Pharmacy Industry News: Senator Urges FTC to Examine Link Between Drug Shortages, Pharma Consolidation
Senator Urges FTC to Examine Link Between Drug Shortages, Pharma Consolidation
A critical shortage of drugs, especially chemotherapy and pain relief medications, is endangering patient safety and costing hospitals an estimated $200 million per year as they scramble to procure substitutes, often at higher prices.
Now Sen. Herb Kohl (D-WI) wants the Federal Trade Commission to examine the impact that consolidation in the pharmaceutical industry may be having on the nation’s drug supply.
Kohl said in a letter to FTC Chairman Jonathan Leibowitz that he was prompted to make the request after fielding numerous complaints from healthcare providers about widespread drugs shortages. Kohl is chairman of the Subcommittee on Antitrust, Competition Policy and Consumer Rights, which oversees the FTC.
“As you know, pharmaceutical industry consolidation in recent years has left fewer manufacturers for both branded and generic drugs,” Kohl said in his letter. “There have been at least nine major pharmaceutical mergers since 2000, most of them valued at over $40 billion each. Just two years ago, in 2009, for example, there were three major mergers – the $68 billion Pfizer/Wyeth merger, the $ 41 billion Merck/Schering Plough merger, and the $47 billion Roche/Genetech merger. And just a few weeks ago, two of the leading generic drug companies, Teva and Cephalon, announced their intention to merge, a transaction valued at $7.5 billion. The impact of this consolidation may be having a serious effect on the availability of prescription drugs.”
Roslyne Schulman, director for Policy Development at the American Hospital Association, told HealthLeaders Media that healthcare providers have been dealing with drug shortages for years, but that the problem has grown considerably in the last year or so. “It’s a huge and growing issue. As the Senator mentioned, the number of shortages is unprecedented and it’s affecting the ability of hospitals to provide care. They sometimes don’t find out about a shortage until they try to place an order and they’re told there is a backlog, with no idea when the shortage will be resolved,” she says.
Schulman says the biggest shortages are linked to “the old standby generic drugs, many of them are what are referred to as sterile injectable drugs.” Those are the biggest issue with regard to shortages now. A couple of generic manufacturers have been working with this coalition. They have been part of the discussion, looking at potential solutions.
Karl Uhlendorf, the deputy vice president of the Pharmaceutical Research and Manufacturers of America, said in a statement that “myriad factors contribute to drug shortages, including natural disasters; shifts in clinical practices; wholesaler and pharmacy inventory practices; raw material shortages; changes in hospital and pharmacy contractual relationships with suppliers and wholesalers; adherence to distribution protocols mandated by the Food and Drug Administration; individual company decisions to discontinue specific medicines; manufacturing challenges and consolidations.
“Regardless of the cause, in order to provide patients with uninterrupted access to medicines it is important for all of us who provide life-saving medications to work collaboratively to minimize unexpected disruptions in the supply of vital medicines,” Uhlendorf said.
Schulman said the AHA supports Senate bill (S.296) , which would strengthen FDA oversight of the nation’s drug supply. The bill requires drug manufacturers to notify FDA at least six months in advance of a planned discontinuation or interruption to the drug supply, with penalties in place for noncompliance; requires the FDA to post on its Web site information about drug shortages and to distribute that information to providers and patients’ advocacy groups so they can plan ahead; and requires FDA to develop criteria to identify drugs that are vulnerable to shortages, and plan for ways to mitigate or prevent the shortage.
Government action, however, may not be enough.
“It’s going to be a combination of industry actions, regulatory change, and some legislative change,” Schulman says. “I don’t think FDA has the authority it needs to mitigate these issues.”
Bill targeting pill mills rattle pharmacists
The Legislature’s passage in May of a bill targeting South Florida’s booming “pill mill” industry has local pharmacists very nervous, but also breathing a sigh of relief.
In its original form, House Bill 7095 would have imposed severe restrictions on any pharmacy or doctor dispensing addictive Schedule II and III drugs such as oxycodone, hydrocodone and morphine.
What had local pharmacists really worried was language stating that only “publicly traded” drug store chains in Florida that had “more than $100 million in taxable assets” would be granted the right under state law to dispense those Schedule II and III narcotics.
