California to Have Insulin Manufactured and Sold at Lower Price

California Governor Gavin Newsom is following through on promises to attack the high cost of drugs.  The press release states:

Governor Gavin Newsom, as part of his tour of the State of California, announced that CalRx has secured a contract with a manufacturer (CIVICA), to make $30 insulin available to all who need it. The Governor also announced today that California will seek to manufacture its own Naloxone.

Today’s announcement makes good on Governor Newsom’s promise on his first day in office, to bring down the price of prescription drugs for Californians and increase accountability and transparency in health care. Californians can learn more about CalRX on the newly launched website.

WHAT GOVERNOR NEWSOM SAID: “People should not be forced to go into debt to get life saving prescriptions. Through CalRx, Californians will have access to some of the most inexpensive insulin available, helping them save thousands each year. But we’re not stopping there – California will seek to make our own Naloxone as part of our plan to fight the fentanyl crisis.”

WHY THIS MATTERS: Today’s announcement will bring down the price of insulin by about 90%, saving cash-paying patients between $2,000 and $4,000 annually. With CalRx, and unlike private companies, we’re getting at the underlying cost – the price is the price, and CalRx will prevent the egregious cost-shifting that happens in traditional pharmaceutical price games. It’ll cost us $30 to manufacture and distribute, and that’s how much the consumer can buy it for. You don’t need a voucher or coupon to access this price, and it’s available to everybody regardless of insurance plan. This is a crucial step in not just cutting the cost for the consumer, but cutting costs across the board in order to bring cheaper prescription drugs to all Californians.

“To address the affordability crisis in California, we have to address the high cost of prescription drugs,” said Dr. Mark Ghaly, Secretary of the California Health and Human Services Agency. “The CalRx Biosimilar Insulin Initiative will benefit Californians who are today paying too much for a medication that we know is life saving and life altering.”

KEY DETAILS

• A 10mL vial will be made available for no more than $30 (normally $300)
• A box of 5 pre-filled 3mL pens will be made available for no more than $55 (normally more than $500)
• No new prescription will be needed. Californians will be able to ask for the CalRx generic at their local pharmacy or via mail order pharmacies. Pharmacies must agree to order/stock the product.
• CalRx plans to make biosimilar insulins available for: Glargine, Aspart, and Lispro (expected to be interchangeable with Lantus, Humalog, and Novolog respectively)

WHAT COMES NEXT

·       As part of the State’s Master Plan to Tackle the Fentanyl Crisis, California is exploring potential next products to bring to market, like Naloxone, to aid in the State’s effort to combat fentanyl overdoses.

·       CIVICA is working with the California Health and Human Services Agency to identify a California-based manufacturing facility.

The CalRX website states, in part:

CalRx represents a groundbreaking solution for addressing drug affordability. Originally announced in January 2019 in Governor Newsom’s first Executive Order(this is a pdf file) and later signed into law in the California Affordable Drug Manufacturing Act of 2020 (Pan, SB 852, Chapter 207, Statutes of 2020), CalRx empowers the State of California to develop, produce, and distribute generic drugs and sell them at low cost.

The State will target prescription drugs where the pharmaceutical market has failed to lower drug costs, even when a generic or biosimilar medication is available. 

The first drug manufactured will be insulin. Once approved by the FDA, Californians can ask their doctor or pharmacist for a CalRx biosimilar insulin.

The CalRx Biosimilar Insulin Initiative will lay the groundwork for future drug projects.

Bringing CalRx products into the drug market will create more competition, which will help shift the industry from obscure, rebate-based pricing towards low, transparent pricing.

• CalRx will use transparent pricing – and set as low as possible – based on the development, production, and distribution costs.
• CalRx will develop target drugs in collaboration with the State’s public programs.
• CalRx will be available for doctors to prescribe and will be available through a variety of outlets, such as a local pharmacy or retail outlet.
• CalRx is not a coupon program. As mandated by law, CalRx will only use federally mandated rebates or discounts, not other ones.

Biden Administration Executive Order on Competition: Some IP Portions

On July 9, 2021, the Biden Administration released an “Executive Order on Promoting Competition in the American Economy” that literally will touch almost every part of the U.S. economy.  The Executive Order can be found, here.  Concerning SEPs the Executive Order states:

To avoid the potential for anticompetitive extension of market power beyond the scope of granted patents, and to protect standard-setting processes from abuse, the Attorney General and the Secretary of Commerce are encouraged to consider whether to revise their position on the intersection of the intellectual property and antitrust laws, including by considering whether to revise the Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments issued jointly by the Department of Justice, the United States Patent and Trademark Office, and the National Institute of Standards and Technology on December 19, 2019.

