

Merck — one of the last large biopharmaceuticals companies in the beleaguered field of antibiotic drug development — on Wednesday said the FDA had sanctioned the approval of its combination antibacterial for the treatment of complicated urinary tract and intra-abdominal infections.

To curb the rise of drug-resistant bacteria and maintain the efficacy of the therapy, Recarbrio (and other antibacterials) — the drug must be used to treat or prevent infections that are proven or strongly suspected to be caused by susceptible gram-negative bacteria, Merck $MRK said.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

John McHutchison in 2012. Getty Images

The $1.1M good­bye: Gilead CSO John McHutchi­son is out as Daniel O’Day shakes up the se­nior team

Just a little more than a year after John McHutchison grabbed a promotion to become CSO at Gilead in the wake of Norbert Bischofberger’s exit, he’s out amid a shakeup of the senior team that is also triggering the departure of two other top execs.

Gilead stated that McHutchison “has decided to step down” from the job as of August 2nd. And their SEC filing notes that he’ll be getting a $1.1 million check to settle up on his contract.

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.

Thomas Gajewski, David Steinberg. (CRI, Pyxis)

Bay­er, Long­wood back star re­searcher's deep dive in­to the tu­mor mi­croen­vi­ron­ment for new I/O tar­gets

From PD-1 targeting to the RAS pathway to the STING complex, Thomas Gajewski has spent the past two decades of his career decoding the various ways the immune system can be unleashed to defend against cancer. So when the University of Chicago professor comes around to putting all his findings into a new platform for finding new targets, VCs and pharma groups alike pay attention.

“He’s been studying T cells for 20 years, plus he’s one of the world’s leaders if not the world leader in the space,” David Steinberg, partner at Longwood Fund, said. “Furthermore, let me add he did a lot of the foundational research and also some of the seminal clinical trials in the existing set of I/O agents. He understands the space really well, he understands the current strengths, and I think he understood really well what was missing, so he knew where to look.”

Kamala Harris speaking yesterday at the Des Moines Register Iowa Presidential Candidate Forum [via Getty]

Who’s the tough­est on drug prices? A game of po­lit­i­cal one-up­man­ship is dri­ving the pol­i­cy de­bate in Wash­ing­ton

Earlier this week we got a look at Senator Kamala Harris’ position on drug prices. She’s proposing that HHS take an average price from single-payer systems like the UK, Germany and Canada — which leverage market access for lower prices — and use that to set the US price. Anything drug companies collect above that would be taxed at a rate of 100%.

And the rhetoric is scathing:
While families struggle to make it to the end of the month, pharmaceutical companies are turning record profits. They’re spending nearly as much on advertising as R&D. They’re manipulating their market power to hike prices on lifesaving generic drugs. They’re making twice the profit of the average industry in America and still increased drug prices by 10.5% over the past six months alone. Meanwhile, they are charging dramatically higher prices to American consumers.
That’s an escalation on Joe Biden’s plan, which includes drug importation from those cheaper markets as well as allowing Medicare to negotiate prices — something that virtually all Dems agree on now.

SJ Lee [File photo]

Go­ing in­side cells, Sung Joo Lee has sketched some big goals for his small — but glob­al — team of drug hunters

For a small biotech based in South Korea with a research arm in Cambridge, MA, Orum Therapeutics has sketched out some big goals aimed at developing antibodies for intracellular targets. And now they have a new $30 million round to push the work forward, aiming at a slate of currently undruggable quests.

Orum has been working on a platform tech out of Ajou University that relies on endocytosis to smuggle antibodies and their cargo inside a cell. They’ve published work in Nature that illustrates its preclinical potential in RAS mutations, and KRAS is on their list of targets. 

Endpoints News

Basic subscription required

Unlock this story instantly and join 54,900+ biopharma pros reading Endpoints daily — and it's free.