Tagged Prescription Drugs

High On Drugs? Anthem Cites Soaring Drug Costs To Justify 35% Rate Hike in California

Health insurance giant Anthem predicts Californians will pop a lot more pills next year.

To make the case for a hefty premium hike in the state’s individual insurance market, Anthem Blue Cross has forecast a 30 percent jump in prescription drug costs for 2018. Such a sharp increase is nearly double the estimates of two other big insurers, and it runs counter to industry trends nationally.

Prescription drug spending in the U.S. grew 6.1 percent over the 12 months ending in July, according to Altarum, a nonprofit think tank. That’s down from 12.9 percent in 2014, when expensive new hepatitis C drugs sharply lifted overall pharmaceutical spending.

“I can’t understand why Anthem is predicting 30 percent,” said Charles Roehrig, a health economist and founding director of Altarum’s Center for Sustainable Health Spending. “There are examples of egregious price increases for particular drugs that have gotten a lot of well-deserved attention. But those haven’t characterized what’s happening as a whole,” he added.

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The advocacy group Consumers Union also questioned why Anthem’s cost projections are so much higher than its competitors, and it has asked state regulators to demand additional documentation from the nation’s second-largest health insurer.

Overall, Anthem is proposing a 35 percent rate increase for about 135,000 consumers who buy their own insurance in and outside the Covered California exchange. It’s the largest increase statewide and assumes that federal subsidies for copays and deductibles will continue to be paid. The second highest, also assuming the U.S. government will continue paying those subsidies, is 28.6 percent by Molina Healthcare.

Some of Anthem’s rivals aren’t as pessimistic on the outlook for drug costs. Two other large insurers, Blue Shield of California and Health Net, projected drug costs will rise by 16.4 and 15 percent, respectively. Anthem came in even lower than that in its rate filing for Colorado’s individual market, projecting an 11.4 percent increase in prescription drug costs.

The company said it stands by its California cost projections in light of growing market volatility. In documents filed with regulators, the company expressed concern that declining enrollment in the individual market would saddle it with a sicker group of policyholders.

“As it pertains to pharmacy, our rates reflect the increasing utilization and rising cost of prescription drugs we have experienced in this market over the last couple of years,” said company spokesman Colin Manning.

In fact, Anthem emphasizes rising drug utilization over higher drug prices when justifying its rate increase — an argument Consumers Union challenged as unusual. Most other insurers in California have cited rising prices as a bigger factor in filings to state regulators.

“Anthem projects an extraordinary increase in its enrollees’ use of prescription drugs at four or more times the rate of enrollees at other carriers,” said Dena Mendelsohn, a staff attorney for Consumers Union in San Francisco.

The California Department of Managed Health Care said it is scrutinizing Anthem’s “underlying medical costs and trends” as part of its review of 2018 rate increases. The state agency, which expects to finish its review next month, can pressure insurers to reduce their rates, but it doesn’t have the authority to block them.

“We may ask [Anthem] questions and for additional information to support the plan’s proposed rate change,” said Rodger Butler, a spokesman for the Department of Managed Health Care.

Anthem is significantly curtailing its presence in Obamacare marketplaces nationally next year amid ongoing uncertainty from the Trump administration and Congress over whether they will continue the federal subsidies that lower out-of-pocket costs for low-income consumers.

In August, Anthem announced a partial withdrawal from California’s individual market, saying it will sell policies in only about half of the state’s counties.

Anthem’s chief executive, Joseph Swedish, told investors and analysts at a conference this month that the company may re-enter certain ACA markets across the country if Congress and the White House take steps to stabilize them.

Some experts wonder if Anthem made a mistake in its California rate filing. It wouldn’t be the first time.

In 2010, an outside actuary working for California regulators found a critical error in Anthem’s proposal to raise rates by up to 39 percent. President Barack Obama seized on the public outcry over that double-digit increase to help get the Affordable Care Act passed in Congress. Anthem later withdrew the increase after David Axene, an actuary in Murrieta, Calif., discovered problems with the company’s calculations.

Axene said this latest filing for 2018 health plans raises plenty of questions.

The pharmacy estimate “does seem high,” he said. “It’s a more mature marketplace now, so hopefully everybody knows how to price it. But I’m sure stupid mistakes still happen.”

This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

Categories: California Healthline, Cost and Quality, Health Industry, Insurance

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FDA Moves To Guard Against Abuse Of ‘Orphan Drug’ Program

The Food and Drug Administration is changing the way it approves medicines known as “orphan drugs” after revelations that drugmakers may be abusing a law intended to help patients with rare diseases.

