Adjusting starting points for initial price offers: the example of ibrutinib.

The Inflation Reduction Act of 2022 (IRA) allows the Medicare program to negotiate drug prices beginning in 2024. Based on the guidance in the statute, CMS has selected specific data items to use to adjust initial price offers for 10 drugs in the decision-making process. Although much of the data are publicly available, some of these data items will need to be collected directly from drug companies. A 2019 US House of Representatives Committee on Oversight and Accountability investigative report collected a wide range of data from manufacturers of 12 high-revenue drugs that show what is available from the drug companies, including development costs, marketing, pricing, competition, and patent status. This article focuses on the data obtained for ibrutinib, an oral medication for treating hematologic malignancies, which is one of the only drugs reviewed by the committee that also has been selected for Medicare price negotiation. We examine data that can be obtained only from the drug manufacturer that the IRA has explicitly identified as being used to determine the price and suggest potential negotiation strategies for CMS in response.

Spending on Dual Over-the-Counter and Prescription Drugs in the Medicare Part D Program.

This study compares Medicare and patient spending for dual over-the-counter and prescription drugs with their over-the-counter cash prices.

Sociodemographic and spending characteristics of Medicare beneficiaries taking prescription drugs subject to price negotiations.

BACKGROUND: The 2022 Inflation Reduction Act authorizes Medicare to negotiate the prices of 10 drugs in 2026 and additional drugs thereafter. Understanding the sociodemographic and spending characteristics of beneficiaries taking these specific drugs could be important describing the impact of the legislation. OBJECTIVE: To describe sociodemographic and spending characteristics of Medicare beneficiaries who use the 10 prescription drugs ("negotiated drugs") that will face Medicare drug price negotiations in 2026. METHODS: A 20% sample of Medicare Part D beneficiaries from 2020 (n = 10,224,642) was used. Sociodemographic and spending characteristics were descriptively reported for beneficiaries taking the negotiated drugs, including subgroups by low-income subsidy (LIS) status and by drug, and for Part D beneficiaries not taking negotiated drugs. RESULTS: Part D beneficiaries taking a negotiated drug compared with Part D beneficiaries not taking a negotiated drug overall had similar sociodemographic characteristics, more comorbidities (3.9 vs 2.2) and higher mean [median] Medicare ($33,882 [$18,251] vs $12,366 [$3,429]) and out-of-pocket (OOP) spending ($813 [$307] vs $441 [$160]). There was variation in characteristics by LIS status. The mean age was highest among non-LIS beneficiaries taking a negotiated drug compared with LIS beneficiaries taking a negotiated drug and beneficiaries not taking a negotiated drug (76.2 vs 69.9 vs 71.4). Among beneficiaries using negotiated drugs, a higher percentage of LIS beneficiaries compared with non-LIS was female (59.7% vs 48.0%), was Black (20.9% vs 6.6%), and resided in lower-income areas (39.1% vs 20.3%). Mean [median] annual Part D OOP spending for negotiated drugs was $115 [$59] for beneficiaries with LIS and $1,475 [$1,204] for beneficiaries without LIS. There were also differences depending on which negotiated drug was used. Drugs for cancer and blood clots had the highest proportions of White users, whereas type 2 diabetes and heart failure drugs had the highest proportions of Black users and beneficiaries residing in lower-income areas. Annual Part D OOP costs were lowest for sitagliptin (LIS: $104 [$60], non-LIS: $1,391 [$1,153]) and highest for ibrutinib (LIS: $649 [$649], non-LIS: $6,449 [$6,867]). Among non-LIS beneficiaries, 24% (22% to 76%) had more than $2,000 in OOP costs. CONCLUSIONS: Inflation Reduction Act OOP spending caps and LIS expansion will lower prescription drug costs for beneficiaries with OOP costs exceeding $2,000 who are mostly White and live in higher-income areas, insulin users who are disproportionately Black with multiple chronic conditions, and beneficiaries with low incomes. However, these provisions will not impact the 76% of non-LIS beneficiaries using negotiated drugs who have OOP costs that are still substantial but below $2,000. Negotiations could reduce OOP costs through reduced coinsurance payments for this group, which is older and has more chronic conditions compared with beneficiaries not taking negotiated drugs. Part D plan design, spending, and utilization changes should be monitored after negotiation to determine if further solutions are needed to lower OOP costs for this group.

