Prescription Drugs

Background

The average MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). Part D enrollee takes 4.5 prescription medications on a regular basis. Appropriate use of prescription drugs can prolong life, improve quality of life, and postpone or replace the need for intensive, often expensive medical treatments. Given older adults’ extensive use of prescription drugs, it is vital to ensure that they are safe, effective, and accessible.

About 80 percent of all prescriptions dispensed are for generic drugs. However, prescription drug spending is driven by considerably more expensive brand-name and specialty drugs like biologicsBiologics are a subset of specialty prescription drugs that are derived from living organisms—human, animal, or microorganisms—or that contain components of living organisms.. On average, the retail price of generics is about 80 to 85 percent lower than that of their branded counterparts. And, with some notable exceptions, their prices have generally decreased in recent years. Retail prices for widely used brand-name and specialty prescription drugs continue to increase at rates that greatly exceed the rate of inflation.

Biologic drugs are an important and rapidly growing subset of specialty prescription drugs. BiologicsBiologics are a subset of specialty prescription drugs that are derived from living organisms—human, animal, or microorganisms—or that contain components of living organisms. are derived from living organisms; they may require special handling and are usually administered by injection. A large and growing share of prescription drugs in development are biologicsBiologics are a subset of specialty prescription drugs that are derived from living organisms—human, animal, or microorganisms—or that contain components of living organisms..

Until the passage of the Affordable Care Act (ACAThe ACA—the shortened abbreviation for the Patient Protection and Affordable Care Act— is comprehensive health care reform legislation enacted by Congress and signed into law on March 23, 2010. ), the Food and Drug Administration (FDA) did not have the authority to approve generic versions of biologic drugs or biosimilars. The ACAThe ACA—the shortened abbreviation for the Patient Protection and Affordable Care Act— is comprehensive health care reform legislation enacted by Congress and signed into law on March 23, 2010. also provides innovator biologic manufacturers with 12 years of market exclusivity before biosimilars can enter the market. This lack of competition helped make biologicsBiologics are a subset of specialty prescription drugs that are derived from living organisms—human, animal, or microorganisms—or that contain components of living organisms. among the most expensive prescription medicines on the market. Prices are about 22 times higher than those of traditional brand-name drugs.

Specialty drugs like biologicsBiologics are a subset of specialty prescription drugs that are derived from living organisms—human, animal, or microorganisms—or that contain components of living organisms. were once reserved for rare conditions. Now they are commonly prescribed for chronic conditions that typically affect older populations, such as rheumatoid arthritis, multiple sclerosis, and certain cancers.

Patient cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. for many expensive drugs has shifted to a coinsuranceA form of health care cost sharing in which a percentage of covered expenses must be paid by the insured. In contrast, a copayment is a specific dollar amount that must be paid for a specific service. model. For example, rather than a set copayment of $100, patients may have to pay a percentage of the drug’s cost, such as 25 to 60 percent of a drug that costs $1,500 to $15,000 per dose. This form of cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. directly exposes consumers to high prescription drug prices and price increases.

Employers, state governments, and other payers have realized that this model is not sustainable. Some are exploring various strategies to help keep these drugs affordable for those who require them. One option is reference-based pricing (i.e., setting the payment amount for a group of clinically comparable drugs on the basis of the least costly one). This approach still allows patients to obtain the more expensive products, although at a greater cost to them, and can result in improved payment accuracy and savings (see also Private Health Plans: Managed Care).

One increasingly popular option is to limit cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services.. While this concept will reduce costs at the pharmacy counter, requiring payers to absorb an even larger share of prescription drug costs. And it may ultimately lead to higher premiums and cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. for consumers generally. Limiting cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. also insulates consumers from prescription drug prices, which could encourage manufacturers to become even more aggressive with their pricing practices in the future.

The appropriate use of prescription drugs can be improved by expanding clinicians’ and patients’ understanding of, and appreciation for, the often-delicate benefit-risk balance associated with all medicines. Expanded medication therapy management services—in particular, those provided by pharmacists and those designed for patients with multiple chronic conditions—are essential to fine-tuning this balance.