The Order further directs the FTC Chair to consider rulemaking in the following areas:

          (i)    unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy;
          (ii)   unfair anticompetitive restrictions on third-party repair or self-repair of items, such as the restrictions imposed by powerful manufacturers that prevent farmers from repairing their own equipment;
          (iii)  unfair anticompetitive conduct or agreements in the prescription drug industries, such as agreements to delay the market entry of generic drugs or biosimilars;
          (iv)   unfair competition in major Internet marketplaces;
. . . and
          (vii)  any other unfair industry-specific practices that substantially inhibit competition.

The Order directs the Secretary of Agriculture to prepare a report concerning IP laws and seeds and other inputs:

to help ensure that the intellectual property system, while incentivizing innovation, does not also unnecessarily reduce competition in seed and other input markets beyond that reasonably contemplated by the Patent Act (see 35 U.S.C. 100 et seq. and 7 U.S.C. 2321 et seq.), in consultation with the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, submit a report to the Chair of the White House Competition Council, enumerating and describing any relevant concerns of the Department of Agriculture and strategies for addressing those concerns across intellectual property, antitrust, and other relevant laws.

The Order directs the Secretary for Health and Human Services to address drug access and pricing:

          (iv)    not later than 45 days after the date of this order, submit a report to the Assistant to the President for Domestic Policy and Director of the Domestic Policy Council and to the Chair of the White House Competition Council, with a plan to continue the effort to combat excessive pricing of prescription drugs and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the Federal Government for such drugs, and to address the recurrent problem of price gouging;
          (v)     to lower the prices of and improve access to prescription drugs and biologics, continue to promote generic drug and biosimilar competition, as contemplated by the Drug Competition Action Plan of 2017 and Biosimilar Action Plan of 2018 of the Food and Drug Administration (FDA), including by:
               (A)  continuing to clarify and improve the approval framework for generic drugs and biosimilars to make generic drug and biosimilar approval more transparent, efficient, and predictable, including improving and clarifying the standards for interchangeability of biological products;
               (B)  as authorized by the Advancing Education on Biosimilars Act of 2021 (Public Law 117-8, 135 Stat. 254, 42 U.S.C. 263-1), supporting biosimilar product adoption by providing effective educational materials and communications to improve understanding of biosimilar and interchangeable products among healthcare providers, patients, and caregivers;
               (C)  to facilitate the development and approval of biosimilar and interchangeable products, continuing to update the FDA’s biologics regulations to clarify existing requirements and procedures related to the review and submission of Biologics License Applications by advancing the “Biologics Regulation Modernization” rulemaking (RIN 0910-AI14); and
               (D)  with the Chair of the FTC, identifying and addressing any efforts to impede generic drug and biosimilar competition, including but not limited to false, misleading, or otherwise deceptive statements about generic drug and biosimilar products and their safety or effectiveness;
          (vi)    to help ensure that the patent system, while incentivizing innovation, does not also unjustifiably delay generic drug and biosimilar competition beyond that reasonably contemplated by applicable law, not later than 45 days after the date of this order, through the Commissioner of Food and Drugs, write a letter to the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office enumerating and describing any relevant concerns of the FDA; 
          (vii)   to support the market entry of lower-cost generic drugs and biosimilars, continue the implementation of the law widely known as the CREATES Act of 2019 (Public Law 116-94, 133 Stat. 3130), by:
               (A)  promptly issuing Covered Product Authorizations (CPAs) to assist product developers with obtaining brand-drug samples; and
               (B)  issuing guidance to provide additional information for industry about CPAs; and
          (viii)  through the Administrator of the Centers for Medicare and Medicaid Services, prepare for Medicare and Medicaid coverage of interchangeable biological products, and for payment models to support increased utilization of generic drugs and biosimilars.

