Tag: drug prices

Price Gouging and Deceptive Advertising Practices Amidst COVID-19 Pandemic

The Federal Trade Commission, the Food and Drug Administration and state Attorneys General have bumped the protection of consumers in the midst of the COVID-19 crisis to the top of their respective lists, including, but not limited to, price gouging and unsubstantiated product efficacy claims.  The U.S. Department of Justice has also issued a broad mandate regarding criminal enforcement of deceptive, fraudulent and predatory practices.

 State Attorneys General

State Attorney General have actively been policing the advertising of claims related to products that purport to cure, treat or prevent COVID-19.  This includes both express and implied claims (e.g., immunity-based claims).

Currently are no vaccines, pills, potions, lotions, lozenges or other prescription or over-the-counter products to treat or cure.

By way of example, a group of thirty-two state attorneys general recently sent letters to executives at prominent online retailers, urging them to help police price gouging.  Additionally, the New York Attorney General has asked GoDaddy and other online registrars to halt and de-list domain names used for Coronavirus-related scams and fake remedies designed to unlawfully and fraudulently profit off consumers’ fears around the coronavirus disease.

The NY AG has also recently contacted Craigslist.com, calling on the company to immediately remove posts that attempt to price gouge users, or otherwise purport to sell items that provide “immunity” to the coronavirus or allow individuals to test for the disease.  For example, the AG’s letter referred to posts that promoted an “immunity pack,” a fake coronavirus testing kit, and face masks that are not even proven to provide coronavirus-related protection.  The AG also asked Craigslist to remove an advertisement for a bottle of Purell that was priced at over $200.

Price gouging on disinfectant products is also a priority.

State AGs and other federal agencies are actively investigating potential price gouging violations, filing enforcement lawsuits, issuing civil investigative demands (CIDs), and serving cease-and-desist warnings.  The NYC Department of Consumer and Worker Protection (DCWP) – formerly the New York City Department of Consumer Affairs (DCA) – has also been policing local business that it believes are selling necessary products (e.g., cleaning products, diagnostic products and services, disinfectants [wipes, liquids, sprays], face masks, gloves, hand sanitizers, medicines, paper towels, rubbing alcohol, soap, tissues and basic food supplies).

The State of New York’s price gouging statute prohibits the sale of goods and services necessary for the health, safety and welfare of consumers at unconscionably excessive prices during any abnormal disruption of the market.  During any abnormal disruption of the market for consumer goods and services vital and necessary for the health, safety and welfare of consumers, no party within the chain of distribution of such consumer goods or services or both shall sell or offer to sell any such goods or services or both for an amount which represents an unconscionably excessive price.

In the State of New York, whether a price is unconscionably excessive is a question of law for the court.  The court’s determination that a violation has occurred shall be based on any of the following factors:  (i) that the amount of the excess in price is unconscionably extreme;  or (ii) that there was an exercise of unfair leverage or unconscionable means;  or (iii) a combination of both factors in subparagraphs (i) and (ii).

Proof that a violation of has occurred can include, for example, evidence that:  (i) the amount charged represents a gross disparity between the price of the goods or services which were the subject of the transaction and their value measured by the price at which such consumer goods or services were sold or offered for sale by the defendant in the usual course of business immediately prior to the onset of the abnormal disruption of the market; or (ii) the amount charged grossly exceeded the price at which the same or similar goods or services were readily obtainable by other consumers in the trade area.  A defendant may be able to rebut such evidence by establishing that additional costs not within its control were imposed on the defendant for the goods or services.

Where a violation is alleged to have occurred, the AG may seek an injunctions, civil penalties and restitution.

Under the Rules of the City of New York, stores are prohibited from selling items that have been declared in short supply at excessively increased prices.  NYC has recently issued an emergency rule prohibiting price increases above 10% on various products necessary to combat the coronavirus.  New York State has now proposed legislation concerning medical supplies that includes a presumption that a price exceeding 10% of its price immediately prior to a public health emergency is to be considered unconscionably excessive.