Other efforts to help guide the appropriate use of prescription drugs include:

  • utilization management tools, such as prior authorizationA prior authorization—sometimes referred to as a “pre-authorization”—is a requirement by health insurance plans that a physician obtain approval from the plan before it will cover the costs of a specific medicine, medical device, or procedure. and quantity limits;
  • formularies and preferred drug lists;
  • unbiased, evidence-based academic detailing;
  • tracking quality by means of enhanced medication adherence and reductions in hospitalizations and medical visits for adverse drug events; and
  • benefit design that facilitates access to high-value therapies.

It is also crucial to ensure the safety of the prescription drug supply. One potential threat is counterfeit, or fake, drugs. Patients who receive counterfeit drugs may experience unexpected side effects or a worsening of their medical condition. Counterfeit drugs may also contain incorrect or hazardous ingredients. The World Health Organization estimates that the incidence of counterfeit drugs is less than 1 percent in the U.S. But a much higher percentage of the medicines in some developing countries may be counterfeit. The Drug Supply Chain Security Act of 2013 includes new licensing, record-keeping, and product identification provisions designed to help reduce the threat of counterfeit drugs.

Another growing tension surrounds the Food and Drug Administration’s review and approval process for new prescription drugs. The U.S. prescription drug approval process is, on average, faster than that of any other major nation. Though some stakeholders believe that reform is needed to speed the process further. One proposal is for the FDA to find ways to incorporate in their review and approval process real-world evidence or data collected from sources outside traditional clinical trials that reflect the experiences of patients in real-world situations. Other proposals would provide additional market exclusivity for certain products. For example, some stakeholders have argued that the FDA should provide additional exclusivity for products that fill an unmet medical need. The FDA defines as providing a therapy where none exists, or that may be better than available therapy.

PRESCRIPTION DRUGS: Policy

PRESCRIPTION DRUGS: Policy

Access to drug therapies

Federal and state governments should implement proven programs to increase access to appropriate drug therapies that have been approved by the Food and Drug Administration (FDA). Such programs include comparative effectiveness research and academic detailing. They also should adopt value-based approaches to reducing prescription drug costs, e.g., price negotiation, well-designed preferred drug lists, and timely, easily accessible clinical and economic information for consumers, providers, and third-party payers.

Cost should not be used as the sole determinant of a prescription drug’s value. (See also Private Health Plans: Managed Care and Value-Based Purchasing in Medicare.)

Initiatives to limit beneficiaries’ out-of-pocket costs for prescription drugs should be implemented in conjunction with policy changes to reduce prescription drug prices.

Policies and legislation should not unnecessarily impede the substitution of biosimilar products that the FDA designates as interchangeable with brand-name biologic products. If when substituting biosimilar products for their brand-name biologic the FDA deems that the products are interchangeable, the process for counterparts should be the same as the process for substituting traditional generic products for their brand-name counterparts.

Reference pricing for clinically comparable prescription drugs should be used under the following conditions:

  • There is sufficient evidence to determine whether the products are clinically comparable.
  • The process for determining which products should be subject to reference pricing is transparent and predictable and allows for public comment from a wide range of stakeholders.
  • Medically necessary exceptions are permitted.
  • Patients are permitted to pay out of pocket to purchase more expensive products even if they are not medically necessary.

(see also Private Health Plans: Managed Care).

Drug selection and utilization management

As major payers for prescription drugs (through MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). Part D and MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets.), the U.S. Department of Health and Human Services and state governments should promote informed prescribing choices through unbiased comparative effectiveness research and academic detailing. Utilization management should reflect value-based insurance-design principles that promote access to high-value therapies. Medication therapy management services, particularly those delivered by pharmacists, should be targeted to people most at risk of adverse drug event-related medical visits and hospitalizations.

Reasonable pricing

Policymakers should encourage competition that enables purchasers to obtain price discounts from pharmaceutical manufacturers and efforts to increase transparency in the pharmaceutical supply chain that uphold or improve negotiation and competition. Cost savings achieved through negotiation, competition, or both should be passed along to consumers via lower prices, cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services., or enhanced benefits.