The Order directs the Secretary of Commerce to reconsider proposed regulations concerning technology transfer:

   (r)  The Secretary of Commerce shall:
          (i)    acting through the Director of the National Institute of Standards and Technology (NIST), consider initiating a rulemaking to require agencies to report to NIST, on an annual basis, their contractors’ utilization activities, as reported to the agencies under 35 U.S.C. 202(c)(5);
          (ii)   acting through the Director of NIST, consistent with the policies set forth in section 1 of this order, consider not finalizing any provisions on march-in rights and product pricing in the proposed rule “Rights to Federally Funded Inventions and Licensing of Government Owned Inventions,” 86 Fed. Reg. 35 (Jan. 4, 2021); 

                (iii)  not later than 1 year after the date of this order, in consultation with the Attorney General and the Chair of the Federal Trade Commission, conduct a study, including by conducting an open and transparent stakeholder consultation process, of the mobile application ecosystem, and submit a report to the Chair of the White House Competition Council, regarding findings and recommendations for improving competition, reducing barriers to entry, and maximizing user benefit with respect to the ecosystem.

Another Government Report Tackling Pharmaceutical Pricing in the United States that Takes Aim at Patenting Practices

The State of Minnesota has recently released a 94 page report on drug pricing and access titled, “Report of Minnesota Attorney General’sAdvisory Task Force on Lowering Pharmaceutical Drug Prices.”  The Executive Summary of the very thorough report points to several problems leading to the high cost of pharmaceuticals in the United States and the state of Minnesota, including 1) product hopping; 2) abuse of the patent system, including the creation of patent thickets (with Humira as the example); 3) pharmaceutical benefit manager practices and a lack of transparency with respect to pricing; and 4) pharmaceutical company practices with respect to direct marketing to consumers and price discounts to consumers for selecting brand name drugs.  The report has many recommendations, including the formation of a commission to investigate and deal with pharmaceutical pricing and other issues; importation of four important drugs from a vendor (insulin, epipens, Truvada and Naloxon); create price gouging legislation; “Strengthen Minnesota’s consumer fraud laws;” “Enact a state anti-kick back law;” “Strengthen Minnesota’s antitrust laws;” advocate for change to federal patent and data exclusivity laws; heavily regulate pharmaceutical benefit managers; ensure greater transparency; more utilization of the federal 340B drug pricing program; and improved usage of bulk purchasing.  The report also includes action steps for the various recommendations. The report details the impact of high drug prices on citizens of Minnesota as well as case studies of drug prices that are “excessive.”  

I am sure the issue regarding the cost of healthcare and pharmaceuticals in the United States will receive a lot of attention in U.S. presidential race this year.  Last April, Chris Holman and I co-organized a conference at University of the Pacific, McGeorge School of Law, in Sacramento, California, on pharmaceutical IP and pricing that tackled the issue. The conference website is available, here.  We may offer a follow-up conference next year after the presidential election.  If you have an interest in attending or participating, please let me know.  

Bloomberg Tracking Pharmaceutical Prices

One way the Trump Administration appears to attempt to control drug prices is through use of the “bully pulpit.”  Wikipedia states that the “bully pulpit”: “is a conspicuous position that provides an opportunity to speak out and be listened to. This term was coined by United States President Theodore Roosevelt, who referred to his office as a "bully pulpit", by which he meant a terrific platform from which to advocate an agenda.”  

President Trump has used strong language to apparently shame pharmaceutical companies from raising drug prices.  Indeed, two pharmaceutical companies announced they would not raise prices for their drugs.  Those two examples make great headlines for President Trump, but are drug prices as a whole getting lower in the United States.  Bloomberg seeks to answer that question and is tracking the pricing of "widely used" and "well known" drugs across several different disease categories and updating that information as time passes.  Notably, prices (excluding Pfizer's drugs, who announced it would not raise prices) appear to be moving up.  Interestingly, the price increases are mostly hovering around 9% to 10%.  Also, the prices tracked by Bloomberg do not include the rebates that are provided by pharmaceutical companies, but are the list prices.  

The Trump Administration is moving on other fronts to try to control drug prices, but many experts state that some of those attempts will not impact the cost of drugs in the United States by much.  It will be interesting to see if actions taken by the Food and Drug Administration discussed here will make a significant difference.  

Disincentivizing the Use of IPRs and PGRs Against Pharmaceutical and Biologic Patents

Senator Orrin Hatch has introduced legislation designed to curb the use of IPRs and PGRs against pharmaceutical and biologic patents by essentially denying the benefits to generic/biosimilar companies of the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act.  Allowing the usage of IPRs against pharmaceutical and biologic patents was a serious oversight in enacting the America Invents Act.  Senator Hatch’s Office has released the following information concerning the new Hatch-Waxman Integrity Act of 2018 (which includes a section by section analysis):

In 2012, Congress enacted the America Invents Act to fix a problem unrelated to drug/biologic innovation and drug/biologic affordability; it created the inter partes review (“IPR”) and post-grant review (“PGR”) processes to combat the growing problem of patent trolls.

