Drugs, Money, and Secret Handshakes by Robin Feldman
Thesis:
Drugs, Money, And Secret Handshakes by Robin Feldman demonstrates how consumers are encouraged to use drugs with higher prices operates in the interests of... doctors, clinics, hospitals, PBMs, brand drug companies, health plans, patient assistance programs, and patient advocacy groups (the book provides primers on the role and incentives of all the major players). Payment flows are structured so that higher prices benefit the intermediaries who should be the watchdogs for the patients. Given these incentive structures, higher-priced drugs receive more favorable reimbursement treatment, and patients are channeled toward more expensive drugs. The system also operates to support competition-free zones for pharmaceutical companies.
Chapter 2: The Landscape
2.1 Branded Prescription Drugs
Prescription drug prices are rising.
Prices have been raised most sharply for common conditions (diabetes, high cholesterol, and asthma) --> true problem in Medicare
Even assuming everyone pays discounted prices (vs full list prices), the discounted prices are still rising far more rapidly than inflation.
10% rebate on 20% price increase isn't a bargain
Private insurance plans often require that patients contribute an amount based on a percentage of the full list price of the drug.
No consistent definition for "speciality drug"
Neither from the industry nor the federal government’s Centers for Medicare and Medicaid Services (CMS)
Tends to include drugs that are used to treat a rare condition, require special handling, use a limited distribution network, or require ongoing clinical assessment.
Some drugs are categorized as “specialty,” however, simply because their cost exceeds $10,000 a year.
2.2: The Byzantine World of Drug Sales
Health insurance flows from both public and private plans, including:
Employer-sponsored health insurance and individually purchased plans, such as those offered by Cigna, Anthem, Blue Cross, or Kaiser Permanente
Medicare for those over the age of 65
Medicaid for those below a certain level of income
Government employee plans, including Veterans Administration (VA) benefits, as well as plans for federal, state, and local workers
Government insurance that provides health care to prisoners
State health insurance sold in exchanges established under the Affordable Care Act
State plans are funded by the federal government but... administered by each individual state, generally through health insurance companies.
State and federal employee plans are generally operated by insurance companies, such as Cigna, Anthem, Blue Cross, Kaiser Permanente, etc. Employer plans may operate through private health insurance companies
Self-insured plans: a combination of a private plan and self-insurance
Taken by some prominent companies such as Google and Walmart
What is a Pharmacy Benefit Manager (PBM)?
Dialogue of PBM to drug company: “I will deliver a large volume of patients to you under this health insurance plan, if you will give a large rebate.”
In theory, use leverage to get lower prices
Contracts based on
Total volume of drugs purchased, the number of product prescriptions filled, or maintaining or exceeding the prior year’s percentage of an insurer’s pa
AWP "list prices" are used to benchmark negotiations
National average wholesale price (AWP) refers to the average price a company charged for its drug at the wholesale level
Published commercial third party data companies,
Some refer to AWP as “Ain’t What’s Paid,” because the figure does not include reductions for rebates or discounts.
Many lawsuits for alleged collusion between the commercial publishers of AWP information and wholesalers to artificially inflate those numbers, increasing the markup spreads for the wholesalers.
Prices are constantly shifting and opaque
An insurer typically is required to cover at least one drug in each class of medications, but it is not required to include all drugs within a class. Exceptions exist in the Medicare system.
Different levels of patient cost sharing for different drugs, known as “formulary tiers"
Insurance doesn't know the net price
The health plan knows how much it pays to the pharmacy at the moment the patient buys the drug, but that payment reflects the list price. The PBM will send a rebate check to the plan later in the year – a check that may represent many drugs and many transactions.
Thus, the actual price of a particular drug transaction is buried within payments that the health plan receives in large chunks some time later. The plan never knows the net price that the drug company receives from the PBM.
Three PBMs – Express Scripts, CVS Health, and OptumRX – dominate 85 percent of the commercial insurance market
Handled 50 percent of the prescription drug benefits for the Medicaid managed-care population in 2015
PBMs acquire their own pharmacies where patients get preferred deals... but FTC scrutiny in 1990s --> drug co's don't make alliances with insurers or PBMs
Capitation – a model that pays a fixed amount to providers based on the number of patients they have or see
Consultants provide a potential source of collusion, in which the PBM competitors do not need to speak to each other, but can nevertheless converge on similar prices and terms.
