Jill Wechsler is a veteran reporter specializing in federal health care and pharmaceutical issues.

Jill Wechsler

The Medicare Part D prescription drug program has emerged as the poster child for how private plans can control costs while providing quality care. Even critics of health insurers acknowledge that the drug benefit has been a success.A recent report from the Kaiser Family Foundation (KFF) documents how government outlays for Part D have been about 30% lower than originally projected by the Congressional Budget Office in 2003, during a period when overall Medicare spending has skyrocketed. The savings arise from a number of factors, said analyst Jack Hoadley of Georgetown University at a KFF briefing: lower enrollment in Part D than expected; a general slowdown in total spending on prescription drugs; fewer new drugs; and, most notably, a huge rise in generic utilization.

Karen Ignagni, president of America's Health Insurance Plans (AHIP), credited the savings to the ability of Part D plans to apply a range of tools to drug utilization, including tiered formularies. Even economist Marilyn Moon, an advocate for consumer protection, acknowledged that private plans have been able to use financial incentives to push beneficiaries into generics, which would be hard for the federal government to do.

The prospect of more new, high-priced therapies coming to market, though, has plans and payers anxious about how to provide coverage for potentially life-saving but budget-busting medicines. With $50,000 to $100,000 price tags expected on a new wave of targeted therapies for cancer, rheumatoid arthritis, multiple sclerosis and other critical diseases, payers are looking to limit prescribing to those patients most likely to benefit, based on biomarkers and diagnostic tests. In addition to step therapy, prior authorization and tiered formularies, payers want pharma companies to provide outcomes studies and comparative effectiveness research that document product value.Part D plans have "a very good deal," according to Moon, because the program's "donut hole" structure relieves insurers from covering high-cost patients. The program's reinsurance system, plus subsidies for seniors also on Medicaid, reduce pressure on plans to manage spending on high-cost medicines. The approval of more costly critical therapies, though, could raise overall spend, prompting further changes in benefit design.

A broader policy issue is whether the ability of drug plans to offer choice while managing costs provides a model for shifting the entire Medicare program to a "premium support" system, as advocated by Republicans. Instead of the current fee-for-service, government-run health program, conservatives want to provide seniors with a voucher to purchase private coverage.

But market competition might not be responsible for lower Part D spending, according to Hoadley, noting that high initial cost estimates and lower drug trends might be more responsible for savings.

Yet former Health and Human Services Secretary Mike Leavitt, now health advisor to Mitt Romney, regards Part D as a model for a reformed Medicare system. Conservative analyst James Carpetta credits Part D's success on the ability of plans to offer many options, noting that reasonable government oversight of the program, with rules governing plan bidding and basic drug coverage, still provides flexibility for changes over time.

Articles

The Medicare Part D prescription drug program has emerged as the poster child for how private plans can control costs while providing quality care. Even critics of health insurers acknowledge that the drug benefit has been a success.

Medicare Part D plans control drug spending

It was a pleasant surprise when leading legislators reached across party lines in June to quickly approve the FDA Safety and Innovation Act (FDASIA). The bill (S. 3187), which President Obama signed into law last month, enables FDA to collect some $6 billion in fees over the next 5 years from pharmaceutical and medical device companies. It's much "cleaner" than the 2007 user fee measure, which set so many requirements on FDA that it slowed drug approvals for a year. Yet, implementing multiple new policies and programs and preparing the host of required guidance and reports still will be a challenge for the agency and regulated firms. 

At almost the same time, the US Supreme Court issued a ruling that upheld the constitutionality of the Affordable Care Act (ACA). For FDA, that ended speculation that the agency might lose authority to establish a pathway for developing new biosimilars. And it confirmed that pharmaceutical companies will continue to pay higher Medicaid drug rebates and hefty excise taxes to the Treasury, while also providing discounts on drugs prescribed to Medicare patients in the "coverage gap." 

This fifth version of the Prescription Drug User Fee Act (PDUFA V) aims to spur medical product innovation by offering assistance in clinical research design for sponsors and greater transparency in the application review process. An important theme is that FDA and pharma companies should consider patient willingness to accept risk in product development and regulation. 

