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Administration wades further into drug price debate
The Obama administration is stepping up its involvement in the debate over drug prices, sending letters to pharmaceutical companies and state Medicaid programs on Thursday asking questions about cost and access.
The Centers for Medicare and Medicaid Services (CMS) sent letters on Thursday to both sides in the drug pricing debate. On one hand, it sent letters to drug companies asking about pricing arrangements that they have with state Medicaid programs and ways to assist states with making high-price drugs affordable.
On the other hand, CMS also sent letters to state Medicaid programs expressing concern that they are restricting access to high-price drugs too much as a way to keep down costs.
The letters reflect an effort by the administration to show a balanced approach to the drug pricing issue, at a time when drug companies have been under assault for high prices.
"The rhetoric around health care costs can become heated, particularly around the cost of prescription drugs," CMS Acting Administrator Andy Slavitt wrote in a blog post Thursday. "At times, it can appear as if some of those who produce the pharmaceuticals and those whose lives often depend on them have unaligned interests. But we will not make progress by polarizing this debate."
Still, the administration says it recognizes that with the anger raging over high drug prices, it needs to take action.
"We recognize that the public is relying on our leadership," Slavitt writes. "We will work to ensure that all viewpoints are considered as we strive for solutions."
Slavitt gave nods to both sides of the argument in his post, noting that "drug innovation has resulted in better health outcomes for people across our nation." However, he also raised concerns about rising costs, noting that drug spending increased 13 percent last year.
The letters come two days after the administration announced a forum on drug prices slated for Nov. 20.
Democratic presidential candidates Hillary Clinton and Sen. Bernie Sanders (I-Vt.) have made drug prices a focus and denounced pharmaceutical companies for their prices. Both have put forward proposals that the pharmaceutical industry strongly opposes, like allowing Medicare to negotiate drug prices down. President Obama proposed allowing Medicare to negotiate drug prices in his budget in February as well, but Republicans in Congress are largely opposed to that effort.
However, there are some signs of Republicans getting involved in the issue. Sen. Susan Collins (R-Maine) announced a Senate Aging Committee investigation into high drug prices on Wednesday.
CMS's actions on Thursday focused on drugs that treat Hepatitis C. There have been new breakthrough cures in that area recently, but they have come at a high price, as much as $84,000 for a 12-week treatment.
The administration sent letters to four drug companies asking about the possibility of "value-based purchasing" for Medicaid, with the idea that the system could save the states money. Under value-based purchasing, Medicaid would pay a price for a drug based on how effective it is shown to be.
At the same time, the administration wrote to state Medicaid plans expressing concern that they are setting too many restrictions on covering Hepatitis C drugs in an effort to lower costs.
Medicaid asks AbbVie, others for pricing options on hep C drugs
(Bloomberg) - Drugmakers including AbbVie and Gilead Sciences were contacted by Medicaid to discuss options for how to pay for hepatitis C cures whose costs have eaten into state budgets.
The companies, along with Johnson & Johnson and Merck, were asked in letters from the Centers for Medicare and Medicaid Services to provide information on arrangements they make with health insurers to link payments to the outcomes of their treatments. Such arrangements may affect the prices drugmakers are required to offer under the Medicaid program, the agency said yesterday.
The agency is also pushing states to make sure poor people with hepatitis C have access to cures for the disease. Some states have been restricting the treatments to individuals with severe liver damage or otherwise limiting their use, the agency said in a letter to state Medicaid programs, also dated yesterday. Medicare provides health insurance for the elderly and disabled, while Medicaid covers the poor.
"Our notice to state Medicaid directors reminds states of their obligation to provide access to these promising therapies based on the medical evidence, and that they have tools available to manage their costs," CMS Acting Administrator Andy Slavitt said in a blog post.
Gilead's Harvoni and Sovaldi hepatitis C treatments have brought in billions of dollars in sales for the drugmaker, helping fuel a 14 percent share rally this year. A course of treatment can cost more than $80,000, though discounts typically reduce the price. Drugmakers are required to offer Medicaid programs their "best price" for pharmaceuticals, according to CMS.
AbbVie's treatment hasn't proven to be as popular, while Merck's isn't expected to be available until next year. Sales of J&J's Olysio have also been falling amid the competition.
Medicaid programs spent $1.3 billion on Sovaldi in 2014, its first full year after regulatory approval, according to a letter in the New England Journal of Medicine in September. In some states, including New York and Nevada, the drug represented more than 5 percent of Medicaid spending, according to the letter by Joshua M. Liao and Michael A. Fischer of Brigham & Women's Hospital in Boston. Gilead spokeswoman Cara Miller confirmed the drugmaker had received the letter from CMS and said the company had no additional comment at this time.