Even though Congress did not intend to upset its drug/biologic-specific Hatch-Waxman and BPCIA procedures with the enactment of the IPR and PGR processes, generic drug and biosimilars manufacturers have increasingly used the IPR process to circumvent the Hatch-Waxman Act and BPCIA patent challenge processes while nonetheless taking advantage of their abbreviated processes for drug entry.1  Moreover, hedge funds with no interest in manufacturing or marketing drugs have filed IPR challenges against drug patents with the goal of profiting from stock market declines triggered by the IPR filings—a type of market manipulation.

The Hatch-Waxman Integrity Act of 2018 would close the loophole unintentionally created by the America Invents Act. To restore the careful balance of the Hatch-Waxman Act and the BPCIA, and to prevent the IPR or PGR processes from undercutting them, the FD&C Act and the PHS Act would be amended to prevent using IPR (or PGR) challenges to circumvent the specific patent challenge processes for drugs and biologics painstakingly created by Congress. In addition, the federal securities rules would be clarified to indicate that filing IPR patent challenges and profiting from resulting stock price changes is a form of prohibited market manipulation.

The Press Release is available, here.  The text of the proposed legislation is available, here.  [Hat Tip to Professor Dennis Crouch’s Patently Obvious Blog]

Trump White House Releases Biopharmaceutical Pricing Reform White Paper

The White House Council of Economic Advisers recently released a report titled, “Reforming Biopharmaceutical Pricing at Home and Abroad.” [Report]  The Report points to basically two problems: 1) overpricing in the United States; and 2) underpaying outside the United States.  The Report states:

U.S. patients and taxpayers alike have mainly financed the returns on R&D investments to innovators. Unlike other developed countries with single payer systems, which nearly all impose some sort of price controls on pharmaceuticals, the U.S. drug market is less financed by the public sector and more open to private market forces. In a free market, prices of products reflect their value as opposed to prices in government-controlled markets, which reflect political tradeoffs. CEA estimates that because of the American market system, more than 70 percent of OECD patented pharmaceutical profits come from sales to U.S. patients even though the United States only represents 34 percent of OECD GDP at Purchasing Power Parity (OECD 2016). Thus, innovators across the world rely heavily on Americans paying market prices to underwrite the returns on investments into products that improve their health because governments abroad use their monopsony power to set prices below market-levels. The United States both conducts and finances much of the biopharmaceutical innovation that the world depends on, allowing foreign governments to enjoy bargain prices for such innovations. This indicates that our current policies are neither wise nor just.  Simply put, other nations are free-riding, or taking unfair advantage of the United States’ progress in this area. In addition, prices paid by Americans for many drugs are too high, particularly so when paid for in government programs. This is the result of poorly designed reimbursement policies and regulations that inhibit price competition, and it is therefore a poor use of taxpayer money. 

The Report further notes that, “The U.S. market makes up 46 percent of OECD sales of brand name innovative drugs, funds about 44 percent of world medical R&D, invests 75 percent of global medical venture capital, and holds the intellectual property rights for most new medicines (BMI 2017; Moses et al. 2015; TEC 2017). Furthermore, publicly funded medical research in the United States has produced two-thirds of the top-cited medical articles in 2009, underlying the university research that often leads to medical breakthroughs (Moses et al. 2015).”

The Report points to issues regarding Medicaid, including opportunity for pharmaceutical companies to game and artificially raise prices.  The Report further provides suggestions concerning Medicare as well as the Pharmacy Benefit Manager Market.  Notably, the Report fails to address biosimilars in very much detail, but notes that there may be two more years before final regulations concerning interchangeability are issued.  This delay is raised as a potential reason why interchangeability approval may be slow.

This Report could drive the Trump Administration's approach to dealing with the high cost of health care.  

Biotechnology Stock Value Swings

In a July 6, 2013 post, this blog discussed the upswing in biotechnology patenting and the rising numbers of biotechnology IPOs.  The blog also mentioned promising R&D and an increase in FDA approvals as a potential cause of the IPOs.  Fast forward to recent months and there is a substantial amount of chatter about a bubble in biotechnology stocks (here, here and here).  In late March, biotechnology stocks took a dive, rebounded soon thereafter and now look like they are headed for another dive.  So, why the swings in value?  On the positive side, there is promising R&D, FDA approvals and pharmaceutical companies with lots of funds to acquire biotechnology companies.  The negative side is described by a recent article by Gregory Zuckerman in the Wall Street Journal titled, Biotech’s Rally Fuels Bubble Fears:

Biotech shares in the Nasdaq now trade at almost 50 times their earnings over the past year, compared with a price/earnings ratio of 27.5 for the overall Nasdaq Composite. Nasdaq biotech shares trade at 31.5 times their expected earnings over the next 12 months, above the 21 ratio for the overall Nasdaq market, according to FactSet Inc.