Other states also utilize percentage-drive formulas when assessing excessive or unconscionable price increases, such as, without limitation, Arkansas, Florida, Michigan, Missouri, New Jersey, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, West Virginia, and Wisconsin.  Some states impose liability upon manufacturers and distributors.  Some states also impose civil fines and penalties for violations, in addition to potential criminal liability.

Any entity charged with price gouging during a public health emergency would be entitled to rebut an alleged violation of this new law with evidence that the additional costs not within the control of the defendant were imposed on the defendant for the consumer medical supplies.

FTC and FDA

The Federal Trade Commission and the Food and Drug Administration recently announced that it has issued joint warning letters to companies that allegedly had been disseminating unsubstantiated product advertising claims related to the coronavirus.  The letters cite efficacy claims that are not supported by competent and reliable scientific evidence, as well as issues relating to unapproved and misbranded drugs.

On March 26, 2020, FTC lawyer and Chairman Joe Simons issued a statement setting forth the agency’s enforcement efforts to protect consumers from unfair and deceptive commercial practices and to educate the public.  The FTC “will not tolerate businesses seeking to take advantage of consumers’ concerns and fears regarding coronavirus disease, exigent circumstances, or financial distress,” FTC lawyer Simons stated.

The FTC has also issued a press release calling attention to business-to-business scams that seek to exploit companies’ concerns about COVID-19, and sent letters to VoIP service providers and other companies warning them that “assisting and facilitating” illegal telemarketing or robocalls related to the coronavirus or COVID-19 pandemic is against the law.

“It’s never good business for VoIP providers and others to help telemarketers make illegal robocalls that scam people,” said FTC attorney Andrew Smith, Bureau of Consumer Protection Director.  “But it’s especially bad when your company is helping telemarketers exploiting fears about the coronavirus to spread disinformation and perpetrate scams,” Smith stated.

Department of Justice

The U.S. DoJ has issued a broad mandate with respect coronavirus-related fraud, price gouging and product hoarding.  In fact, it recently filed a number of federal criminal actions to combat fraud and other offenses related to the coronavirus pandemic.

Two of the actions were filed in California.  One involving allegations that an individual solicited investments in a company he claimed would be used to market pills that would prevent coronavirus infections, as well as market an injectable cure for those who had already contracted the virus.  The other, involving allegations that an individual mislabeled drugs that were purported to be a miracle cure for COVID-19.

Another two actions were filed in New Jersey.  One involving charges of violating the federal Anti-Kickback Statute and conspiracy to commit health care fraud.  The other, involving allegations of assault resulting from an individual who represented to have tested positive for COVID-19 that coughed on FBI agents, lied to them about his accumulation and sale of surgical masks, medical gowns and other medical supplies, and selling supplies to doctors and nurses at inflated prices.           .

The DoJ also recently filed a civil wire fraud lawsuit in a Texas federal district court against a website (coronavirusmedicalkit.com) that was purportedly offering access to bogus World Health Organization vaccines.

Digital marketers, consumer-facing businesses and others in the supply chain should consider consulting with experienced FTC defense counsel to avoid unsupported efficacy claims and inadvertently charging unlawful prices for goods and services necessary for the health, safety and welfare of consumers.

© 2020 Hinch Newman LLP

For more on FTC COVID-Actions, see the National Law Review Coronavirus News section.

Growing Number of States Enact Drug Pricing Transparency Laws

Drug prices continue to be a hot button issue in American politics.  While many of the Trump Administration’s efforts to curb increasing drug prices stalled in 2019, a number of state legislatures have adopted drug price transparency laws in recent years.  Since 2015, Vermont, Nevada, California, Maryland, Louisiana, New York, Oregon, Colorado, Connecticut, Maine, Texas, and Washington have all adopted drug pricing transparency laws.  These laws are designed to incentivize manufactures to lower drug prices by requiring them to report information about drug price increases and their justification for how drug prices are set.  We have been tracking and summarizing these laws, and you can find our summary here.