How the Money Flows
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Chapter 3: Pharmacy Benefit Managers and Insurers
3.1: Why PBMs May Prefer Higher Prices
Insurers pay their PBMs based on the extent of the discount that a PBM can negotiate with individual drug companies.
In other words, the greater the distance between the list price and the final price, the more money a PBM makes.
Like a department store that raises prices right before the sale, so that the sale discount looks more appealing.
the contract between the PBM and the insurance plan is based on the rebate level the parties think the PBM will be able to negotiate, while the insurance plan is never permitted to know the actual level of that rebate.
Drug companies offer payments to PBMs in the form of administrative fees or data-managing fees
fees have the advantage of being invisible to the insurers in certain circumstances.
if value of the service is less than the payment made, transaction is an indirect price concession.
Rebates and other transfers of value can be called “persuasion payments.”
The drug company’s product may be placed in an advantageous position on the PBM formulary, or the PBM may even entirely exclude a competing drug in the same class from being reimbursed at all.
Lower-priced competitors may be blocked out
volume discounts, loyalty discounts, or market penetration rebates
“Packaged,” “bundled,” or “loyalty” rebates
A drug company tells a PBM that, to get the best rebate, the PBM’s client must accumulate a certain volume not across only one drug, but across all of the drugs.
When a drug company has a portfolio of drugs to offer, the opportunities for blocking competition increase
The company can bargain so that the weaker drug receives an exclusive or preferred position on the formulary
Prilosec from AstraZeneca
Price concessions for Prilosec would not hurt the company and would provide little benefit to the PBM’s insurance client. The price concessions would, however, provide a tidy profit for the PBM. And, of course, the entire deal would keep the market clear of any lower-priced competitors
The drug company was giving price concessions on a drug that it was intending to drive patients away from, in exchange for exclusive status on the drug that it was driving patients toward
The greater a drug’s volume, the more the drug company can spread out a persuasion payment across each unit of the drug sold
if the competing drug is not a perfect substitute, some patients simply will refuse to switch, supported by laws that require a plan to continue coverage for patients who remain with their original drug under certain circumstances, known as coverage continuation laws.
If low-priced generics have gained a significant foothold – perhaps the branded drug now has only 50 percent of the market, rather than 80 percent of the market the drug company that wants to knock out those generics will have to pay a fortune to compensate the PBM for the income it will lose by walking away from the cheaper drug, referred to as imperfect substitutes
federal antitrust law tends to categorize behavior as inappropriate only when it rises to the level of attempts at market dominance, rather than smaller increases in market share.
Given the advantages of volume in the PBM system, competitors may be unable to break through and gain more than limited market shares, despite their vastly lower prices.
Terms to entrench a market leader
The right of first refusal: this would allow the drug company to match any lower price that another company may bid when requests for new bids go out.
loyalty clauses or MFN clauses: the drug company could promise that it will not offer its drug at a lower price to any other PBM or buying group, leading to uniform prices across the industry
March 2018 J&J raised list prices for its medicine by an average of 8.1 percent, the average net price fell by 4.6 percent as a result of discounts and rebates. Overall sales did well that year, rising 6.7 percent to $21.5 billion, which the company attributed to higher volume.
increased volume indicates an increased market share, the price concessions may simply be a vehicle for blocking out competitors.
October 2017, Shire Pharmaceuticals sued Allergan Pharmaceuticals
Alleged that Allergan used bundled rebates to block competition and preserve its dominant market share in blockbuster dry-eye medication Restasis
Shire could give the new drug away for free, and the numbers still wouldn’t work.