Had the bill passed in that form, it would have severely impacted, or even closed down, many local independent pharmacies, and put a lot of people out of work.
But that language was removed, much to the relief of independent pharmacy owners statewide.
As passed by the House and Senate in final form, House Bill 7095 does require all 4,000-plus pharmacies in Florida — regardless of size — to go through a new and very stringent repermitting process by July 1, 2012.
And that is a big concern for pharmacists like Kim Cadenhead, owner of Kim’s Family Pharmacy in Cantonment.
“We hope this new legislation requiring stricter background checks will help accomplish the goal of shutting down pill mills,” Cadenhead said.
But what worries Cadenhead and others is that the self-imposed regulations set by pharmacists are largely null and void. House Bill 7095 effectively takes those standards and puts them entirely in the hands of legislators.
Despite those concerns, Florida Pharmacy Association Executive Director Michael Jackson said the repermitting standards will go a long way toward eliminating many of the bad actors operating the state’s pill mills.
“The intent of the legislation, I believe, is to further define who can own and operate a pharmacy in Florida,” Jackson said. “And it’s also to make sure those who do own a pharmacy permit are not convicted felons. Under the old law, felons could own pharmacies.”
Cadenhead doubts state health officials have the manpower to conduct background checks and process more than 4,000 new permits within a year.
And Jackson, too, is concerned about the July 2012 deadline.
“Until the Department of Health writes and issues those new regulations, pharmacy owners won’t know what they have to do to get their new permits,” he said.
For now, pharmacies remain in the dark, their futures uncertain; bitter medicine for those who have always followed the very laws pill mill operators are abusing.
Officials looks into new prescription plan that could save Fall River $450K
A new prescription drug benefits business model, launched less than a year ago in New Jersey, would save the city a guaranteed $400,000 to $450,000. And, according to the company head and city officials advocating the program, it could deliver more than $1 million in annual savings, particularly if school employees join the plan.
The concept is to recoup available rebates and repackaging profits on drugs, currently being kept by many pharmacies, that produce variations in the average wholesale price, said Gary Sekulski, founder of Prescription Corporation of America, based in Denville, N.J.
Sekulski is set to present what he called a unique savings model to the City Council’s Committee on Finance on Tuesday night at 6 at Government Center at the urging of Councilors Eric Poulin and Raymond Mitchell.
They initiated a resolution the council passed this month to hear Sekulski’s company, local pharmacists and selected union officials discuss the potential savings.
Poulin, Mitchell and Sekulski were joined by local pharmacists Thomas Cory of Standard My Neighborhood Pharmacy and Thomas Pasternak of Walsh Pharmacy in making their arguments to The Herald News editorial board last week.
The city spent $11.2 million on prescription drugs, Sekulski said, for its approximately 5,000 employees and retirees in 2010.
“The industry can assign different bar code billing to the same product,” Poulin said, “and the city’s been paying these bills without question for years.”
ADVOCATING FOR CHANGE
Poulin said he’s been advocating a change from the way the city’s been covering the cost of prescriptions under its self-insured plan for more than a year — sometimes meeting resistance, he said.
Sekulski, who said he’s worked in the insurance industry since 1982 and specializes in cost containment, said high profits and discrepancies are the result of more than 60 pharmacy benefit management companies that fill mail-order prescriptions and work as intermediaries between insurers and pharmacies.
He presented a repackaging spreadsheet from “dataRX” Nov. 8, showing a couple dozen pricing examples of 40 milligrams of Nexium, a drug used to provide heartburn relief from acid reflux.
Sekulski’s pricing list varied widely — up to double the price and more — for 30 repackaged pills from the Astra Zeneca brand name.
Poulin said the analysis they received showed, for example, large cost discrepancies between the same drug and quantity for a worker’s compensation claim versus a standard purchase.
“I don’t know how the heck this has gone on for so long without anybody knowing about it. It does beg the question,” Mitchell admitted.
At one point, Sekulski said the “PBM” companies, handling the wholesaling from the manufacturer “can keep 30 to 45 percent” of the cost. The PBMs “can bill a client — the city — higher than pharmacies are billed,” he said. He did not present detailed data to back that up.