Below is a brief overview of the trends that we’re seeing in state drug price transparency laws.

  • State Laws Requiring Manufacturer Reporting on Drug Price Increases.  The most prevalent type of drug price transparency laws requires manufacturers to report an extensive amount of information about drug price increases.  Generally, states require manufacturers to report the information to a state government agency (e.g., Oregon), but other states (e.g., California) require manufacturers to provide advance notice of drug price increases to purchasers.  Generally, reporting requirements are triggered when the wholesale acquisition cost (WAC) increases over a certain dollar threshold or when the net increase of the WAC increases a certain percentage over the course of a year.
  • State Laws Requiring Manufacturer Reporting for Specific Drugs Identified by the State or Certain Types of Drugs. Several states (e.g., Connecticut and Vermont) authorize an independent board to compile a list of drugs on which the state spends significant dollars and/or for which the WAC has increased significantly over the past year or past five years.  Manufacturers of the drugs identified by the board are required to report certain information about the drugs’ costs and pricing.  The reporting requirements in other state laws are specific to certain types of drugs.  For example, Nevada’s drug price transparency law initially applied only to forms of insulin and biguanides, which are essential for diabetes treatment.  In 2019, Nevada expanded the law to apply to prescription drugs essential for asthma treatment as well.
  • State Laws Requiring Pharmacy Benefit Managers (PBMs) to Disclose Manufacturer Rebates.  These laws place accountability for drug price increases on PBMs by requiring them to disclose the amount of rebates they negotiate and retain from manufacturers.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

ARTICLE BY Rachel E. Yount of Mintz.
For more drug pricing transparency developments see the National Law Review Biotech, Food & Drug law page.

340B Drug Ceiling Prices Now Available

On April 1, 2019, the Health Resources and Services Administration (HRSA) launched a secure website that lists the maximum price drug manufacturers may charge 340B-covered entities for 340B-eligible drug purchases (the 340B Ceiling Price Site).  Drug manufacturers and 340B-covered entities may access the 340B Ceiling Price Site through their HRSA Office of Pharmacy Affairs information system (the 340B OPAIS) account here: https://340bopais.hrsa.gov/

Since the creation of the 340B program in 1992, participating covered entities could not verify whether they received the correct price for medication purchased through the program. In 2010, as part of the Patient Protection and Affordable Care Act, Congress directed HRSA to create a secure database that lists the 340B ceiling price.   Nearly nine years later, HRSA launched the 340B Ceiling Price Site which allows covered entities to now access verifiable 340B drug pricing information.

The 340B ceiling price is statutorily defined as a drug’s average manufacturer price (AMP) of a drug reduced by the unit rebate amount (URA).  The URA is calculated by dividing the drug’s Medicaid drug rebate amount (DRA) by the AMP.  The 340B ceiling price can be calculated as AMP – (DRA/AMP).

To populate the 340B Ceiling Price Site, HRSA obtains AMP and URA information from the Centers for Medicare and Medicaid Services (CMS), as well as a third-party drug pricing publisher, First Databank.   Manufacturers are also tasked with providing pricing information to HRSA during quarterly price reporting windows, which will last for two weeks each calendar quarter. If there is a discrepancy between HRSA’s data and manufacturer reported data, the manufacturer may either: (1) accept HRSA’s data as its own, (2) refuse to edit the manufacturer data and provide explanations for each discrepancy, or (3) edit the manufacturer data and provide reasoning for any remaining discrepancies.  After resolving pricing discrepancies, HRSA will publish the calculated 340B ceiling price to the 340B Ceiling Price Site.

Covered entities’ access to the 340B Ceiling Price Site is limited to the covered entity’s authorizing official (AO) and primary contact (PC).  AOs and PCs are strictly prohibited from sharing 340B pricing information outside of their organization and from exporting pricing information from the 340B Ceiling Price Site. They must attest to their compliance with these obligations each time they log into the 340B Ceiling Price Site.