SmithKline and Eli Lilly exposed a monopolistic rebate scheme involving cephalosporin antibiotics in the 1970s
District court found no illegal tying arrangement. The court ruled that the competitor would have to prove that Lilly completely refused to sell the two desired drugs unless the hospital purchased the undesired third. In this case, however, buyers certainly could choose to buy the products individually and forgo the rebate
It is impermissible to use a pricing scheme linking monopolistic products with another competitive product to deter entry or effective competition in the market
Context matters.. it's a problem because their position is from a government granted monopoly. Vs. Apple can force a bulk discount on a supplier of computer chips and not have antitrust issues, because consumers have the choice to go buy from Dell instead
It is much harder for the patient to go to another health plan, so a frustration over a single drug's price may get lost in the noise.
A drug company’s bid on insulin can stipulate that if the plan provides a favored position for another one of the company’s drugs, then the rebate on insulin will increase by an additional amount
2017, a NYT report found that using generic Adderall could cost a patient's family $50 more per month. Another found his plan didn't cover the generic at all, leading to $90 monthly co-payments instead of the usual $10 or less
Systemic structures that push brand prices higher can create opportunities for soaring generic prices as well
Exemplified by Valeant Pharmaceuticals raising Syprine from $652 to $21,267, and when Teva's generic entered it was priced at $18,375 for 100 pills, much higher than the original $652
Insurers have begun to require that the PBMs pass through part of all of the rebates they receive from drug companies.
normally interpreted as excluding price concessions paid on mail-order and specialty pharmacies, bundled rebates or loyalty payments, and fees not designated as rebates.
inflation payments to PBMs to cover annual increases in list prices.
shift that money to other types of side payment that the PBM can hold on to
In short, one can think of the role of the PBM as analogous to that of a travel agent. In theory, both of them ought to be looking for the best price for the customer – but a travel agent, who may be paid by the airline and hotel based on the cost of the vacation, has the incentive to sell you a nice Caribbean cruise, rather than a trip to a cheap motel at the beach town nearby. As long as the travel agent can get the trip for you at a price cheaper than other agents will charge, or cheaper than you could get on your own, the travel agent is in a good position. And if there are only three travel agents in the country, that’s even better.
3.2: Where Are The Insurers?
PBM to insurer: “if you ask us for rebate pass-through, we will certainly charge you more,”
A full, claims, data transfer can be akin to giving people the alphabet and assuring them that they can write Shakespeare.
price protection
If a large plan with some level of market clout asks for access to contract terms and claims information, a PBM can offer, as an alternative, that the price won’t rise more than 2–4 percent.
Any individual insurer that tried to buck the system would bear all the burdens of trying to ensure competition in the drug industry, meaning that no one would be willing to move alone
would likely be considered collusion by competitors against an upstream supplier
Why can't Medicare divide the bridge and negotiate prices?
Private health insurance plans are generally the relevant actors, not the government. It's done on a state level.
The Affordable Care Act of 2010 mandates that health insurance companies must spend at least 80 percent of premium dollars on paying medical claims, known as the “80/20 rule.” This mandate is designed to help keep costs down
Under the 80/20 rule, if the cost of medical inputs (including drugs) is $80, a health insurance company can take home profits of $20 and charge patients $100 to enroll in the plan. This meets the 80/20 rule. If the cost of medical inputs (including drugs) rises to $800, the health insurance company gets to take home a higher amount of profit of $200 and charge patients $1,000 to enroll in the plan.
When the allowable profit is measured as a percentage of total cost, the health insurance company does better when the cost of inputs rises.
A PBM can tell the health insurance plan with angelic sincerity that it has successfully obtained a variety of specific rebates from a particular drug company. That information may be 100 percent accurate – and completely useless. It may be that the plan’s utilizations operate in such a way that those rebates are unlikely to come to fruition.
Only the PBM sees the full drug company contract, along with all of the claims and utilization information for a particular plan
“Raising rivals’ costs"
A strategy that raises costs for competitors without incurring any concomitant costs for the company itself
You raise prices at the tail end of a monopoly period, so that you can lower them in a way that provides a bargaining tool that entrants will be unable to match
Drug companies raise prices frequently, while PBM contracts are negotiated infrequently. Near the end of the contract, the PBM may be less inclined to push back on a drug company’s pricing strategies
Rising prices provide opportunities for side payments and rebates that go directly into the PBMs’ pockets
Timing leads to mismatch of incentives...