HOW IT WORKS
He, along with the two councilors and the two local pharmacists, told The Herald News that Sekulski would form “a partnership” with the local independent pharmacies. Prescription Corporation of America would offer comparable or better mail-order services than those currently available to the city’s employees and retirees.
One thing Poulin and Mitchell stressed was that city participants in the prescription plan would retain the option to continue buying drug prescriptions the same way they have been — by mail order, or at drug-store chains or independent pharmacies.
The city could stand to save more if local pharmacies handled the scripts than a chain drug store, transferring the shared business to Sekulski.
“I will not do a chain as a model,” Sekulski said, “because I can’t disrupt their business model.”
Sekulski said a chain drug store can work out its repackaging of drugs with the manufacturer to benefit its profits.
‘MAJOR SAVINGS FOR THE CITY’
Employee co-payments would remain the same, he and city officials said.
There would not, therefore, be a need to negotiate changes with the unions, Poulin said. However, the city could add “incentives” for participants to purchase prescriptions at independent pharmacies, which would offer lower drug prices to the city.
“It looked like a major savings for the city,” said Officer Michael Perreira, police union president, who — along with Lt. Michael Coogan, head of the firefighters union — met recently with Poulin and Mitchell about the proposal.
“We both agreed we’d be very interested in hearing what they have to say,” Perreira said. Coogan, also a member of the city Insurance Advisory Committee, could not be reached for comment.
A PLAN PROVED SUCCESSFUL
Sekulski said he spent two years researching his model before launching last July. He said there are 11 municipalities, counties and school districts in this program, all in New Jersey.
He named Middlesex County as one self-insured client. He said they spent $18 million on drugs for plan participants — about $7 million more than Fall River — and his company guaranteed a $500,000 savings.
“It looks like they’ll save over $1 million,” he said.
The Herald News was awaiting a requested list of his clients and contacts on Friday.
City Administrator Shawn Cadime said he participated in talks with Sekulski, Poulin, Human Resources Director Madelyn Coelho, the local pharmacists and the city’s longtime insurance consultant, Group Benefits Strategies in Auburn, represented by Ginger Hastings.
“What we’re trying to do is find any kind of savings we can in health care,” Cadime said, noting significant yearly increases in costs.
Cadime said when they met in April “they gave a great presentation. It seems worthwhile to look at,” he said, “if the city can save even $300,000 to $400,000.”
Responding enthusiastically, he said, “Anytime anybody’s guaranteeing money it’s really hard to pass up. (But) We need to ensure we’re not missing any details.”
He said they were awaiting additional information from GBS’ Hastings. “We’d be the first in Massachusetts,” he added.
A MORE CAUTIOUS APPROACH
Mayor Will Flanagan took a more cautious approach while stating that Cadime and his staff had the financial details.
“This is one of those cost-saving measures we’re looking at right now,” Flanagan said.
He said it “may not be included” for the upcoming budget starting July 1, “but it may be implemented this year or early next year before the close of the books for fiscal year 2012.”
“We’re still going through the detailed process. We’re doing some more research,” said Coelho, who’s coordinated the information. “We should know a lot more in a week or so.”
IRONING OUT DETAILS
She said the question of changing the mail-order user from Express Scripts and whether a change would need to go out to bid needs to be determined.
According to Sekulsi, and based upon preliminary data, he said, “We will guarantee someplace between $400,000 and $450,000.” He said typical rebates the self-insured municipalities could receive for buying in quantity had not been passed along to Fall River, according to information given to him.
Because costs to clients for school employees are put in the cheapest wholesale classification with hospitals, inclusion of the School Department could increase the guaranteed amount to a range of $1 million to $1.3 million, he said.
When asked how he made his money, Sekulski said his commission would be “from 50 to 70 percent” for any additional savings above the guaranteed amount listed in the contract with the city.
That would mean he’d pocket that percentage above the $400,000 or what he guaranteed.
Poulin said the city’s insurance consultant, GBS, was slow providing necessary data and gave an incomplete year-to-year comparison of expenses for this new company to draft a specific financial contract.
The head of GBS, Jack Sherry, whose company consultants on health care costs to 190 municipalities and school districts, said he’d try to reach Hastings to return a call about their position on Sekulski’s proposal. None was immediately received Friday.