Although the 340B Ceiling Price Site provides covered entities with valuable pricing information, covered entities are reminded that the price they pay for 340B-eligible drugs could differ from the 340B ceiling price depending upon the covered entity’s wholesale pricing contract terms. The price paid for 340B eligible medications may vary for a number of reasons, including wholesale cost-minus/plus calculations and the availability of sub-340B ceiling pricing for drugs through the 340B Prime Vendor Program.

 

© 2019 Dinsmore & Shohl LLP. All rights reserved.
Read more drug pricing news on the Health Care type of law page.

Trump Administration Proposes Requiring Disclosure of Drug Prices in TV Ads

The Trump Administration is moving full speed ahead with its proposals under the Blueprint to Lower Drug Prices (the “Blueprint”).  Earlier this week, the Centers for Medicare & Medicaid Services (“CMS”) released a proposed rule that would require pharmaceutical manufacturers to disclose the list price of their pharmaceutical products in direct-to-consumer (“DTC”) television ads (the “Proposed Rule”).  This comes only a week after the President signed legislation prohibiting “gag clauses” in pharmacy agreements and allowing pharmacists to tell patients that they can obtain a product for less by paying the cash price instead of their insurance company’s negotiated rates.

This recent Proposed Rule is relatively straightforward: any prescription drug or biologic with a list price of more than $35 that may be directly or indirectly covered by Medicare or Medicaid must include the following statement in DTC television ads:

  • “The list price for a [30-day supply of] [typical course of treatment with] [name of prescription drug or biological product] is [insert list price]. If you have health insurance that covers drugs, your cost may be different.”

CMS proposes that the “list price” in the above statement should be the product’s Wholesale Acquisition Cost (“WAC”); however, CMS is seeking comment on whether WAC best reflects the “list price.”  WAC is the published price that pharmaceutical manufacturers charge wholesalers for their products.  WAC does not include any prompt pay or other discounts, rebates or reductions in price. It is also different from the usual and customary price that a cash paying patient pays at the pharmacy.

CMS further proposes that the only “enforcement mechanism” under the Proposed Rule would be the annual publication of a list of manufacturers that have not complied with the disclosure requirements.  CMS believes violations of the regulation would be enforced as unfair and deceptive marketing through the Lanham Act, which allows competitors to bring causes of action against each other.  In other words, CMS is anticipating that the industry will self-police compliance with the regulation.  However, CMS is also seeking comment on other approaches to enforce compliance with the Proposed Rule.

Notwithstanding the straightforward nature of the Proposed Rule, it is clear that CMS is bracing itself for legal challenges.  CMS spends a significant portion of the preamble defending its rationale for requiring list price to be disclosed and its authority to issue this Proposed Rule, as well as attempting to preempt potential First Amendment challenges.

The stated purpose of the Proposed Rule is to reduce the price “that consumers pay for prescription drugs and biological products.”  CMS’ rationale is that by providing beneficiaries with “relevant information about the costs of prescription drugs and biological products,” beneficiaries can make informed decisions that minimize their out-of-pocket costs and reduce costs to Medicare and Medicaid.  CMS believes that requiring pricing information in ads allows beneficiaries to “price shop,” so that the prescription drug market can be similar to other commodities.  CMS points to market research among other commodities finding that when pricing information is available, competition increases resulting in price reductions.  One interesting note is that out-of-pocket costs only impact non-dual-eligible Medicare beneficiaries.  States can only charge Medicaid beneficiaries a nominal prescription drug copay that is identified in the Medicaid State Plan or in regulation.  Dual-eligible beneficiaries have a copayment that ranges from $0 to $8.35, regardless of the drug’s WAC.