Pharmacy Benefit Manager Pricing and Spread Pricing for High-Utilization Generic Drugs.

This cross-sectional study uses Medicare Part D claims for high-utilization generic drugs to analyze gross profits accumulated by pharmacy benefit managers, pharmacies, wholesalers, and manufacturers in the pharmaceutical supply chain.

Role of Registries in Medicare Coverage of New Alzheimer Disease Drugs.

This Viewpoint discusses how the design of the Centers for Medicare & Medicaid Services (CMS) registry could impact Medicare's ability to evaluate whether monoclonal antibodies are reasonable and necessary for patients with Alzheimer disease and help physicians understand when the drug is most beneficial.

Estimated Savings From Using Added Therapeutic Benefit and Therapeutic Reference Pricing in United States Medicare Drug Price Negotiations.

OBJECTIVES: US Medicare will begin negotiating prices for top-selling drugs in 2023. This study describes and estimates potential savings from a therapeutic reference pricing approach, linking comparative effectiveness with the costs of existing therapeutic alternatives, that Medicare could use to adjust the starting point for price negotiations. METHODS: First, we identified target drugs likely to be selected for Medicare negotiation. Second, we identified comparative effectiveness ratings for target drugs based on French Haute Autorité de Santé reports. For target drugs with minor or no added benefit, we identified therapeutic alternatives based on the French reports and US clinical guidelines. For each target drug with minor or no added benefit, we computed the difference between spending based on the drug's estimated statutory ceiling price and spending based on the weighted average cost of therapeutic alternatives or the lowest cost therapeutic alternative. Finally, we calculated potential annual savings from using a starting point in negotiations based on costs of therapeutic alternatives. RESULTS: Potential drug-level savings to Medicare from using a starting point in negotiations based on average spending across therapeutic alternatives, compared with using the statutory ceiling price alone, ranged from $186 541 340 to $2 173 441 197. Potential savings from using a starting point based on the lowest cost alternative ranged from $199 872 163 to $3 605 904 765. CONCLUSIONS: Although we do not expect Medicare to rely on French comparative effectiveness assessments, this study demonstrates the potential for additional savings when using comparative effectiveness and costs of therapeutic alternatives to inform the starting price for negotiations.

Hospital Prices For Commercial Plans Are Twice Those For Medicare Advantage Plans When Negotiated By The Same Insurer.

Most major insurers operate in both the commercial health insurance and Medicare Advantage (MA) markets. We investigated the ratio of commercial-to-MA prices negotiated by the same insurer, in the same hospital and for the same services, using 2022 price information disclosed by hospitals in compliance with the hospital price transparency rule. Insurers negotiated median hospital prices for commercial plans that were two to three times higher than their MA prices in the same hospital for the same service. The median commercial-to-MA price ratio in the same hospital varied, from 1.8 for surgery and medicine services to 2.2 for laboratory tests and emergency department visits and 2.4 for imaging services. In multivariable Poisson regression analysis, higher ratios were associated with system-affiliated, nonprofit, and teaching hospitals, as well as with large national insurers. These findings reflect the differences in financial incentives and regulatory policies in the commercial and MA markets. Because insurers respond to differing incentives by obtaining different negotiated prices across markets, policy and practice efforts that alter incentives for insurers may have the potential to lower commercial prices.

Incorporating Added Therapeutic Benefit and Domestic Reference Pricing Into Medicare Payment for Expensive Part B Drugs.

