Washington Report: Innovation, Coverage, and Costs - Pharmaceutical Executive


Washington Report: Innovation, Coverage, and Costs

Pharmaceutical Executive

Examining exclusivity

The challenge of balancing R&D incentives with patient access is a major concern for disease and advocacy groups such as the National Organization for Rare Disorders (NORD), as it commemorates the 30th anniversary of the Orphan Drug Act (ODA). That landmark legislation provides seven years market exclusivity to therapies granted orphan status, along with relief from user fees and other benefits. The law has been highly effective in spurring development of new treatments for rare diseases, but high prices on many of these therapies has created difficulties with insurer coverage, especially for off-label use, noted NORD vice president Diane Dorman at the Food and Drug Law Institute (FDLI) annual meeting in April.

ODA's success has encouraged additional exclusivity policies. The Affordable Care Act grants 12 years of protection for innovator biotech therapies as part of the program to spur development of biosimilars. And last year's FDA Safety & Innovation Act (FDASIA) provides five years exclusivity for new antibiotics to treat life-threatening pathogens, in addition to the usual five years exclusivity for new chemical entities (NCEs), explained attorney Chad Landmon of Axinn Veltrop & Harkrider. Congress and advocates are looking to apply such incentives to additional therapeutic areas, but NORD opposes new exclusivity categories for "ultra orphans," Dorman commented, for fear that revising ODA will "open it to mischief and mayhem."

The larger issue is how added incentives shape new drug development and rates for new medicines. Michael Nicholas of Teva Pharmaceuticals speculated that limited protection prompts companies to abandon promising development programs and proposed a simplified reward system: five years exclusivity for all new therapeutics, eight years for NCEs, and an added year for new indications. That kind of scheme might reduce some of the wrangling over what kinds of structural differences and research activities should trigger five- or three-year exclusivity, and how exclusivity applies to combination products. Meanwhile, everyone is gearing up for battles over biosimilar exclusivity, as seen in early disputes over when exclusivity starts for an innovator biotech product.

Narrow benefits

If marketers want payers to cover pricey specialty drugs, advised John Doyle, senior vice president at Quintiles Consulting at the FDLI meeting, they need to provide data that supports appropriate treatment decisions and can help plans detect waste and drug misuse. Insurers already are looking to limit drug coverage in health plans to be marketed through new insurance exchanges, a central component of Obamacare scheduled for prime time this October. Plans recognize that to reduce premiums for individuals and small groups, narrow drug benefits can controls costs—and also discourage enrollment by older, less healthy beneficiaries.

Although all exchange plans have to cover prescription drugs as one of 10 essential benefits, there's a "race to the bottom" in terms of prices and coverage, observed Caroline Pearson of Avalere Health at the Health Insurance Exchange summit last month. Even with state "benchmark" plans setting basic formulary requirements, insurers have leeway in determining the number of drugs in each category and class, and in setting coverage requirements for physician-administered drugs. Plans also have flexibility in how they use tiering and utilization management strategies, especially in states requiring "open formulary" plans, Pearson notes.

Her review of some of the early proposed exchange plans indicate that patients will have high out-of-pocket costs, particularly for specialty drugs: the deductible for drug benefits on California's standard "silver" plan is $500, and coinsurance for top tier medicines is 20 percent; Connecticut has a $200 drug deductible and 50 percent coinsurance. The high cost and limited coverage of these plans has everyone worried about "sticker shock" when consumers start shopping for plans this fall.

Jill Wechsler is Pharm Exec's Washington correspondent. She can be reached at


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