US bill grants incentives to scarce drug producers
pharmafile | December 17, 2012 | News story | Manufacturing and Production | FDA, PADSA
New legislation tabled in the US could provide incentives to companies producing drugs that are in short supply – particularly sterile injectable generics – in the form of tax breaks and preferential reimbursement rates.
The Patient Access to Drugs in Shortage Act (PADSA; HR 6611) was introduced late last month by Rep. Bill Cassidy and has been referred to the House Committee on Energy and Commerce for consideration.
Cassidy said whilst introducing the bill that the ‘artificially low’ Medicare reimbursement rate for generic sterile injectable drugs discourages their production, so this should be pegged to a figure which “accurately reflects the value of those drugs”.
The bill also includes a special provision for when a drug is in short supply by incentivising brand name drug manufacturers to enter and stabilise the market, he added.
“We hear from patients, doctors and hospitals that every day, shortages of cancer chemotherapy medicines and other drugs affect a patient’s treatment”, said Cassidy.
“This legislation adjusts how Medicare pays for medicine so as to decrease the risk of a drug shortage”, he added, noting that Medicare will actually save money by eliminating the need to substitute much more expensive medicines for inexpensive generics.
For example, one of the sterile injectable drugs currently in short supply in the US is leucovorin for cancer, which costs Medicare $420 and patients $108 for 12 cycles of treatment. Because of the shortage, patients are prescribed a newer version called levoleucovorin which costs Medicare over $24,000 and the patients $6,000 for the same number of courses.
According to the FDA, the number of times drugs were in short supply almost tripled from 61 in 2005 to 178 in 2010, and reached more than 250 last year.
The catalyst, according to Cassidy and the bill’s co-sponsors, was a switch to the use of the average sales price (ASP) from the average wholesale price (AWP) to calculate Medicare reimbursement rates in 2005.
While ASP reimbursement works well in the brand market because it establishes a price ceiling, in the generic market, it causes a rapid drop in price as – on average – the ASP is about 50% of the AWP for the same drug, according to an Office of the Inspector General (OIG) report.
“Manufacturers who once had a strong financial incentive to produce highly complex generic injectables were suddenly faced with miniscule profits on these products,” say the PADSA authors, who want the rates to be based on the wholesale acquisition cost (WAC) of drugs which h would “would provide stable market-based pricing”.
The recently passed Food and Drug Administration Safety and Innovation Act (FDASIA) also tried to tackle the issue, but focused on notification by manufacturers and expected regulatory review to alleviate the situation when shortages arise.
Phil Taylor
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