OBJECTIVES: Identify expensive Part B drugs and evidence for each drug's added benefit and model a reimbursement policy for Medicare that integrates added benefit assessment and domestic reference pricing. METHODS: A retrospective analysis using a 20% nationally representative sample of 2015 to 2019 traditional Medicare Part B claims. Expensive drugs were defined as having average annual spending per beneficiary exceeding the average annual social security benefit ($17 532 in 2019). For expensive drugs identified in 2019, added benefit assessments conducted by the French Haute Autorité de Santé were collected. For expensive drugs with a low added benefit rating, comparator drugs were identified in French Haute Autorité de Santé reports. For each comparator, average annual spending per beneficiary in Part B was computed. Potential savings from 2 reference pricing scenarios were calculated: reimbursing expensive Part B drugs with low added benefit at the level of each drug's (1) lowest cost comparator and (2) beneficiary-weighted-average cost of all comparators. RESULTS: The number of expensive Part B drugs grew from 56 in 2015 to 92 in 2019. Of the 92 expensive drugs in 2019, 34 offer low added benefit. Implementing reference pricing for these expensive drugs with low added benefit could have saved an estimated $2.1 billion if prices were set based on spending for their lowest cost comparator, or $1 billion if prices were set based on the weighted average of spending for comparators. CONCLUSION: Reference pricing based on added benefit assessment could be used to address the launch prices for expensive Part B drugs with low added benefit.

Comparison of Price Index Methods and Drug Price Inflation Estimates for Hepatitis C Virus Medications.

Importance: Measuring drug price inflation is challenging because new drugs continually enter the market, some drugs transition from branded to generic, and current inflation indexes do not account for these market basket changes. Instead, they measure the price increases after new drugs have been launched. Therefore, the public pays the higher costs of newer and usually more expensive drugs, but the inflation indexes do not reflect the increases over existing drugs previously used to treat the same conditions. Objective: To assess how price index methods can affect estimates of drug price inflation using a case study of hepatitis C virus (HCV) medication and to explore other approaches for constructing a price index. Design, Setting, and Participants: This cross-sectional study used data from outpatient pharmacies to compile a list of all HCV medications that were ever on the market (brand and generic) from 2013 to 2020. Using National Drug Codes of HCV drugs, a 20% nationally representative sample of Medicare Part D claims from 2013 to 2020 was queried. Alternative drug price indexes, including product-level vs class-level product and quantity definitions were developed in which gross vs net price definitions were used and an adjustment was created and applied to capture treatment duration because newer drugs often required a shorter duration. Main Outcomes and Measures: Price index value and rate of inflation from 2013 to 2020 for each methodologic approach to constructing a drug pricing index. Results: In all, 27 different HCV drug regimens were identified in Medicare Part D claims in 2013 to 2020. A product-level approach for measuring inflation estimated a 10% gross drug price increase from 2013 to 2020 for HCV drugs, whereas a class-level approach including the higher prices of the new drugs showed a 31% gross price increase. After adjusting for manufacturer rebates to estimate net prices, the findings showed that HCV drug prices fell by 31% from 2013 to 2020. Conclusions and Relevance: The findings of this cross-sectional study indicate that the current product-level methods to estimate drug price inflation underestimated price increases for HCV drugs by failing to include the high launch prices of new market entrants. Using a class-level approach, the index captured higher spending on new products at launch. Prescription-level analyses, which did not consider shorter durations of treatment, overestimated price increases.

Estimating Changes in Medicare Part D and Commercial Insurer Insulin Spending Amid Planned State-Led Biosimilar Insulin Production in California.

This cross-sectional study evaluates the cost savings of state-led manufacturing and selling of biosimilar insulin.

Comparison of Out-of-Pocket Spending on Ultra-Expensive Drugs in Medicare Part D vs Commercial Insurance.