CMS states that it has legal authority to promulgate this Proposed Rule because the Social Security Act requires that the Secretary administer the Medicare and Medicaid programs in a manner that minimizes unreasonable expenditures.  Further, it explains that Congress explicitly directs HHS to operate the Medicare and Medicaid programs efficiently.  CMS argues that promoting pricing transparency promotes efficient markets and can reduce unnecessary expenditures.  It is interesting to note the Administration determined that this rule should be issued by CMS, rather than FDA or Federal Trade Commission, which otherwise regulate the advertisement of prescription drugs and market competition, respectively.  Statements from Secretary Azar and HHS officials indicate that HHS did not use FDA’s authority because such authority is limited to drug claims and side effects.

Additionally, CMS tries to preempt any First Amendment challenges against its proposal, stating that this price disclosure “consists of purely factual and uncontroversial information about a firm’s own product.”  CMS argues that prescription drug price disclosure is no different from requiring the disclosure of calories on menus or an insurer’s financial interest in PBMs, which have been upheld by either the United States Supreme Court or circuit courts.

CMS will accept comments on this rule for 60 days following its publication to the Federal Register.  Given the speed in which the Administration is tackling the proposals in its Blueprint, we will continue to track developments.

 

©1994-2018 Mintz All Rights Reserved.
This post was written by Lauren M. Moldawer of Mintz.

New FDA Commissioner Hits the Ground Running

Fresh off his noticeably smooth confirmation, the new Commissioner of Food and Drugs, Dr. Scott Gottlieb, appeared before Congress last Thursday and unveiled his strategic initiatives and priorities for the Trump Food and Drug Administration (“FDA”).  These run the gamut from improving regulatory science and policies to streamlining clinical trials to spurring innovation on behalf of patients.  Two initiatives, in particular, merit closer attention and discussion: combating opioid abuse and addressing drug price increases through more, accelerated generic competition.

Opioid Regulation

In his first post to the FDA Voice blog, Dr. Gottlieb wrote:

As Commissioner, my highest initial priority is to take immediate steps to reduce the scope of the epidemic of opioid addiction. . . .  I believe it is within the scope of FDA’s regulatory tools – and our societal obligations – to take whatever steps we can, under our existing legal authorities, to ensure that exposure to opioids is occurring under only appropriate clinical circumstances, and for appropriate patients.

First among these steps, the Commissioner is establishing an Opioid Policy Steering Committee, comprised of “some of the agency’s most senior career leaders, to explore and develop additional tools or strategies FDA can use to confront this epidemic.”  The strategies under consideration include (1) mandatory education for health care professionals about (i) appropriate prescribing recommendations; (ii) how to identify the risk of abuse in individual patients; and (iii) how to get addicted patients into treatment; and (2) working more closely with provider groups to develop standards for prescribing opioids in different clinical settings, so that “the number of opioid doses that an individual patient can be prescribed is more closely tailored to the medical indication.”

Limiting the availability of prescription pain medication is a dicey proposition, however.  As Dr. Gottlieb acknowledged, certain situations “require a 30-day supply” and, “[i]n those cases, we want to make sure patients have what they need.  But there are plenty of situations where the best prescription is a two- or three-day course of treatment.”  The individualized medical judgments and circumstances that drive opioid prescribing likely mean that no single approach is likely to strike the proper balance between over-prescribing and ensuring sufficient access to adequate pain management.  Interestingly, the variability between opioid prescribers and patients did not stop the Centers for Medicare and Medicaid Services from proposing hard limits on opioid dosing for non-cancer pain or palliative/end-of-life care (i.e., chronic pain) for Medicare Advantage Organizations and Prescription Drug Plan Sponsors.

In fact, pain patients already have struggled under bright-line limitations on opioids.  As we previously reported, the State of Massachusetts enacted a new law in March 2016 that prohibits “a practitioner [from] issu[ing] a prescription for more than a 7-day supply . . . [w]hen issuing a prescription for an opiate to an adult patient for outpatient use for the first time [or] to a minor,” the first such limitation legislatively imposed by any state.”  Mass. Gen. Laws ch. 94C, § 19D (2016).  Massachusetts physicians surveyed following the law’s enactment complained that “the pendulum has swung too far, depriving pain patients of needed relief,” and that “regulations won’t solve the addiction problem . . . .  Instead, they make doctors reluctant to prescribe opioids.”