Once a Medicare patient reaches the out-of-pocket threshold, the government picks up 80 percent of the cost through what is known as “reinsurance.” Thus higher drug prices push Medicare patients more quickly into the territory in which the government picks up a greater portion of the tab, and the health insurance company pays less
Medicare makes the health insurance company allocate the rebate dollars it receives from pharmaceutical companies back to the government’s reinsurance plan. However, the formulas operate in a way that allows the health plan to keep more of the rebate when most of those rebates are for higher-priced drugs.
Rising prices provide opportunities for side payments and rebates that go directly into the PBMs
A Medicare patient’s cost-sharing obligation is generally based on the list price, not the final price after rebate.
Whistleblower case against the PBM Caremark.
The PBM negotiated a swapping arrangement in which pharmacies would receive higher payments for Medicare-covered drugs in exchange for lower payments for drugs covered by commercial plans.
Hid true costs in a way that allowed the company’s health plan arm to show lower premiums for its Medicare drug coverage bid.
Suggests that, where competition does exist, the ability to camouflage various payments can not only shift costs, but also improve a company’s competitive position when it comes to health insurance plan premiums
When an employer, such as Walmart, self-insures, the company generally takes on the financial risk, while contracting out to an ordinary health insurance company, such as Aetna, to manage the claims flow
Employer who actually pays the bill. Once again, the health insurance company (Aetna) has less of an incentive to push for cost control
3.3: The PBM Incentive Structure - Who Pays The Bills?
Rising prices are largely cost-free to the drug company. The drug company can return the extra amount collected with the price increase to the PBMs in the form of side payments and rebates, while maintaining or increasing the same drug sales revenue.
Who is paying the bill?
Employers, the individual patient, or a government program
Chapter 4: Pharmacies, Doctors, and Patient Groups
4.1: Why Pharmacies May Prefer Higher Prices
Drug companies can develop a new version of the drug, with a different timing, dosage, or delivery system. The new version will be protected by new patents.
In that case, the pharmacist cannot suggest that the patient go with the older generic version, even though the price may be much lower for something that is essentially the same
Specialty pharmacies can provide easy opportunities for drug companies to offer side payments, in a manner that helps to buttress the drug’s market position.
The FDA is increasingly approving drugs on condition that the company provide additional information about their safety and efficacy across time.
Requirements --> drug company has an incentive to track its drugs closely, which provides an avenue to confer tracking payments to any type of pharmacy
Allows drug companies to limit the distribution networks to particular specialty pharmacies, even when such limited distribution is not required by the FDA.
Problematic when the PBM also owns a specialty pharmacy that shares monopoly rents with a drug company, particularly a current market leader or large-volume drug company.
One interest group report asserted that certain PBMs write their contracts to mandate that specialty drugs must be filled at their own pharmacies and then reclassify various drugs as falling within the specialty category to drive traffic to their own pharmacies.
Anthem and PBM Express Scripts – May 2016 Class Action.
Express Scripts would pay more to purchase the smaller PBM company in exchange for the ability to charge patients above competitive market price for prescription drugs.
Incentives for the PBM to steer patients to its own pharmacies, rather than to contract with as many pharmacies as possible.
When PBMs own pharmacies, the originally intended structure, in which the PBM is responsible for negotiating the best bargain on drug prices, becomes so tilted that patients’ interests are bound to suffer.
Ex: Zyprexa
PBM’s combination with one of the largest pharmacies in the country gave it the ability to mine data to push a particular drug over that of its competitor.
Opportunities to advance their sales agendas in a manner that will appeal to the PBM’s incentive structures and harm competition.
Independent pharmacists have complained that PBMs are charging the payors more than they are paying the pharmacists. In other words, the PBM charges the health plan $10, but pays the pharmacy only $5 when the prescription is filled.
The pharmacist does not even know what the payments will be until the moment of ringing up the sale.
The pharmacist has the choice of losing money on the transaction or turning the patient away at the last second.
“Key opinion leader” payments
Lawsuit alleges that AbbVie provided kickbacks to doctors and nurses in the form of cash, meals drinks, gifts, trips, and patient referrals to inappropriately induce them to use its drug. (2018)
The company employed a network of nurse “ambassadors,” who were ostensibly visiting patients at home to help administer the drug, but in reality were deployed to push patients to continue using Humira, and to provide free insurance processing and prior authorization services.