AbbVie also got the letter and plans to respond, said Jackie Finley, a spokeswoman. "AbbVie remains focused on supporting access to treatment for people living with hepatitis C," she said.
J&J is "actively engaged in responding to the request," said spokeswoman Lisa Vaga. Merck had no immediate comment.
Federal Officials Warn States on Hepatitis C Drug Restrictions
Officials say state Medicaid programs may be violating law by denying expensive medicines
By Joseph Walker
Nov. 5, 2015
In a sign of growing government interest in rising prescription-drug costs, federal officials on Thursday said state Medicaid programs may be violating federal law by denying patients expensive hepatitis C medications.
They also asked drug makers to provide information on their pricing arrangements with health insurers, which officials said could help ease the financial burden on state budgets.
The Centers for Medicare and Medicaid Services said in a notice to state Medicaid directors that some states may be "imposing conditions for coverage that may unreasonably restrict access" to hepatitis C drugs. Such restrictions may be "contrary to the statutory requirements" of a federal law requiring Medicaid programs to pay for all medically necessary treatments, defined as any use approved by the Food and Drug Administration or by certain medical guidelines known as compendia, the notice said.
CMS's notice, which was posted online Thursday, said that some states have restricted use of hepatitis C drugs to Medicaid patients with severe liver disease and those who can prove they have abstained from drug and alcohol abuse. Patient advocates and doctors have long complained that such conditions aren't included in the drugs' FDA-approved prescribing labels.
CMS's notice to states was announced in a blog post by Andy Slavitt, acting administrator of CMS. Mr. Slavitt said that the high cost of hepatitis C drugs had "strained personal as well as public budgets, particularly state health-care budgets." Referring to what he called "heated" public debate on rising drug costs, he said that "it can appear as if some of those who produce the pharmaceuticals and those whose lives often depend on them have unaligned interests."
Mr. Slavitt wrote letters to the chief executives of several hepatitis C drug makers to request information about the companies' "value-based" pricing arrangements with commercial and government health insurers. Mr. Slavitt said in the letters, which were also posted online, that he was requesting the information to better understand such arrangements, which he said could impact the discounts state Medicaid programs are entitled to receive for drugs. Value-based pricing is an industry term for when the price paid by insurers and pharmacy-benefit managers depends in part on how effective a drug is with a given patient. Mr. Slavitt said states should be given the opportunity to participate in such pricing arrangements.
The letter also asks the CEOs if they have "other ideas to assist states in the affordability of these new, unbudgeted pharmaceuticals?"
The letters were sent to Gilead Sciences Inc., AbbVie Inc., Johnson & Johnson, and Merck & Co.
AbbVie said it intends to respond to CMS's request. Gilead declined to comment. J&J and Merck didn't respond to requests for comment.
Medicaid, which provides health insurance to low-income people, is entitled under federal law to receive rebates of at least 23.1% of the "best price" at which a drug maker sells brand-name drugs. A manufacturer's "best price" is defined as the lowest price a company gave to a buyer after discounts and rebates.
Aaron Albright, a CMS spokesman, said in an email that the agency had received questions about how value-based pricing "fits into the best price rules, so we are trying to gather information to understand what's happening."
Patient advocates praised CMS's guidance to states, which they said would help increase the availability of treatments for patients. Robert Greenwald, director of Harvard University's Center for Health Law and Policy Innovation, said in an email that his group "applauds CMS for clearly articulating that restricting access to HCV treatments solely on the basis of cost and using medically unjustifiable criteria is unacceptable."
Many states have complained that the high cost of new medications has strained their budgets. In 2014, Texas refused to pay for Gilead's hepatitis C drug Sovaldi, which state officials attributed to the drug's $84,000 list price per treatment course, The Wall Street Journal reported earlier this year.
Through the first half of this year, state Medicaid programs spent a combined $1.33 billion before rebates on Gilead's hepatitis C drugs Harvoni and Sovaldi, according to preliminary data posted on CMS's website.
In its notice to states, CMS also said it was concerned that health insurers known as managed-care organizations, which are paid by states to provide health insurance to some Medicaid beneficiaries, have "more restrictive" policies on hepatitis C drugs than traditional plans administered by states.
States should "examine their drug benefits to ensure that limitations do not unreasonably restrict coverage of effective treatment" of new hepatitis C drugs, CMS said in the notice. CMS also said it would monitor states' policies on hepatitis C drugs "to ensure compliance with the requirements" of the law.
CMS also said that, "given the costs" of the drugs, it shared states' budget concerns, but that states should take advantage of increased competition among drug manufacturers to negotiate larger rebates or other pricing arrangements to reduce their costs.

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