Broadly targeting opioids as a class of drugs also may cast too wide a net.  A recent article in the journal Substance Abuse reported “[t]he US opioid epidemic has changed profoundly in the last 3 years” in that “[h]eroin and fentanyl have come to dominate an escalating epidemic of lethal opioid overdose, whereas opioids commonly obtained by prescription play a minor role, accounting for no more than 15% of reported deaths in 2015.”  The article urged that the changing etiology of opioid overdose “require[s] substantial recalibration of the US policy response.”

What is clear—and what Dr. Gottlieb seems to recognize—is that opioid abuse and addiction are dynamic issues that differ from prescriber to prescriber and from one patient to another.  Those variables may make a one-size-fits-all”strategy unviable.

Drug Prices

During a budget hearing before the House Committee on Appropriations, Dr. Gottlieb testified that, “while the FDA does not have a direct role in drug pricing, we can take steps to facilitate entry of lower-cost alternatives to the market.”  He identified policy challenges that the last Congress had attempted to address through legislation designed to expedite access to affordable drugs.  Such legislation included the CREATES Act, which we previously analyzed.  The proposed law sought to prevent brand-name drug companies from using FDA safety rules (i.e., Risk Evaluation and Mitigation Strategies (REMS) and requirements thereunder, e.g., Elements to Assure Safe Use (ETASU)) for medicines with higher risk potential to block or delay generic entry.  “FDA has an important role to play in making sure that its statutory and regulatory processes are working as intended,” Gottlieb told Congress, “not being manipulated in ways that FDA and Congress did not intend.”

In response to growing political pressure in Washington to expedite drug reviews, Dr. Gottlieb assured lawmakers that biomarkers, new technologies, and more efficient clinical trial designs would make it possible to shorten the regulatory process.  But accelerated approval of expensive, investigational (albeit life-saving) therapies has raised concerns among health policy experts.

A recent op-ed published by the New England Journal of Medicine (NEJM) cautioned that

accelerated approval can lead to situations in which private payers may choose not to cover a drug because of high cost and lack of evidence of clinical efficacy, thereby thwarting the pathway’s goal of getting potentially important therapies to patients earlier, while major government payers are forced to cover the product, directing substantial tax dollars to drugs not yet shown to have clinical benefit.

The NEJM article’s authors argue that any biopharma company granted an accelerated approval should be subject to certain price restrictions until the confirmatory trials are completed, reasoning that “the price paid by taxpayers should reflect the strength of the available evidence about the drug’s clinical impact.”  Additionally, they proposed that all drugs moving through an accelerated-approval pathway should be subject to formal economic impact analyses after one to two years on the market, possibly funded by an increase in the user fees for manufacturers that use this pathway.

Dr. Gottlieb is also evaluating the generic drug and biosimilar review and approval process.  More specifically, Dr. Gottlieb is looking at measures to  facilitate communication between the industry and FDA, address complex molecules, and to speed up the approval of biosimilar products.

These recommendations are not without some appeal.  Despite seeking to deliver more “bang” for the taxpayer’s “buck,” however, prospectively capping the federal reimbursement for a high-cost drug product still subject to additional clinical trials and/or other R&D may create a financial disincentive to pharmaceutical manufacturers to foot the expense of developing breakthrough drugs to fill an unmet medical need.

Stay Tuned

To deliver on the promises of reducing the incidence of opioid abuse and lowering drug prices, Dr. Gottlieb’s FDA must navigate the competing interests and thorny health policy issues highlighted above.

Jason L. Drori, David L. Rosen and Judith A. Waltz of Foley & Lardner LLP.