Importance: Little is known about how out-of-pocket burden differs between Medicare and commercial insurance for ultra-expensive drugs. Objective: To investigate out-of-pocket spending for ultra-expensive drugs in the Medicare Part D program vs commercial insurance. Design, Setting, and Participants: This was a retrospective, population-based cohort study of individuals using ultra-expensive drugs included in a 20% nationally random sample of prescription drug claims from Medicare Part D and individuals aged 45 to 64 years using ultra-expensive drugs included in a large national convenience sample of outpatient pharmaceutical claims from commercial insurance plans. Claims data from 2013 through 2019 were used, and data were analyzed in February 2023. Main Outcomes and Measures: Claims-weighted mean out-of-pocket spending per beneficiary per drug by insurance type, plan, and age. Results: In 2019, 37 324 and 24 159 individuals using ultra-expensive drugs were identified in the 20% Part D and commercial samples, respectively (mean [SD] age, 66.2 [11.7] years; 54.9% female). A statistically significant higher share of commercial enrollees vs Part D beneficiaries were female (61.0% vs 51.0%; P < .001), and a statistically significantly lower share were using 3 or more branded medications (28.7% vs 42.6%; P < .001). Mean out-of-pocket spending per beneficiary per drug in 2019 was $4478 in Part D (median [IQR], $4169 [$3369-$5947]) compared with $1821 for commercial (median [IQR], $1272 [$703-$1924]); these differences were statistically significant every year. Differences in out-of-pocket spending comparing commercial enrollees aged 60 to 64 years and Part D beneficiaries aged 65 to 69 years exhibited similar magnitudes and trends. By plan, mean out-of-pocket spending per beneficiary per drug in 2019 was $4301 (median [IQR], $4131 [$3000-$6048]) in Medicare Advantage prescription drug (MAPD) plans, $4575 (median [IQR], $4190 [$3305-$5799]) in stand-alone prescription drug plans (PDPs), $1208 (median [IQR], $752 [$317-$1240]) in health maintenance organization plans, $1569 (median [IQR], $838 [$481-$1472]) in preferred provider organization plans, and $4077 (median [IQR], $2882 [$1075-$4226]) in high-deductible health plans. There were no statistically significant differences between MAPD plans and stand-alone PDPs in any study year. Mean out-of-pocket spending was statistically significantly higher in MAPD plans compared with health maintenance organization plans and in stand-alone PDPs compared with preferred provider organization plans in each study year. Conclusions and Relevance: This cohort study demonstrated that the $2000 out-of-pocket cap included in the Inflation Reduction Act may substantially moderate the potential increase in spending faced by individuals who use ultra-expensive drugs when moving from commercial insurance to Part D coverage.

The Relationships Among Cash Prices, Negotiated Rates, And Chargemaster Prices For Shoppable Hospital Services.

Hospitals must disclose their cash prices, commercial negotiated rates, and chargemaster prices for seventy common, shoppable services under the hospital price transparency rule. Examining prices reported by 2,379 hospitals as of September 9, 2022, we found that a given hospital's cash prices and commercial negotiated rates both tended to reflect a predetermined and consistent percentage discount from its chargemaster prices. On average, cash prices and commercial negotiated rates were 64 percent and 58 percent of the corresponding chargemaster prices for the same procedures at the same hospital and in the same service setting, respectively. Cash prices were lower than the median commercial negotiated rates in 47 percent of instances, and most likely so at hospitals with government or nonprofit ownership, located outside of metropolitan areas, or located in counties with relatively high uninsurance rates or low median household incomes. Hospitals with stronger market power were most likely to offer cash prices below their median negotiated rates, whereas hospitals in areas where insurers had stronger market power were less likely to do so.

Trustee Compensation And Charity Care Provision In US Nonprofit Hospitals.

In 2019 more than one-third of US nonprofit hospitals compensated their trustees. These hospitals provided less charity care than nonprofit hospitals that did not compensate their trustees. We found that trustee compensation was negatively associated with hospitals' charity care provision and that it may affect the self-selection of trustees and their fulfillment of their fiduciary duties.

When States Mandate Hospital Community Benefit Reports, Provision Increases.