Just like Amazon.com Inc., eBay Inc. and some other technology companies were growing companies with shares trading at sky-high valuations in 2000, some worry that today’s highflying biotech shares also are strong companies trading at prices that are too high. Celgene currently trades at a p/e ratio of 51.1. Biogen, Amgen and Gilead are at 36.6, 24.8 and 13.8, respectively.

I suspect that there are also two other reasons to worry about the value of biotechnology companies.  First, the FDA is moving toward approval of generics—biosimilars—for biologics, here.  Indeed, in March of 2015, the FDA approved the first biosimilar, Sandoz’s Zarxio, which is the biosimilar for Amgen’s Neupogen, a cancer treatment.  Second, there is growing discontent with the pricing of some drugs, particularly the amazing drug Solvaldi for Hepatitis C.  Notably, Gilead Sciences has moved to make its drug available at a lower cost in some countries such as India.  What do you think? 

California Governor Jerry Brown Vetoes California’s Biosimilars Bill

I recently wrote about California’s Biosimilars Bill which was passed by the California Legislation.  California Governor Jerry Brown vetoed the Biosimilars Bill today.  The Sacramento Bee discusses the veto, here.  The Bill arguably made it more difficult for a pharmacist to provide a biosimilar for a prescribed biologic, thus allowing biologic companies to place a barrier on the ease of substitution of biosimilars for biologics.  The generic pharmaceutical industry as well as the California Public Employees’ Retirement System (CalPERS) opposed the legislation.  The federal Food and Drug Administration also raised concerns about the Bill.  The Bill was supported by the Biotechnology Industry Organization and Amgen.  The Governor issued the following statement concerning the Bill:

To Members of the California State Senate:

Senate Bill 598 would effect two changes to our state’s pharmacy law.  First , it would allow interchangeable “biosimilar” drugs to be substituted for biologic drugs, once these interchangeable drugs are approved by the federal Food and Drug Administration (FDA).  This is a policy I strongly support. 

Second, it requires pharmacists to send notifications back to prescribers about which drug was dispensed.  This requirement, which on its face looks reasonable, is for some reason highly controversial.  Doctors with whom I have spoken would welcome this information.  CalPERS and other large purchasers warn that the requirement itself would cast doubt on the safety and desirability of more cost effective alternatives to biologics.

The FDA, which has jurisdiction for approving all drugs, has not yet determined what standards will be required for biosimilars to meet the higher threshold of “interchangeability.”  Given this fact, to require physician notification at this point strikes me as premature.

For these reasons, I am returning SB 598 without my signature. 

Nicely done, Governor.

Protecting Patient Safety or Preserving Profits: California’s Biosimilars Bill

The California legislature recently passed legislation essentially regulating when pharmacists can substitute a biosimilar for a prescribed biologic.  Apparently, the Governor of California has not yet signed the legislation.  The legislation is opposed by the generic pharmaceutical industry because it arguably creates a burden on the pharmacist to substitute a biosimilar for a biologic and thus makes it more difficult or maybe less likely a pharmacist will do so.  This, in turn, may allow biologic companies to prevent the usage of biosimilars and thus maintain a supracompetitive price.  While there are concerns with safety and efficacy concerning biosimilars that are different than traditional small-molecule drugs, those concerns would have been addressed by the U.S. Federal Drug Administration (FDA) already.  There is a concern with patient disclosure, but again, the FDA should have dealt with the concerns that matter most to the patient.  Notably, the California Public Employees’ Retirement System (CalPERS) board voted to oppose the legislation and the FDA has expressed concerns about the legislation.  Amgen and the Biotechnology Industry Organization are strong supporters of the legislation. The legislative digest and (mark up) text of the legislation is available here.  Additional commentary concerning the legislation is here, here and here. The FDA Law Blog has helpful commentary as well as The Biosimilars State Legislation Scorecard, here.  Notably, California is often considered a "laboratory" or leader in creating state legislation (we certainly create a lot of it.).