Although regulations may require physicians to disclose that they have a financial interest in the surgical facility, patients might easily believe that they are in better hands in a facility familiar to the physician.
In return for the rebate, the doctor or treatment facility charges patients the list price, or even some rebate off the list price, and pockets the spread.
PBM to Hospital: may condition rebates on volume or exclusivity
The Third Circuit confirmed its dismissal of a case against Sanofi, regarding rebates to hospitals for its anticoagulant drug Lovenox
Courts are unsympathetic to competitors.
4.2: Doctors, Hospitals, and Other Medical Practitioners
Section 340B of the federal Public Health Service Act of 1944 provides that certain nonprofit hospitals that serve the nation’s most vulnerable patients receive large rebates on drugs used in outpatient treatment, which is thought to be used for indigent care. Drug companies provide these rebates up front, as steep discounts off the list price – discounts that may amount to as much as 50 percent. Medicare then reimburses these drugs at a much higher rate: 6 percent above the average list prices. The relevant hospitals receive these rebates even for patients who have private insurance. Private plans generally reimburse for the drugs at rates even higher than Medicare, further increasing the spread.
Spreads based model --> Incentives for rising prices and agreements that entrench large drug companies and disfavor lower-cost or newer entrants.
For drugs administered by a doctor, such as injectable or infused cancer or rheumatology drugs, Medicare will reimburse the doctor at a rate of the average selling price plus 4.3%
“4.3% of a $100 drug is only $4.30, but 4.3% of a $10,000 drug is $430.”
Financial incentive + unconscious bias that higher-priced items may be of higher value, particularly if the higher-priced item is accompanied by extensive advertising --> push doctors toward more expensive treatments
4.3: Patients And Patient Advocacy Groups
Coupon or coupon card: the brand-name company agrees to pay all or a significant portion of the patient’s out-of-pocket costs
Coupon plans constitute unregulated insurance, in which the drug company handing out the coupon indemnifies the patient for any higher cost-sharing that may result from using the branded drug
Clarify on this analogy more
Signs of problematic payments
Co-payment offsets
Almost always offered by branded drugs primarily when competition exists from generics or other brands – and that the benefits are normally directed at patients who have prescription drug insurance plans.
The cost of reimbursing the patient’s co-pay is much less than the full cost difference between the branded drug and the generic.
The patient pays little, the insurance company bears a far higher cost.
When the patient’s cost goes to zero, drug companies can encourage overconsumption of the drug
Hemophilia drug manufacturers and specialty pharmacies, whose products cost between $30,000 and hundreds of thousands of dollars annually, have taken to courting patients and their relatives by offering free meals and hiring opportunities.
In 2015, 14 drug companies donated $116 million to patient advocacy groups, which far exceeded the $63 million that those companies spent on lobbying activities.
Drug companies can donate drugs to their own foundation or to independent charitable organizations that support the purchase of the company’s drugs, earning charitable deductions in the process.
Short-dated medication donates -- @Altrui Rx
Under a tax code provision, the company gets to deduct an amount that is greater than the cost of the drug.
A special enhanced-deduction provision allows drug companies to deduct not only the cost basis of the inventory they donate but also the basis plus half the difference between that and the fair market value, up to twice the basis
The higher the list price, the greater the benefit to the company – at least until the company reaches the cap
4.5: But Don't We Want To Incentivize Innovation
There is a highly concentrated market (such as the PBM market) situated downstream from a monopoly market (that is, drug companies with patents or exclusivities) in which the monopolists have mechanisms to maintain their power
78% of the drugs associated with new patents are not new drugs, but existing ones.
Chapter 5: May Your Drug Price Be Ever Green
Evergreening
Artificially extending the life of a patent or other exclusivity by obtaining additional protections to extend the monopoly period.