GOAL: We examined the variation in community benefit and charity care reporting standards mandated by states to determine whether state-mandated community benefit and charity care reporting is associated with greater provision of these services. METHODS: We used 2011-2019 data from IRS Form 990 Schedule H for 1,423 nonprofit hospitals to create a sample of 12,807 total observations. Random effects regression models were used to examine the association between state reporting requirements and community benefit spending by nonprofit hospitals. Specific reporting requirements were analyzed to determine whether certain requirements were associated with increased spending on these services. PRINCIPAL FINDINGS: Nonprofit hospitals in states that required reports spent a higher percentage of total hospital expenditures on community benefits (9.1%, SD = 6.2%) compared to states without these requirements (7.2%, SD = 5.7%). A similar association between the percentage of charity care and total hospital expenditures (2.3% and 1.5%) was found. The greater number of reporting requirements was associated with lower levels of charity care provision, as hospitals allocated more resources to other community benefits. PRACTICAL APPLICATIONS: Mandating the reporting of specific services is associated with greater provision of certain specific services, but not all. A concern is that when many services must be reported, the provision of charity care might be reduced as hospitals choose to allocate their community benefit dollars to other categories. As a result, policymakers may want to focus their attention on the services they most want to prioritize.

Competition And Vulnerabilities In The Global Supply Chain For US Generic Active Pharmaceutical Ingredients.

The US supply of generic drugs is heavily dependent on the global supply chain for sources of generic active pharmaceutical ingredients (APIs) for the US pharmaceutical market. Data from Clarivate Analytics' Cortellis Generics Intelligence database were analyzed to perform a systematic examination of generic APIs produced globally for the US market during 2020-21. We identified a total of 565 facilities producing 1,379 unique generic APIs across forty-two countries. India, China, and Italy were the top producers; 14 percent of APIs were manufactured in the US. About a third of APIs were manufactured by a single facility, and another third were manufactured by two or three facilities. More than one in every five APIs reflected markets in which current Food and Drug Administration standards would have failed to detect low competition because there were three or fewer API manufacturers despite there being four or more manufacturers of finished generic drugs. Monitoring the API supply is crucial to identifying vulnerabilities in the US pharmaceutical supply chain and identifying drugs that could represent potential priorities for domestic production. Incentives in the US may be needed to support API production to safeguard against supply-chain disruptions.

Association Between Drug Characteristics and Manufacturer Spending on Direct-to-Consumer Advertising.

Importance: Some drugs are heavily marketed through direct-to-consumer advertising. Objective: To identify drug characteristics associated with a greater share of promotional spending on advertising directly to consumers. Design, Setting, and Participants: Exploratory cross-sectional analysis of drug characteristics and promotional spending for the 150 top-selling branded prescription drugs in the US in 2020 as identified from IQVIA National Sales Perspectives data. Promotional spending data were provided by IQVIA ChannelDynamics. Exposures: Drug characteristics (total 2020 sales; total 2020 promotional spending; clinical benefit ratings; number of indications, off-label use; molecule type; nature of condition treated; administration type; generic availability; US Food and Drug Administration [FDA] approval year, World Health Organization anatomical therapeutic chemical classification; Medicare annual mean spending per beneficiary; percent sales attributable to the drug; market size; market competitiveness) assessed from health technology assessment agencies (France's Haute Autorité de Santé and Canada's Patented Medicine Prices Review Board) and drug data sources (Drugs@FDA, the FDA Purple Book, Lexicomp, Merative Marketscan Research Databases, and Medicare Spending by Drug data). Main Outcomes and Measures: Proportion of total promotional spending allocated to direct-to-consumer-advertising for each drug. Results: The 2020 median proportion of promotional spending allocated to direct-to-consumer advertising was 13.5% (IQR, 1.96%-36.6%); median promotional spending, $20.9 million (IQR, $2.72-$131 million); and median total sales, $1.51 billion (IQR, $0.97-$2.26 billion). Of the 150 best-selling drugs, 16 were missing data and key covariates; therefore, the primary study sample comprised 134 drugs. After adjustment for multiple drug characteristics, the mean proportion of total promotional spending allocated to direct-to-consumer advertising for the remaining 134 drugs was an absolute 14.3% (95% CI, 1.43%-27.2%; P = .03) higher for those with low added clinical benefit than for those with high added clinical benefit and an absolute 1.5% (95% CI, 0.44%-2.56%; P = .005) higher for each 10% increase in total sales. Conclusions and Relevance: Among top-selling US drugs in 2020, a rating of lower added benefit and higher total drug sales were associated with a higher proportion of manufacturer total promotional spending allocated to direct-to-consumer advertising. Further research is needed to understand the implications of these findings.