Patient advocates played a prominent role in pressing for faster FDA approval of certain new treatments, including specific provisions that expedite review of fast-track products and clarification of evidence and end points to support accelerated approval of drugs for serious or life-threatening conditions. 

Grants for developing orphan products will continue under FDASIA, and revised conflict-of-interest rules will make it easier to bring in "knowledgeable experts" to serve on advisory committees, especially those dealing with rare diseases.  

Infectious disease experts won incentives for developing new antibiotics: an added 5 years exclusivity will apply to specific "qualified infectious disease products," which FDA has to define and list. 

Other provisions stabilize programs that encourage development of new formulations and expanded labels for pediatric treatments, and a new pilot will test whether an offer of priority review vouchers, which can be redeemed for a speedy FDA review of another product, will accelerate development of new therapies for rare childhood diseases.  

A less-noticed but important provision requires electronic submission of applications for drugs and biologics, once FDA establishes policies and standards for doing so. Here, FDA and the legislators take the unusual step of making agency guidance mandatory, a strategy that seeks to move this policy forward without a lengthy rulemaking process. And the final bill aims to reduce duplicative clinical studies by encouraging FDA to accept foreign clinical trial data that supports new drug applications.  

FDASIA also allows manufacturers to make minor modifications in Risk Evaluation and Mitigation Strategy (REMS) programs. Generic drug makers lost out in their campaign to prevent brand companies from using REMS to block access to products needed to test and develop new generic competitors, an issue that could affect biosimilar development down the road. 

However, other changes in policies governing generic drug exclusivity and procedures for handling citizens' petitions promise to accelerate consumer access to generics.  

Some Senators sought to add provisions to the bill that would restrict the prescribing and sale of opioid painkillers to rein in rampant abuse of these products. That proposal, however, ran into strong objections from pharmacists. As a compromise, the legislation instructs FDA to hold a public meeting on the need to reschedule hydrocodone and calls for scrutiny of ways to exchange prescribing information across state lines to help pharmacists detect multiple painkiller prescriptions. 

Further discussion of opioid use is likely to examine FDA's long-awaited REMS for extended-release opioids, which was released last month-but without a proposed requirement for prescribers to meet certain educational requirements. 

The final law also contains a wealth of provisions designed to help FDA detect and block counterfeit and adulterated medical products. All drug manufacturers and foreign suppliers have to register with FDA using a unique facility identifier. Importers must meet numerous requirements and file registration information electronically. FDA may block imports from manufacturers that deny access to inspectors and may detain-and even destroy-adulterated products at the border, instead of having to send them back to the shipper. Manufacturers have to notify FDA if a drug may be stolen or counterfeited, and intentional adulteration for economic gain carries stiff penalties, including jail time.  

To curb critical drug shortages, the law extends reporting requirements for manufacturers anticipating short supply situations and gives FDA clear leeway to expedite inspections and application reviews to help mitigate or prevent a shortage. The Drug Enforcement Administration has to provide timely approvals or denials of requests to increase quotas of controlled substances when needed to address a drug shortage.  

There will be an FDA annual report on its success in stopping shortages, along with a drug shortage list that will help patients and providers stay informed about supply problems. And a new Department of Health and Human Services task force will examine ways to enhance the federal response to shortages and create a strategic plan to address these problems.  

And several provisions aim to improve FDA regulatory practices involving drug production and oversight. FDA now can schedule plant inspections based on risk factors, instead of following a long unworkable 2-year pharma inspection requirement.  

The agency may share trade secret information with trusted regulatory counterparts, and US law governing drugs and medical products may be applied to extraterritorial violations, such as economically motivated adulteration of products like heparin.  

A less-noticed provision in the FDASIA addresses how FDA may-or may not-regulate medical applications for smart phones and other computer devices, a hot issue for software developers, manufacturers, and health authorities. The legislation instructs FDA to form a working group that will quickly (in 18 months) develop a strategy for an "appropriate, risk-based regulatory framework" on health IT "that promotes innovation, protects patient safety, and avoids regulatory duplication."  

FDA will consult with the National Coordinator for Health Information Technology and the Federal Communications Commission and include manufacturers, payers, venture capitalists, IT vendors, patients, providers, and others in the working group.  