Takeaways from Robin Feldman's Study
Adding new patents and exclusivities to extend the “protection cliff” is particularly pronounced among blockbuster drugs
Of the roughly 100 bestselling drugs, more than 70% had their protection extended at least once, with more than 50% having the protection cliff extended more than once
Looking at the full group, almost 40% of all drugs available on the market created additional market barriers by having patents or exclusivities added to them
Once a company starts down this road, there is a tendency to keep returning to the well. Of those that added protections, 80 percent added more than one
Among those adding more than one barrier, some were serial offenders, with almost half adding four or more protections and some adding more than 20
The problem is growing across time. The number of drugs that had a patent added on to them almost doubled during the period of study. The addition of certain other types of barrier, such as “orphan drug” exclusivity, increased at an even greater rate – some even tripling
These results may easily understate the landscape
In addition, the pharmaceutical industry has developed techniques for erecting competitive barriers that do not involve obtaining additional patents and exclusivities.
This is not an image of innovation and competitive entry; it is an image of a system that provides for repeated creation of competition-free zones.
5.1: A Brief Tour of the Modern Drug Approval Process
With patenting occurring early in the drug development cycle, some of the patent term will have expired before the drug gets to market. The average remaining patent period for a new drug is 12 years
The “Orange Book Patent Listing Dispute List” allows for disputes over the accuracy of a use code, but the process has no teeth.
Let’s say that the company holds a patent and has listed it in the Orange Book as relating to certain uses of a drug. At some point before the patent expires, the company can simply say, “Oh, my goodness! I see that my patent covers another use. Guess I’ll just add that right in, now
5.3.7.1: Increase in Orphan Drug Exclusivity
Orphan drug exclusivity is a seven-year exclusivity granted to drugs that are approved and designated specifically to treat problems affecting populations of 200,000 individuals or fewer
Today it seems "everyone is an orphan", with orphan drugs accounting for more than 40 percent of drugs approved by the FDA.
Spillover pricing
The practice of setting high prices for drugs, regardless of whether they are used for their approved or off-label uses.
Off-label use occurs when doctors prescribe a medication for a use other than that for which the FDA originally approved it
Epogen was prescribed off-label to treat a wide variety of types of anemia, dramatically expanding the patient population that paid the high price of Epogen.
Salami slicing
Separating patients with different stages or types of a disease and obtaining a different orphan drug exclusivity for each slice.
A drug does not have to be newly developed to qualify for orphan drug exclusivity.
Chapter 6: Solutions
John F. Kennedy explained, the enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth persistent, persuasive and unrealistic.
6.1: Proposals With Potential (But Problems)
Limiting list price increases to below 10 percent. On the one hand, it is certainly better than an increase above 10 percent.
Little public relations benefit from increasing only 5 percent or 6 percent, as opposed to 9 percent, and they could get hammered by shareholders and capital markets for going much lower than 10 percent.
Set a floor for price increases, rather than simply a ceiling.
In re Brand Name Drug Litigation
Drug companies might give better prices on drugs to large pharmacies, or “favored purchasers,” than to small retailer pharmacies.
Pricing and patient care data would be key for monitoring value-based contracts.
Such information and data analysis asymmetries will only expand and grow more problematic, making it nearly impossible for payors and government entities to engage in independent auditing.
Outcomes-based pricing could present serious moral hazards.
Could create an uncomfortable incentive structure, in which insurers, PBMs, hospitals, and doctors get paid more if the patient dies – perverse incentive to prefer treatments that are less effective or riskier, or avoid high-cost treatments in favor of cheaper, less effective ones.
Some of the risks associated with the complex diseases, for which many of these outcomes-based models are proposed, are not solely attributable to the drug treatment.
The FDA is not permitted to consider value when approving a drug. In contrast, European approval authorities may choose not to approve a drug if the drug does not appreciatively improve life in proportion to its price.
The value of giving my child a polio vaccine may be US$1 million per dose, because it would be worth that to avoid my child succumbing to polio. The US healthcare system would collapse, however, if each vaccine were to cost $1 million per dose.
Solution? Cumulative value
If the national budget for drug spending is a certain amount (or the average person’s budget for drug spending is a certain amount), how much of that amount does it make sense to spend on this particular advance?
Having Medicare negotiate for drug prices directly with pharmaceutical companies.