Developing Prioritization Criteria to Identify Target Drugs for CalRx, the California Generic Drugs Initiative.

OBJECTIVES: This study aimed to establish criteria to identify priority drugs for CalRx, a California-sponsored initiative to support the manufacture and distribution of affordable generic drugs. METHODS: A web-based ranking exercise was implemented with key stakeholders in August 2020, using pricing, spending, and public health criteria identified through a review of academic literature and public health agency reports. A total of 39 of 40 invited stakeholders in 4 different categories-patient advocates, healthcare providers, health insurers, and health policy and economic experts-participated in this study (98% response rate). RESULTS: Drugs that treat large populations, drugs that represent high cost to payors, and drugs that represent high cost to consumers were ranked a priority, receiving > 10% of ranking weights. Drugs that treat conditions with high morbidity or mortality, drugs without therapeutic alternatives, and drugs treating vulnerable populations represented criteria of further interest (9%-10% of weights). Shortage risk and curative effect (8%-9% of the weights), high price increases, communicable disease treatments, and high unit prices (< 8% of the weights) represented the bottom of the priority distribution. CONCLUSIONS: This study suggests that drugs that treat large populations, drugs that represent large costs to payors, and drugs that represent large costs to consumers should be the priority for California's CalRx generic drug initiative. A prioritizing algorithm will assist California in determining top drugs to target from a public health and spending perspective as it plans the rollout of the CalRx initiative and negotiates with drug manufacturers.

Estimating Savings Opportunities From Therapeutic Substitutions of High-Cost Generic Medications.

Importance: Use of generics is generally understood as a cost-saving practice. However, pharmacy benefit managers have an incentive to place higher-priced generic drugs on insurers' drug formularies to profit by creating a large difference between the price negotiated with pharmacies and the price paid by insurers (what is known as spread pricing). Objective: To examine price differentials and savings potential between high-cost generics and corresponding therapeutic alternatives of same clinical value and lower cost. Design, Setting, and Participants: This cross-sectional analysis examined the top 1000 generics in Colorado's all-payer claims database (CO-APCD) in 2019. High-cost generics and lower-cost generic therapeutic alternatives of same clinical value constituted the study sample. Data were analyzed from January 2019 to December 2019. Exposures: Generic drug prices measured by transaction prices, average wholesale price (AWP), and national drug acquisition average cost (NADAC). Main Outcomes and Measures: Price differentials between the high-cost generics and the corresponding therapeutic alternatives. Levels of discounts and savings that could be achieved if the high-cost generics had been substituted by their therapeutic alternatives. Results: This cross-sectional study of the top 1000 CO-APCD generics identified 45 high-cost products that had lower-cost therapeutic alternatives of same clinical value. Overall, high-cost generics were 15.6 times more expensive than their therapeutic alternatives (median values). If the lower-cost alternatives had been used, total spending would have been reduced from $7.5 million to $873 711, resulting in 88.3% savings. Most substitutions (28 of 45 [62.2]%) involved different dosage forms or different strengths of the same drug and provided mean (SD) discounts of 94.9% (3.8%) and 77.1% (19.9%), respectively. Conclusions and Relevance: In this study, replacing high-cost generics with lower-cost alternatives of same clinical value would produce savings of nearly 90%. Plan sponsors should be aware that some generics are associated with higher spending and should periodically review the specific products driving their generic drug spending. Substitution of high-cost generics may provide a simple pathway to offer the same therapeutic benefit at lower cost to patients and insurers.