Efforts to address high prescription drug prices should be as holistic as possible to help reduce the possibility of cost-shifting.

Contracts between pharmacies and pharmaceutical managers should not include gag clauses that bar pharmacists from informing consumers that a drug may be available for a lower cost.

“Pay-for-delay” practices that allow brand-name drug manufacturers to extend market exclusivity beyond the anticipated patent expiration (by compensating the would-be generic manufacturer to delay market entry) should be prohibited. Such practices currently in effect should be investigated by the Federal Trade Commission to determine their impact on competition and drug prices.

States should use the purchasing power of MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets., other state-funded prescription drug benefit programs (such as those for state employees), and private purchasers (to the extent they choose to participate) to obtain prescription drug price discounts from manufacturers and pharmacies.

Efforts to expand the use of value-based purchasingA strategy used by Medicare, and other purchasers of health care services to measure and reward high-quality and cost-effective health care delivery. must ensure that the MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. program retains access to reduced prescription drug prices that are equal to or better than what they receive under the Best Price requirement.

States should pursue both intrastate and interstate prescription drug buying pool agreements that can reduce drug benefit costs for health plans and can provide price discounts to all residents who currently pay for their prescription drugs entirely out of pocket.

States should encourage price competition by developing online prescription drug price postings for consumers, based on retail pharmacy information classified by zip code. For prescribers, relative prices within therapeutic categories should be easily accessible through electronic prescribing systems.

Market access to biosimilars (generic biologicsBiologics are a subset of specialty prescription drugs that are derived from living organisms—human, animal, or microorganisms—or that contain components of living organisms.) should be accelerated through an FDA regulatory pathway that would reduce the 12-year market-exclusivity period granted to innovator biologicsBiologics are a subset of specialty prescription drugs that are derived from living organisms—human, animal, or microorganisms—or that contain components of living organisms. under the Affordable Care Act.

Transparency in the prescription drug development and pricing process should be increased, particularly in cases of drug manufacturers that benefit from taxpayer-funded research.

Activities that take place in the prescription drug supply chain—which includes wholesalers, pharmacy benefit managersA company that administers, or handles, the drug benefit program for an  employer or health plan. PBMs process and pay prescription drug claims and are responsible for creating and updating a health plan's drug formulary., and pharmacies—that artificially inflate prescription drug prices should be prohibited.

Federal, state, and local governments should ensure that prescription drug launch prices and subsequent pricing decisions are reasonable, justified, and support improved consumer access and affordability.

Assistance programs

State pharmaceutical assistance programs that combine enhanced access with pharmacist-led medication management services can help to optimize prescription drug use. Existing state programs, especially for MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). beneficiaries who do not qualify for the Part D Low-Income Subsidy, should be maintained. Pharmaceutical manufacturer-sponsored assistance programs should utilize a standardized application form to simplify the enrollment process.

Formularies and preferred drug lists (PDLs)

Well-designed drug formularies and PDLsA list of pharmaceutical products covered under a public or private insurance plan with no prior authorization. Prior authorization means a provider must obtain approval before prescribing in order for their cost to be covered under the plan. should be used to enhance quality and conserve resources.

Appeals of coverage decisions

A clinically sound and well-communicated exceptions and appeals process must be in place. The process should allow appeals to an independent, objective third party and should require as prompt a decision as a patient’s condition mandates. Data should be collected to permit at least an annual evaluation of the process’s appropriateness regarding clinician and consumer burden and effects on patient health outcomes.

Insurers should be required to show cause before denying payment for a particular drug when the prescriber has deemed the insurer’s recommended substitute to be medically inappropriate.

Step-by-step directions for initiating the exceptions and appeals process should be clearly identified to consumers. Patients who obtain a nonpreferred drug through the exceptions process should pay for it at the cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. tier level associated with preferred drugs if the prescriber determines that therapeutically similar preferred drugs are medically inappropriate for the enrollee.