In a blog post Tuesday, FDA Commissioner Scott Gottlieb said he wants to ensure financial incentives are granted “in a way that’s consistent with the manner Congress intended” when the Orphan Drug Act was passed in 1983. That legislation gave drugmakers a package of incentives, including tax credits, user fee waivers and seven years of market exclusivity if they developed medicines for rare diseases.

A KHN investigation earlier this year, which was published and aired by NPR, found many drugs that now have orphan status aren’t entirely new. Of about 450 drugs that have won orphan approval since 1983, more than 70 were drugs first approved by the FDA for mass-market use. Those include cholesterol blockbuster Crestor, Abilify for psychiatric disorders and rheumatoid arthritis drug Humira, the world’s best-selling drug.

Gottlieb announced plans to close a loophole that allows manufacturers to skip pediatric testing requirements when developing a common-disease drug for orphan use in children. He also signaled that bigger changes are being considered, announcing a public meeting to explore issues raised by scientific advances, such as the increase in precision medicine and biologics.

“We need to make sure our policies take notice of all of these new challenges and opportunities,” he wrote. Gottlieb, through his agency, declined multiple requests for interviews.

Over the years, drugmakers have fueled a boom in orphan drugs, which often carry six-figure price tags. Nearly half of the new drugs approved by the FDA are now for rare diseases — even though many of them also treat and are marketed for common diseases.

Gottlieb became commissioner in May, a few months after three key Republican senators called for a federal investigation into potential abuses of the Orphan Drug Act, and the Government Accountability Office agreed to investigate.

The GAO has yet to begin its investigation, saying it doesn’t expect to start work until late this year, when staff is available. Regardless, in late June, Gottlieb announced what would be the first in a series of updates that shift the way the FDA handles orphan drugs.

Those include:

  • Eliminating a backlog in drug applications for orphan designation or status. Getting a “designation” is a critical first step if a company wants to win orphan incentives once the drug is approved for treatment use. And, much like the rise in approvals, the requests by companies to get drugs designated with orphan status has also skyrocketed. Gottlieb said in June that he wanted to get rid of the backlog; on Tuesday, he said the effort was complete. About half of the 200 applications from drugmakers won orphan status.
  • Mandating that drugmakers prove their medicine is clinically superior before getting the market exclusivity that comes with being an orphan. The agency had lost a lawsuit in which a company said it was owed the exclusivity period regardless of whether its medicine was better. And two more lawsuits had been filed by Eagle Pharmaceuticals and, more recently, another by United Therapeutics. The FDA Reauthorization Act, which passed last month, made it law that a drug has to be clinically superior to get the incentives.
  • Closing the loophole for pediatric orphan drugs by requiring all drugs approved for common adult diseases, like inflammatory bowel disease, undergo pediatric testing when getting approval as a pediatric orphan drug. Pediatric testing is not required for orphan drugs, and last month Congress mandated that orphan drugs for cancer be tested for children. Still, the American Academy of Pediatrics celebrated the proposed change but warned it was only a “first step.” Dr. Bridgette Jones, chair of American Academy of Pediatrics Committee on Drugs, said late Tuesday that orphan drugs are “still mostly exempt from pediatric study requirements … children deserve access to safe, effective medications.”

Dr. Martin Makary, who wrote a critical 2015 paper on orphan approvals, said the changes at the agency indicate that Gottlieb seems “concerned about all the right things.”

“The government does a lot of lip service in general,” Makary said. “This is not lip service.”

The restructuring has been swift in some ways.

Sandra Heibel, a senior consultant at Haffner Associates, a firm that helps companies submit orphan drug applications, noted that the approval process for designations definitely sped up over the summer, and “we are absolutely getting responses from the FDA back in 90 days. That has come through.”

Other changes to the agency, though, will evolve slowly. For example, the orphan drug office has begun reaching across the FDA’s divisions for help in reviewing drugs. In May, the FDA’s orphan reviews began to work with the office of pediatric therapeutics to review pediatric applications — ideally increasing the expertise applied when considering a company’s request for orphan drug use in children.

In an emailed note Tuesday, the agency confirmed that Gottlieb’s orphan modernization plan is part of a larger effort to increase competition and decrease drug prices. One focus is on targeted drugs — especially those that affect rare diseases or diseases for which there is no effective therapy, the agency said.

“Such drugs present some of the biggest opportunities in medicine to treat and cure debilitating and very costly diseases,” the agency stated.

KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

Categories: Cost and Quality, Health Industry, Pharmaceuticals

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