The starting point will be FDA draft guidance issued last year that proposed agency regulation of software that links to a device such as an MRI or infusion pump-but not low-risk apps such as calorie counters.  

Software and medical device companies are concerned that FDA will over-regulate this budding industry, squashing innovation and promising health technology in the process. Approximately 40,000 medical apps have been developed, some by pharma companies looking to enhance patient use of treatments for diabetes and other medical conditions and to help manage clinical trials. A manufacturer recently sought and gained FDA approval for an app that displays radiological images, and some IT firms support FDA regulation to gain more predictability in market requirements.  

Despite its many provisions, FDASIA does not please everyone. Some consumer advocates warn that more accelerated approvals may expose patients to unsafe therapies. Infectious disease experts wanted provisions to ensure appropriate use of antibiotics. And debate continues over what was left out of the bill-namely requirements for a national track-and-trace system for prescription drugs. Here, policy-makers were stalemated by industry's insistence that tracking apply only to production lots-and not individual vials and bottles, as FDA demanded. Manufacturers, distributors, and pharmacists consequently still face multiple state tracking requirements, starting with a California law that goes into effect in 2015. 

As the analysts and lawyers continue to pore over the fine print in FDASIA, additional impacts and unnoticed requirements will emerge. FDA will consider all these perspectives in developing a communications plan on risks and benefits of medical products and in assessing the gains provided by the new PDUFA V review program for new drugs and biologics. 

 is a Washington-based reporter specializing in federal and state healthcare issues. 

The passage of the FDA Safety and Innovation Act will support innovation, answer the current shortages, and even regulate mobile applications.

FDA user fee legislation speeds drug approvals, addresses shortages, counterfeits

To reduce the money spent on treatments that don't work, health plans and payers are examining closely how Comparative Effectiveness Research (CER) can steer patients and providers to more appropriate care. This approach is gaining momentum from the Patient Centered Outcomes Research Institute (PCORI), which is poised to distribute some $120 million in coming months-and nearly $400 million in 2013-to launch a range of CER projects.

PCORI spent the last year getting organized, hammering out definitions and seeking advice from all corners of the healthcare community, as required by health reform legislation. It aims to award initial grants this fall to start identifying medical products and practices with superior patient outcomes.

Added funds will evaluate strategies for improving healthcare systems and for assessing CER methods. In assessing projects, PCORI will weigh potential impact on medical practice and patient adherence, as well as prospects for reducing excessive care and costs. Although PCORI is constrained from using CER to make specific payment recommendations, researchers could evaluate how patient response would be affected by out-of-pocket outlays and other economic factors.

In setting the CER agenda, employers and insurers have emphasized the importance of assessing common chronic conditions that consume a sizeable portion of healthcare outlays; patient advocates stress the need to consider how treatments may affect individuals differently. Andrew Baskin, national medical director for quality and provider performance measurement at Aetna, advises PCORI to focus on "high-volume, high-cost, high-impact" healthcare issues to achieve some early successes that will resonate with patients and payers.

Strategies for ensuring the validity of observational studies and generalizability of data to broader populations are important for insurers looking to incorporate CER into reimbursement models. In addition to costs, payers are considering whether a new treatment demonstrates improvement over existing care and if clinicians will follow guidelines for appropriate use. Experts at the World Health Care Congress in April noted the need for CER in making value-based coverage decisions, particularly where randomized clinical trials are not possible.

Yet, Naomi Aronson, executive director of the BlueCross BlueShield Technology Evaluation Center, sees significant obstacles to assessing outcomes and their impact on health. Treatment affordability is key, she says. Even if a comparative study can document that some patients fare better on a certain therapy, the healthcare system might not be able to afford it.

Meanwhile, the quest for more patient subgroup analysis raises concerns among researchers and biopharmaceutical companies that larger and more costly CER studies will stifle innovation. To reduce outlays and risks, insurers, pharmacy benefit managers and drug makers are forming partnerships to evaluate a range of real-world strategies for treating patient subgroups and assessing diseases.

An important role for PCORI is to co-ordinate CER activities to avoid redundancies. Dissemination of results is key to drive findings into practice. PCORI will support communication activities by the Agency for Healthcare Research and Quality, which issues reports on effective treatments.

