Advancing Patient Care Through Competition April 19, 2018

Speech | In Person

• Speech by: Scott Gottlieb, M.D.

Remarks by Scott Gottlieb, M.D.
Commissioner of Food and Drugs
Pharmaceutical Care Management Association
Washington, DC

(Remarks as prepared for delivery)

Thank you for inviting me to speak today. 

As everyone in this room knows well, we’re in a period of significant change across the health care industry, marked by rapid innovation, broad consolidation, and significant pressure to reduce costs – particularly as an increasing proportion of health care costs are shifted directly onto patients.

Your industry is at the center of much of this transformation and plays a vital role in helping ensure that new innovations are accessible to patients and that costs system-wide are kept in check by supporting market-based competition and continuing to support broad utilization of lower cost generic alternatives.

You have an enormous responsibility to patients. And I can speak for the people at FDA, that we want to work with you to help advance our shared goals for improving patient care.

As you know, more than 260 million Americans – more than 80% of the U.S. population – have their drug benefits managed by PBMs.  That’s more covered lives than the health care systems in Germany and France combined.

That makes PBMs a powerful force for greater health care efficiency.  Your ability to drive savings for our country is evidenced by your success in generic substitution.

Over the last decade, it has been estimated that generic substitution has helped the U.S. save $1.67 trillion in drug costs, including more than $250 billion in 2016 alone.

However, given all of these dynamics, your industry also has been subject to new scrutiny. This is especially true as the business practices that worked effectively in the past to help ensure America’s innovation ecosystem delivers patient access to affordable medicines have been questioned as opaque and counterproductive. You’ve heard the challenges and the criticism. And I know you’re being challenged to bring new solutions to the table to continue to deliver on your promise of helping make health care more affordable.

You are not alone in this mission.

We’re all being challenged to do more to help patients access the care they need.

In fact, every stakeholder in the health care industry needs to rethink how we deliver on our commitment to patients. We’ll only be able to deliver on that commitment by working together to support innovation, improve efficiency and market competition, and enhance transparency.

Of course, to have competition, you must have competitors. And FDA has recognized the critical role we play in helping ensure timely and robust market competition and therapeutic diversity through modern regulatory science standards and efficient review processes across the entire life-cycle of product development –  from generics to biosimilars to branded products.

Let me start with what are doing to accelerate innovation and reduce the costs of bringing new treatments to market.

Drug development costs are still soaring and too many trials still fail – often in late stages – not just because the science is challenging, but also because the clinical trial paradigm is badly in need of modernization. High risks and significant development costs ultimately translate into higher drug prices.

We need new approaches that can help improve trial productivity and enable more efficient clinical trial designs, while also ensuring that the results of those trials are more applicable in real world settings. By taking concrete steps to advance regulatory efficiency and reduce not only the direct costs of development, but the time and risk embedded in these endeavors, we can help lower costs for patients.

For instance, we’re taking important new steps to advance the most innovative FDA-approved products, like CART and immuno-oncology drugs.  Soon, we’ll role out a suite of new policies that I believe will make the development path for these novel and potentially curative therapies more efficient.

We’re providing clear guidance on the regulatory and scientific frameworks for product developers, so that safe and effective targeted treatments can be identified with scientifically valid tests and ultimately, made available to patients faster.

We’re developing hundreds of new disease-specific guidances that will outline clear, concise, and up-to-date development guidelines to help make drug development more efficient and foster innovation. These will be targeted to serious disorders.

We are helping advance new digital technologies that empower patients and modern diagnostic tools like next generation sequencing, and helping better adapt them to patient care.

These advances, both in science and regulatory efficiency, can help reduce costs. They’ll reduce the time manufacturers enjoy a monopoly position as the first-and-only product in a class. We often talk about the benefits from generic competition. But we can’t underestimate the benefit of new drug competition from when a second-to-market novel therapy enters a new drug category. In addition to offering patients important therapeutic variety that can improve health outcomes, we often see significant cost savings from facilitating this sort of much needed market competition.