Cory said he became familiar with Sekulski’s fledgling company during a pharmaceutical conference. He predicted that if the city accepts the model, the five local pharmacies in the city “would have 90 percent of the former mail-order business.”
Pasternak said the increased business would also likely mean more jobs for city residents as the local pharmacies expand their staff to meet the added demand.
Drug industry: Nation aims for role as global pharmacy
India’s commerce ministry is aiming to carve out a role for the nation as the world’s pharmacy.
Once known for making low-cost copycat drugs for its price-sensitive domestic market, India’s pharmaceutical industry has emerged as a global force, supplying low-cost, quality off-patent medication.
It increasingly sends drugs to western markets such as the US as well as to developing economies.
India’s pharmaceutical exports grew robustly during the financial crisis and were estimated at $10.3bn in 2010-11, up more than 10 per cent on the previous year and nearly double the level of five years earlier, the commerce ministry says.
But in a fragmented global generics market currently estimated at $85bn a year, India’s government, and its pharmaceutical companies, believe there is plenty of room to grow, especially as numerous blockbuster drug patents expire in the next few years.
India aims to increase drug exports to $25bn by 2013-14, aided by pressure on fiscally strained developed countries to cut healthcare costs.
“Developing countries are facing fiscal problems, and wherever public health is a major charge on the national exchequer, solutions will have to be found,” India’s commerce ministry wrote in a recent strategy paper. “An integral piece … will be increasing reliance on high-quality generics, instead of patented or brand-name drugs. This is an opportunity we cannot miss.”
Once focused mainly on the domestic market, Indian companies have become adept at filing applications to sell their low-cost generics in western markets – almost immediately after they go off patent, or by challenging the patent.
New Delhi-based Ranbaxy, bought by Japan’s Daiichi Sankyo in 2008, expects to get six months of US sales exclusivity – a privileged granted to the first generics company successfully to challenge a drug patent – for its version of Pfizer’s blockbuster cholesterol-lowering drug Lipitor.
Ranbaxy’s performance in the past year has benefited from six month exclusivity periods for generic versions of GlaxoSmithKline’s anti-herpes medicine Valtrex, and a generic version of Eisai’s Aricept for Alzheimer’s disease.
“There is well-oiled machinery that cranks out these applications to sell drugs,” says an India-based investor in the pharmaceutical industry.
India has more than 100 pharmaceutical manufacturing facilities approved by the US Federal Drug Administration – more than any country outside the US.
Many of these companies have warehouses in Malta, where they ready generic supplies for shipment to the EU when drugs go off-patent there.
Indian drug companies are also looking to emerging markets, such as Russia, Latin America and the Middle East.
Bino Pathiparampil, an equity analyst with Mumbai-based India Infoline Capital, says: “They are making big gains [in such territories], although from a very low base.”
Multinationals such as Merck, Abbott Laboratories, Sanofi-Aventis, and GlaxoSmithKline – once bitterly resentful of Indian copycats – now see the country as an increasingly important part of their global supply chain.
Recently, India has seen a series of takeovers of locally owned drug companies by pharmaceutical companies.
Multinationals are also forging manufacturing, sales, marketing and research tie-ups with local companies. One such is Merck’s partnership with Gujarat-based Sun Pharma to develop, make and sell branded generic drugs to emerging markets.
“Big pharma players are more open to work with emerging market players,” says Vasant Kumar, president of Scriplogix, a New York-based consultancy. “They need to keep costs under control, and emerging markets are becoming more important in their portfolio.”
However, India has yet to establish itself as a base for innovative pharmaceutical research.
Local research firms such as Jubilant, TCG, the Tata Group’s Advinus, and Dr Reddy’s Aurigene, are promoting themselves as partners to do contract work for big companies seeking to reduce costs.
But the business is held back by concerns about intellectual property rights and companies’ reluctance to outsource such a crucial function.
“Leakage is rampant,” says the industry investor, who adds that companies looking to outsource “don’t want to take a chance”.
Some Indian companies say they have a few promising molecules in development. But research spending by most Indian drug companies is a pittance, the highest levels being between 5 and 10 per cent of sales – insignificant compared with large multinationals.