To reduce the money spent on treatments that don't work, health plans and payers are examining closely how Comparative Effectiveness Research (CER) can steer patients and providers to more appropriate care. This approach is gaining momentum from the Patient Centered Outcomes Research Institute (PCORI), which is poised to distribute some $120 million in coming monthsâ€”and nearly $400 million in 2013â€”to launch a range of CER projects.

CER studies will shape coverage decisions

While scientists and biomedical researchers at the recent meeting of the American Society of Clinical Oncology (ASCO) applauded encouraging data on dozens of breakthrough cancer therapies, analysts pondered strategies for convincing payers to cover the new life-saving drugs. More than 900 cancer therapies are under development, according to the Pharmaceutical Research and Manufacturers of America (PhRMA), and FDA anticipates approximately 20 submissions for new cancer medicines this year. Not all the reviewed products will make it to market, but those that do will have to demonstrate their value over comparable treatments to achieve coverage. Private health plans and payers are demanding more evidence from pharmaceutical marketers to support reimbursement for new and old therapies, while striving to reduce their pharmacy expenditures by driving generic prescribing and imposing high copays on patients.  

How and when pharma companies should develop comparative effectiveness information on new drugs was the focus of the annual meeting of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) in Washington last month. With $50,000 to $100,000 price tags on targeted therapies for cancer, rheumatoid arthritis, multiple sclerosis, and other critical diseases, payers are looking to limit prescribing to those patients most likely to benefit based on biomarkers and diagnostic tests. In addition to implementing step therapy, prior authorization and tiered formularies to control drug outlays, payers seek outcomes studies, comparative effectiveness research (CER), and targeted clinical trial designs to document product value. 

So far, payers and insurers in the United States have been willing to cover costly new cancer therapies because the number is relatively small and many target small patient populations, explained Thomas Bramley, vice president of Xcenda, the consulting arm of AmerisourceBergen. But now plans are looking for more convincing cost-effectiveness data and budget impact models, along with companion diagnostics able to direct treatment to those patients most likely to respond. Drug "affordability" has taken hold, as payers realize that there are limits on patient acceptance of high copays. 

One development is that pharmaceutical companies are more open to consultation and collaborating with payers and health plans to avoid launching new products that will be rejected in the market. Sean Tunis, president of the Center for Medical Technology Policy, described the Green Park Collaborative, which hopes to develop guidance on effective research designs to meet the needs of payers and HTA agencies, starting with an Alzheimer's disease pilot. Newell McElwee, executive director of US Outcomes Research at Merck, agreed that industry is talking more to payers about what evidence they require for a positive reimbursement decision, adding that collaboration is preferable to obtaining 10 different research recommendations from 10 different payers.  

Yet, some analysts questioned whether all the budget impact analysis from pharma companies is useful in deciding reimbursement. There's skepticism about such calculations on both sides, and payers seem to prefer models for how patients do long-term on a treatment, noted Kathy Hughes, vice president, Health Economics and Outcomes at Avalere Health. Marketers feel that a budget analysis is necessary to gain market access, but recognize that its usefulness may be limited to certain types of drugs and therapeutic areas.  

Payers can offer helpful advice to drug developers on designing clinical trials to produce useful CER-and sometimes to support a company's decision to kill a development program not likely to yield a marketable product. However, there are concerns that discussions on research methods and outcomes claims between drug companies and payers prior to product approval could violate off-label marketing restrictions. And uncertainty over the rules governing how pharma marketers can present outcomes information that touches on off-label uses to payers and formulary committees has put pressure on FDA to clarify its policy.  

A perennial issue is whether FDA and other regulators can make it easier to bring new drugs to market by encouraging the inclusion of outcomes assessments in pre-approval trials. The opening session at ISPOR addressed whether the current regulatory paradigm should be modified to facilitate assessment of patients with co-morbidities, to compare alternative therapies and to assess outcomes relevant to patients in phase 3 studies. Tunis acknowledged that trials with active comparators are more expensive and take longer, and that many quality measures are not well validated. Former FDA Commissioner Mark McClellan, MD, PhD, now at the Brookings Institution, noted that rising costs and new healthcare delivery systems support CER, but that the legal standard for new drug approval remains safety and effectiveness, not comparative effectiveness. Trials can be modified to provide additional information, said FDA Senior Advisor Vicki Seyfert-Margolis, but FDA requires adequate and well-controlled studies to approve new drugs.  