Pharmacy benefit managers (PBMs)

The Federal Trade Commission should monitor relationships between PBMsA company that administers, or handles, the drug benefit program for an  employer or health plan. PBMs process and pay prescription drug claims and are responsible for creating and updating a health plan's drug formulary. and vertically integrated acquisitions for effects on consumer choice, clinical outcomes, and retail price.

The sharing of any claims records among PBMsA company that administers, or handles, the drug benefit program for an  employer or health plan. PBMs process and pay prescription drug claims and are responsible for creating and updating a health plan's drug formulary., insurers, health plans, pharmaceutical manufacturers, and pharmacies should include guarantees of patient confidentiality.

Gag clauses in contracts between pharmacies and pharmaceutical benefit managers contracts that bar pharmacists from informing consumers that a drug may be available at a lower cost should be eliminated.

Direct-to-consumer marketing

Evidence-based clinical decision support systems should be broadly integrated. State and federal efforts to limit gifts to prescribers through mandatory reporting could also help indicate the drug-therapy classes for which evidence-based decision support is most needed. Further, states should limit the dollar value of gifts from drug manufacturers and their representatives to prescribers. The effects of direct-to-consumer advertising for prescription drug products on consumer choice, cost, and clinical outcomes should be further studied.

The FDA should consider a moratorium on direct-to-consumer advertising for new prescription drug products until their manufacturers provide clear and convincing evidence of safety and effectiveness within the broader population. This would help counter the increasing influence of pharmaceutical marketing.

Detailing

States should adopt legislation to prohibit the sale of prescriber profiling data for commercial detailing purposes. States should implement academic detailing programs to educate prescribers through unbiased, evidence-based research. These should be supplemented by related consumer-awareness and educational-outreach campaigns.

 

Consumer education

Patient medication informationWritten information about a prescription medicine that is provided to a patient when it is dispensed. (PMI All written information that accompanies a prescription medicine including pharmacy-distributed, medicine-specific patient leaflets; medicine-specific and/or drug-class-specific medication guides that are approved by the US Food and Drug Administration; and patient leaflets that may be…) should be supplemented by pharmacist counseling at the point of dispensing and by other clinicians at the point of prescribing (including drug samples). Patient and caregiver preferences for PMI All written information that accompanies a prescription medicine including pharmacy-distributed, medicine-specific patient leaflets; medicine-specific and/or drug-class-specific medication guides that are approved by the US Food and Drug Administration; and patient leaflets that may be… delivery method, format, font size, and language should be established prior to dispensing a medication and should be delivered accordingly.

 

Consumers ability to choose mail-order pharmacies

States should prohibit insurers, health plans, and state MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. agencies from requiring enrollees to purchase prescription drugs only by mail.

States should not adopt laws and regulations that impose unnecessary and costly burdens on out-of-state mail-order pharmacies.

 

Consumer-friendly labeling

The FDA should develop patient-centered drug labels that emphasize, in easily readable fonts, the most important details for safe and effective use. Further, the agency should work more deliberately with manufacturers to avoid sound-alike and look-alike confusion among drug names and should work with prescribers, other clinicians, and consumers to establish appropriate responses to emerging labeling and drug safety problems.

 

Promotion of off-label use

Drug companies should continue to be prohibited from promoting drugs for uses that have not been approved by the FDA.

Federal and state agencies that administer public insurance programs should enforce reimbursement standards that permit reimbursements only for drugs that have a medically appropriate use and should devote more attention and enforcement resources to monitoring requests for reimbursement of drugs that have a history of inappropriate off-label promotion.

Clinical trials

Registration of all Phase II through Phase IV clinical trials on the federal website clinicaltrials.gov—including plain-language summaries of results, regardless of outcome—should be mandatory.