In fact, by enhancing the speed and efficiency of innovation, we can in some cases dramatically reduce the time period where there are monopolies in product classes and therapeutic areas to the point where these monopoly positions can be measured in months.
 
Since the cost of capital is a significant component of drug pricing, efficient development programs and new regulatory science tools for doing clinical trials – and new and more efficient approaches for structuring clinical trials, like the use of master protocols and basket trials – can support more efficient competition and flexible pricing after products are approved.
  
This is also true when it comes to biosimilars, which is an area where we’ll have much more to say very soon. We want to take new steps to foster biosimilar competition. For instance, we’re developing new tools and information resources that can assist biosimilar sponsors in developing high quality biosimilar and interchangeable products using state of the art analytical techniques. These tools can support the conduct of smaller, targeted trials, allowing more efficient biosimilar development programs without compromising on our scientific rigor. 

We’re also accelerating generic approval times and working to reduce gaming by brand companies in order to help bring lower cost alternatives to market much faster.

While the U.S. has one of the most effective and efficient generic drug markets in the world, there’s still more we can do to facilitate generic entry and competition to benefit patients and payers. And there’s much more that other countries can do to re-channel some of the money that they spend on their generic drugs toward helping underwrite the cost of innovation.

For example, the OECD reports that generics drugs by volume were roughly 19 percent of all pharmaceuticals in Italy, 34 percent in Japan, 22 percent in Switzerland, and 27 percent in France.   Research by Wouters and colleagues reported that a set of generic drugs was much more expensive in Italy, Switzerland and France.   Together these findings suggest that other countries could reduce spending on drugs by increasing utilization of generics and lowering the price of generics by making pharmaceutical markets more competitive.

All this data indicates that there’s much more other countries can be doing to make their generic drug markets more competitive, and re-channel some of those savings toward research and development of novel treatments for unmet medical needs. We have some ideas on how we can work with them in these efforts, starting with more harmonization when it comes to the global approval of some generic medicines. We look forward to working on these efforts with our European counterparts.

FDA’s work to drive innovation and enhance competition creates multiple opportunities for cost reduction, for instance through competitive bidding or value-based contracts within PBM drug formularies. PBMs can use competition among close therapeutic substitutes and biosimilars to drive pricing concessions. These savings should be passed along to patients in the form of reduced copays. 

But I’m concerned that the full benefits of competition are still not reaching patients and consumers, given changing payor and insurer dynamics. Biosimilars is a good example of this. FDA will continue to approve additional biosimilars but if there isn’t appropriate reimbursement and market access for these products, patients won’t see the benefits of lower prices. 

Manufacturers are using several schemes to hamstring biosimilar competition and I worry that some PBMs have been complacent participants in such schemes. To date, we’ve approved nine biosimilar products, but only three are available in the U.S. In some cases, patent thickets on biologics deter market entry for years after FDA approval. In other cases, restrictive contracting, rebating, and distribution agreements deter coverage and reimbursement. 

While such schemes may have the immediate impact of reducing the costs of these therapies, the net result is a lopsided playing field that disincentives biosimilar developers from making the sizable investment in bringing such products to market. I am concerned this will lead to reduced competition in the long-run and unsustainable costs for these treatments.

Many of these practices persist because high list prices enable lucrative returns across the drug supply chain as the spread between list and net price is carved up and shared among participants.

It’s easier to log profits this quarter than to think about what the market will look like in two years’ time or five.

This is an unacceptable situation when millions of Americans are finding it difficult to afford their medicines, especially those in high deductible plans, those who need off formulary treatments, or those who pay co-insurance for non-preferred products.

High prices at the pharmacy counter can lead to patients abandoning prescriptions, worsening health outcomes, and raising overall health care costs. The status quo is financially unsustainable, and it is eroding confidence in manufacturers and payers. 

