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Takeaway: While Congress tries to figure out drug prices, ICER has a few ideas about Accelerated Approvals and picking the low-hanging fruit

Editor's Note: Below is a brief excerpt from a complimentary Health Policy Unplugged note written by our Health Policy analyst Emily Evans

Health Policy Unplugged is Hedgeye's newest Unplugged Product; click HERE to learn more about Emily's research process and the analysis subscribers receive.

FDA: From Partner with Industry to Accountability Partner - 5 3 2021 3 13 59 PM

Politics

That bête noir of American politics, drug prices, returns. Although there is a lot of agreement at something must be done, the what and the how have remained elusive.

Disagreement abounds on the implications of inflation rebates on innovation; whether Medicare can effectively negotiate prices; and the role of patent law.

The intractability of the issue is a testament to how the drug industry’s influence has knit itself into so many corners of health care that doing something has become the world’s longest game of whack-a-mole. Of course, some of that influence is purely political; the industry made no secret of its support for President’s Biden’s candidacy and its lobbyists have some of the biggest checkbooks in Washington and in state capitols across the county.

Ironically that outsized influence is what has turned the industry into a political football. When the Affordable Care Act was being written, PhaRMA’s chief, Billy Tauzin, cut a deal with the White House that kept drug prices off the table, thus ensuring a more viable path to passage. That move also left the pharmaceutical industry as one of the few parts of the health care industry with little price regulation.

The pharmaceutical industry’s now unique latitude to raise prices at will was too irresistible for the rest of the sector.

Hospitals implemented 340(b) programs with zeal. Insurers turned the formerly obscure pharmacy benefit manager function into a strategy for acquiring market share. List prices rose and the eyepopping numbers now have everyone’s attention.

For all the talk about inflation-linked rebates and negotiation of Medicare prices, most serious policy people know that bending the drug cost curve the right way has far reaching consequences.

Slowing growth in Medicare Part B drug prices means a flatter curve for 340(b) discounts and less money for hospitals to buy and build. As the Trump administration quickly determined in 2018, ending PBM rebates and getting the gross to net ratio under control probably means higher MA plan premiums, unpopular with an active voting bloc.

What remains is probably an incremental policy program, part carrot, part stick. The most mature work is on a redesign of Medicare Part D plans that would smooth out the out-of-pocket expenditures for beneficiaries and encourage use of generics and biosimilars. Meanwhile, the regulatory system offers threats and opportunities to keep the mind focused. The drug industry’s primary policy objective – to rein in PBMs – has been delayed but not eliminated while their biggest regulatory threat, the Most Favored Nation drug rule can be revived with new rulemaking. The Institute for Clinical and Economic Outcomes is poised to offer influence.

Will it be enough? Who knows, but it is probably worth another try.

FDA: From Partner with Industry to Accountability Partner - 20210502 MA Plan Design

Policy

There are, of course, a lot of other ways to affect drug prices besides high-profile legislation and lightening rod rules. Close followers of health policy should not have been surprised to learn longtime health policy operative, Chris Jennings, was appointed to the board of the Institute of Clinical and Economic Review, an independent organization focused on the trade-offs between price and clinical value of drugs.

Jennings, a veteran of the Obama administration, was an adviser to the Biden campaign and helped craft its health platform, including a pledge to develop an advisory entity on drug prices.

Absent a legislative authority to create such a group, the president could achieve a very similar goal by leveraging the capacity of a non-governmental organization like ICER.

If anyone thinks the White House is not serious about adopting an cost-effectiveness standard, consider the white paper released last week by ICER, just ahead of the Food and Drug Administration’s two day meeting to evaluate Accelerated Approvals of Genentech’s Tecentriq  (indication of locally advanced or metastatic triple-negative breast cancer), MRK’s Keytruda (indications of gastric cancer and hepatocellular carcinoma) and BMY’s Opdivo (indication of hepatocellular carcinoma).

ICER’s report includes 10 recommendations for reforms of the Accelerated Approval Pathway. These include strengthening selection of surrogate endpoints, demanding greater use of RCTs, increasing enforcement of confirmatory trials, and sunsetting AAPs that lack confirmatory evidence. Important for this discussion, ICER is also suggesting marginal-cost pricing be imposed – akin to the prospective payment system for services – until full approval is realized.

These suggestions are not particularly radical, but they go after some of the lowest hanging fruit in the drug price debate, ineffective drugs with high price tags that need to prove their worth.

Power

The Oncologic Drugs Advisory Committee Meeting that convened last week to review AAP indications was the first of its kind in years. Coupled with an announced ban on menthol and flavored cigarettes, the FDA may finally be getting its regulatory game back on.

It is curious timing. The White House has not yet nominated a new Commissioner, a normally very sought-after post. Dr. Janet Woodcock, considered a friend of the drug industry but rejected by progressives, remains in the acting role with reported aspiration for the permanent spot. Not an ideal leadership dynamic to undertake significant policy changes.

Then, included in ICER’s report was SRPT’s DMD drug, eteplirsen, as an example of how costly and ineffective AAP drugs can be while the FDA offers limited accountability.

Approval of the drug was marked by patient and political grass roots advocacy – some would say AstroTurf – that led to calls to limit the role of patient petitions. Woodcock was a staunch defender of the eteplirsen and overcame significant internal scientific opposition to get it approved.

Perhaps Woodcock is trying to demonstrate that the FDA can, in fact, provide oversight and regulation and be more an accountability partner than an enabler of expensive and high-priced drugs.

It is something the White House would surely love to see.