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story.lead_photo.caption Food and Drug Administration Commissioner Scott Gottlieb listens during an interview with The Associated Press in New York on Monday, March 5, 2018.

A "rigged payment scheme" among drug plans, insurers and pharmaceutical companies has blocked access to less-expensive versions of some of the most costly drugs in the United States, the head of the Food and Drug Administration said Wednesday.

FDA Commissioner Scott Gottlieb aimed particular criticism at giant pharmacy benefit managers that contract with health plans to administer coverage of drugs, saying the industry's contracting tactics have stymied cheaper copies of expensive biotechnology drugs. Known as PBMs, the companies include Express Scripts Holding Co., CVS Health Corp. and UnitedHealth Group Inc.'s OptumRx unit.

"Consolidated firms -- the PBMs, the distributors, and the drugstores; team up with payers," Gottlieb said in prepared remarks at a major conference of health insurers in Washington. "They use their individual market power to effectively split monopoly rents with large manufacturers and other intermediaries; rather than passing on the saving garnered from competition to patients and employers."

The speech is some of the broadest criticism yet by President Donald Trump's administration of the health care industry. While the FDA has little or no power over pharmacy benefit managers, Gottlieb's remarks make clear that administration health officials place the blame for high drug costs not just on biotechnology and pharmaceutical companies, but also on other parts of the complex medical supply chain.

Gottlieb said the arrangements between pharmacy benefit managers, drugmakers, insurers and distributors threaten the new market for what are known as biosimilars, cheaper versions of complex biotechnology drugs. Unlike pills, biotechnology drugs are made from living cells, and have advanced the treatment of many diseases. They've also come with record prices.

Biosimilars were meant to be a less costly alternative to the products, and Gottlieb called them necessary for a competitive market that works for patients. A 2010 law created a way for the FDA to approve the drugs and help doctors and patients decide how to use them. Their uptake has been stymied by what Gottlieb said were opaque contracts that favor the older, more costly drugs.

He described a system by which makers of the biotech drugs make exclusive arrangements with pharmacy benefit managers and insurers, who agree to cover only the old drug in return for rebates or discounts.

"The rigged payment scheme might quite literally scare competition out of the market altogether," Gottlieb said. "I fear that's already happening."

Both CVS Health and Express Scripts said that they have aggressively advocated for bringing biosimilars to the market. CVS said it was quick to include biosimilars on its list of covered drugs, resulting in substantial savings.

Drug plans have said that rebates make their way back to patients in the form of lower monthly insurance premiums, and have called the opaque contracts a necessary trade secret. On Tuesday, UnitedHealth said it would start passing a portion of them directly back to patients, which could lower out-of-pocket costs for people on particularly costly treatments. The move was praised by Health and Human Services Secretary Alex Azar.

The federal government has proposed a similar policy for drug plans that serve people in Medicare, which the pharmacy benefit industry opposes and has said will raise premiums for everyone.

Few of the new, less-expensive biosimilars have gained a foothold. Of the nine biosimilars the FDA has approved since 2015, only three are available for sale. Often that gap is blamed on disagreements over patents on the original drugs.

But Gottlieb said the payment arrangements "raise another, perhaps even more insidious barrier to biosimilars taking root in the U.S., and gaining appropriate market share."

Pfizer Inc., which sells Inflectra, a biosimilar of Johnson & Johnson's $6.3 billion arthritis drug Remicade, sued Johnson & Johnson last year for using exclusionary contracts to block its product.

As Trump's administration looks to tackle high drug prices, Gottlieb has taken the lead, particularly by pushing for ways to speed low-cost generic drugs to market.

Those efforts haven't just focused on drugmakers. A White House report on drug pricing last month called out pharmacy benefit managers as well and steered clear of Trump's previous threat to have the government negotiate prices directly.

Unlike typical generics which can be 80 percent cheaper than a brand-name drug, biosimilars require more research, an expense that typically makes them about 15 percent to 20 percent cheaper than the drug they're copying. This means the brand-name rebates continue to be attractive to pharmacy benefit managers and insurers who also get some of the cut.

"Payers are going to have to decide what they want: The short-term profit goose that comes with the rebates, or in the long run, a system that functions better for patients, providers, and those who pay for care," Gottlieb said.

Business on 03/08/2018

Print Headline: 'Rigged' Rx setup is claim of FDA

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