Variations in results from randomized trials and observational studies were further explored at the annual CER symposium sponsored by the Agency for Healthcare Research and Quality (AHRQ). Analysts described the differences between efficacy and effectiveness studies for evaluating healthcare delivery systems, understanding responses of diverse populations and variable care settings, and comparing different treatment modalities and interventions.  

Assistance in improving the quality of CER may come from the new Methods Report from the Patient-Centered Outcomes Research Institute (PCORI). A preliminary draft, which is scheduled to be finalized in November, outlines 60 standards to guide researchers in assessing heterogeneity, handling missing data, accessing data networks, utilizing adaptive strategies, establishing data registries, and assessing diagnostic tests.   

A goal for William Crown, group president, Health Economics & Outcomes Research and Late Phase Research, UnitedHealthcare's OPTUMInsight and ISPOR president-elect, is to further refine CER methods so that the conclusions from observational studies are more reliable. "We need to raise the sophistication of the discourse surrounding randomization and observation," he said.  

Dr McClellan proposed at ISPOR that changes in healthcare delivery systems through ACOs and other models can help measure quality and costs to achieve savings and improve outcomes, as experienced with the Medicare Part D drug benefit. A recent report from the Kaiser Family Foundation (KFF) documents how government outlays for Part D have been about 30% lower than originally projected by the Congressional Budget Office, during a period when overall Medicare spending has skyrocketed. The savings arise from a number of factors, said analyst Jack Hoadley of Georgetown University's Health Policy Institute at a KFF briefing:  lower enrollment in Part D than expected, a general slowdown in total spending on prescription drugs, fewer new drugs coming to market, and, most notably, a huge rise in generic drug prescribing.  

Karen Ignagni, president and CEO of America's Health Insurance Plans (AHIP), credited the savings to the ability of Part D plans to apply a range of medication management tools to drug utilization, including tiered formularies that encourage patients and prescribers to switch to generics. Even economist Marilyn Moon, a well-known advocate for consumer protection in healthcare, acknowledged that private plans have been able to use financial incentives to push beneficiaries into generics-something that would be hard for the federal government to do. 

But Moon noted that Part D plans have "a very good deal" because the doughnut hole structure relieves insurers from covering very high-cost patients. The program's reinsurance system, plus subsidies for seniors also on Medicaid, reduces the pressure on plans to manage spending on high-cost medicines. That may change, though, if the emergence of more pricey critical therapies raises overall costs for Part D and other public and private drug benefits.   

A broader policy issue is whether Part D's success in managing costs and expanding access provides a model for shifting the entire Medicare program to a "premium support" system, as advocated by Republicans. Instead of the current fee-for-service, government-run health program, conservatives want to provide seniors with vouchers to assist in purchasing private insurance from multiple plans.  

But market competition may not be responsible for lower Part D spending, notes Hoadley; instead, unrealistically high-cost estimates may be more responsible for savings estimates than effective drug management activities. Limited plan switching by Part D enrollees, moreover, indicates that competitors are not luring beneficiaries with better deals.  

Yet former Health and Human Services Secretary Mike Leavitt, now health advisor to Republican presidential hopeful Mitt Romney, regards Part D as a model for a reformed Medicare system. Conservative James Carpetta credits Part D's success on the ability of plans to offer many options, noting that reasonable government oversight of the program, with rules governing plan bidding and basic drug coverage, creates an effective program with flexibility to change over time. 

While scientists and biomedical researchers at the recent meeting of the American Society of Clinical Oncology (ASCO) applauded encouraging data on dozens of breakthrough cancer therapies, analysts pondered strategies for convincing payers to cover the new life-saving drugs.

Jill Wechsler

Articles

Medicare Part D plans control drug spending

FDA user fee legislation speeds drug approvals, addresses shortages, counterfeits

CER studies will shape coverage decisions

Payers seek more comparative research documenting value and affordability of high-cost therapies