 

Research

Given the enhanced access to prescription drugs through MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). Part D and the ever-increasing utilization of drugs by older adults, funding for the FDA’s post-marketing surveillanceBecause not all side effects can be anticipated by preapproval studies, FDA operates post-marketing surveillance and risk assessment to identify adverse events. This is used to update drug labels, and even to reevaluate the approval or marketing. activities (e.g., Sentinel) and communication of emerging risk information should be allocated more equitably in relation to pre-marketing approval activities. Given the accelerated implementation of FDA-approved Risk Evaluation and Mitigation StrategiesREMS is a safety program that the FDA can require for medications with serious safety concerns to help ensure its benefits outweigh its risks. This includes communication plan directed to doctors, and other prescribers, pharmacies, and/or patients. (REMSREMS is a safety program that the FDA can require for medications with serious safety concerns to help ensure its benefits outweigh its risks. This includes communication plan directed to doctors, and other prescribers, pharmacies, and/or patients.) for many biologicsBiologics are a subset of specialty prescription drugs that are derived from living organisms—human, animal, or microorganisms—or that contain components of living organisms. and other prescription drugs, the Agency for Healthcare Research and Quality should undertake research to determine REMSREMS is a safety program that the FDA can require for medications with serious safety concerns to help ensure its benefits outweigh its risks. This includes communication plan directed to doctors, and other prescribers, pharmacies, and/or patients.’ effect on appropriate prescribing, patient adherence, and health outcomes.

Policymakers should continue to support the Patient-Centered Outcomes Research Institute, established by the ACAThe ACA—the shortened abbreviation for the Patient Protection and Affordable Care Act— is comprehensive health care reform legislation enacted by Congress and signed into law on March 23, 2010. . The institute’s research findings should be made easily accessible to all stakeholders.

 

Reimportation and importation

ReimportationThe act of bringing back into the US, legally or illegally, a prescription drug that was originally manufactured in the US, then exported for sale abroad, then imported back into the US. and importation of prescription drugs from licensed pharmacies and wholesalers operating in Canada should be permitted with strong safety standards. These standards should include pedigree requirements and anti-tampering and anti-counterfeiting measures and must be implemented as part of any importation system. The FDA should be given sufficient resources and authority to ensure that the safety of drugs imported from Canada or other countries is comparable to the safety of drugs dispensed in the U.S.

Antitrust

The Federal Trade Commission should continue monitoring restraints of trade in the generic drug industry. It should initiate appropriate action against any brand-name or generic drug manufacturer alleged to have violated federal antitrust laws.

Safety in expedited FDA review and approval processes

Any efforts to expedite FDA approval processes should ensure that patient safety remains paramount. Given the FDA’s limited resources, expedited approval should only be granted to products that meet an unmet medical need and substantially improve upon existing therapies.

FDA approval processes should only rely on real-world evidence if it has been conclusively proven that such evidence provides valid and reliable information about a drug’s benefit and harm.

FDA should be granted appropriate resources to conduct adequate post-marketing surveillanceBecause not all side effects can be anticipated by preapproval studies, FDA operates post-marketing surveillance and risk assessment to identify adverse events. This is used to update drug labels, and even to reevaluate the approval or marketing. activities. FDA should be granted the authority to hold manufacturers accountable if they do not submit required post-marketing studies.

Extra market exclusivity should only be granted in extremely limited circumstances and only for innovations that meet an unmet medical need and substantially improve upon existing therapies.

An increasing number of orphan drugs have additional indications that expand their use and sales dramatically. Orphan DrugAn orphan drug is a pharmaceutical agent developed to treat medical conditions which, because they are so rare, would not be profitable to produce without government assistance. The conditions are referred to as orphan diseases. Act incentives should only apply to medicines that fully meet the definition of an orphan drugAn orphan drug is a pharmaceutical agent developed to treat medical conditions which, because they are so rare, would not be profitable to produce without government assistance. The conditions are referred to as orphan diseases. .

FDA should establish clear guidelines for when and how pharmaceutical manufacturers can share scientifically valid and reliable pharmacoeconomic information with payers for drugs undergoing FDA review.

Anticompetitive Behavior

Federal policymakers should ensure that practices do not unfairly exclude competition in the prescription drug market.