But I’m not here to point fingers. We all have challenges to confront. We all have a role to play. FDA included.

The FDA will continue to address challenges within our jurisdiction.  For instance, we want to encourage competition that’s based on a product’s real-world performance. 

To advance this sort of competition, the FDA will shortly be releasing a final guidance on communication of pharmaco-economic information between manufacturers and sophisticated intermediaries like PBMs and hospital-based pharmacy and therapeutics committees. 

Reliable scientific and economic information, including information that may not be in the FDA approved label, can support more flexible drug pricing and coverage agreements, including indication-based payments.  

FDA is aware of certain restrictive contracting and distribution strategies manufacturers use to prevent generic and biosimilar sponsors from securing product samples.

Because generic and biosimilar developers generally need to perform tests comparing their products to the brand drug or reference biologic, a brand manufacturer’s refusal to sell its product to potential competitors can create an artificial barrier to the submission and approval of generic or biosimilar applications – a barrier of the brand manufacturer’s own making.

The refusal to sell can take different forms, but in some cases, may include limited distribution networks or commercial arrangements with wholesalers, distributors, specialty pharmacies or others in the distribution chain to restrict these types of sales.

Such arrangements are wrong and may prevent competition.

They are also inconsistent with the statutory framework created by Congress, and frustrate a basic tenet of the modern compromise between access and innovation.

I’m speaking about this here because I know that many PBMs own specialty pharmacies or distributors. We should come together to help advocate for refusal to enter into these agreements as a matter of fundamental market fairness.

I spoke earlier about all our shared responsibility to balance innovation and affordability through market-based competition.

I’m encouraged by the actions taken by some of your members to help patients, prescribers, and pharmacists identify more affordable medicines at the point of care. 

I also applaud the actions recently announced by some insurers that they would pass manufacturer’s drug rebates, often negotiated with PBMs, directly to their fully insured members with employer-based insurance – about 10 million covered lives.  This is a bold action that will help create a fairer, more transparent market. I hope that other insurers, employers, and manufacturers follow their lead.  I also hope that your industry will continue to innovate to make it more transparent to pass along these rebates.

The FDA’s role is, and will continue to be, providing an efficient and scientifically modern pathway for the review and approval of safe and effective medicines.

Together, we can help create a more patient-focused health care system without reducing incentives to innovate. 

I also look forward to discussing other vital public health initiatives, like bipartisan Congressional legislation for mandatory e-prescribing of controlled substances in Medicare Part D.  Opioid related addiction and death is the public health crisis of our time, and it will require coordinated action across the public and private sectors to halt and reverse it.

E-prescribing is one of the most effective tools we have for battling the opioid epidemic, and supporting more rational prescribing. I know that you all are helping in these efforts.

PBMs can also play a vital role in this battle by expanding coverage of non-opioid pain management alternatives, and reducing ineffective and dangerous opioid prescribing practices. 

Another critical step is to help people safely dispose of unused opioids.  Most patients prescribed opioids do not use the entire prescription given to them, which means there are millions of pills sitting in cabinets and drawers in homes across the country.

We also know that people who misuse prescription pain medication for the first-time often inappropriately gain access to the drugs from friends and relatives. 

We can reduce the risk of people accidentally taking or intentionally misusing unneeded opioids by safely removing them from their homes as quickly as possible.

In addition to reducing the risk of addiction, we need to help those already addicted return to lives of sobriety.  

We hope that you continue to expand coverage of medically assisted therapies to support addiction recovery, and naloxone for overdose prevention.  

The President has made it a national goal to reduce opioid prescribing rates. And I look forward to working with your members to achieve this goal without reducing access to patients with legitimate need for opioid treatment.   
     
America’s market-based system for biopharmaceutical innovation has helped make our nation the world’s medicine chest. 

Ensuring the full benefits of innovation reach patients and consumers as affordably and responsibly as possible is the challenge I hope that you will help us meet.

Thank you.