Medicare is doing this now since 2023... check: https://www.cms.gov/inflation-reduction-act-and-medicare/medicare-drug-price-negotiation
Even basic rebates do not fully pass through under Medicare – a circumstance that already creates incentives that push prices higher.
Drug companies would have to negotiate directly with health insurance plans over the prices of their drugs. However, just as drug companies have been sharing some of their monopoly rents with PBMs to block out lower-priced competitors, drug companies could shift to sharing some of their monopoly rents with health insurance companies in a similar manner.
The McCarran-Ferguson Act restricts the ability of the Federal Trade Commission (FTC) to regulate insurance markets, limiting the FTC to regulating the business of insurance only to the extent that it is not regulated by state law.
If the primary locus of activity shifts to interactions involving health insurers, the federal government’s role will be severely limited.
Fear of the possibility of Exhaustion
Passing legislation over the objection of the pharmaceutical industry is extremely challenging, particularly without handing over some other benefit to the industry.
The heart of the problem would remain, but the political will would be spent.
6.2: What Will Work
Market Information.
Changes at the Federal Level
Amendments to the Food and Drug Act of 1906, which regulates the manufacture and marketing of all prescription and nonprescription medication, the Employee Retirement Income Security Act of 1974 (ERISA), which sets standards for pensions and health plans in private industry, or by an expansion of the Physician Payments Sunshine Act of 2010.
The agencies that administer Medicare and Medicaid.
National Institutes of Health (NIH). Regulations issued by such bodies could mandate that those who receive funding must include transparency stipulations for those who license or purchase the resulting inventions
Changes at the State Level
Mandate that the information have a delayed release, as opposed to insisting that the information must never see the light of day.
The Al Capone Approach -- punish via an Indirect approach
SEC : Express Scripts
SEC conveyed surprise that the PBM seems to be treating the money flow from drug companies as though the drug companies were the PBM’s customers – when in fact, the health plans are the customers.
Attempts to claim that PBMs have a "duty" to patients have fallen flat, however, running up against issues related to ERISA, the mammoth federal law that governs most health plans and pensions. A different understanding of the role of ERISA could shift the landscape considerably, opening the door to claims that the PBMs are breaching their fiduciary duty to patients.
Mandate full pricing disclosure when federal or state agency buys products bc govt is a buyer of a wide swath of products
Risk of AI
Different entities could have perfectly coordinated efforts, while pointing to the AI to say, “The computer made me do it.”
Requires policymakers to creative rethink antitrust doctrines.
Case Study: Haven Health, an Amazon/Berkshire Hathaway/J.P. Morgan joint- venture, failed...
One and Done
Under a one-and-done system, a drug would receive one period of exclusivity, and only one. The choice of which “one” could be left entirely in the hands of the pharmaceutical company, with the election made at the moment of drug approval.
Period of exclusivity could be a patent, or an orphan drug designation, or a period of data exclusivity for safety and efficacy data, or something else – but not all of the above and more.
Implementation at the FDA level underscores the fact that these problems and solutions are designed for pharmaceuticals, not other types of technology
Consider pushing secondary patents into some form of short exclusivity, rather than a full patent term.
Patents aren't core property rights... English common law placed patents squarely in the final category as franchises
The notion that the Takings Clause would prevent Congress from shortening the length of time or the interaction among various patent rights would be misguided
Congress could standardize the periods of protection offered by various exclusivities, which currently range from six months to seven years
Complexity in these systems (aka no standardization) --> opportunities for game-playing
Standards-based approach
Look at the overall effect of a behavior in an effort to thwart those who follow the letter of the law, but manage to arrive at a destination that the law intends to forbid. Such an approach can be useful when those being governed may be able to find loopholes to defeat governmental intent
Ex: The tax code’s “step transaction” doctrine allows tax authorities to collapse all steps of a transaction if the steps are part of an overall plan to avoid taxation
The government also could impose penalties on the lawyers involved in behaviors that violate the standards
Example: under the SEC’s system to deter fraudulent filings, the Enforcement Division can impose punishment on the company making the filing, and the Litigation Division can suspend the attorney from practice before the Commission.
When companies plead with the government for beneficial treatment by arguing that they cannot withstand competition, one should be deeply skeptical