If you think that because you get health insurance through your job at a big company, you won’t be affected if Republicans overhaul Obamacare, think again. Several of the law’s provisions apply to plans offered by large employers too (with some exceptions for plans that were in place before the law passed in March 2010).
It’s not yet clear how President-elect Donald Trump and the congressional Republicans plan to revamp the federal health law. They have not agreed on a plan, and they do not have enough votes in the Senate to fully repeal the current statute. So they are planning to use a budgeting rule to disassemble part of the law, and that will limit what they can change. But they also may seek revisions in important regulations and guidance that have determined how the law is implemented.Insuring Your Health
KHN contributing columnist Michelle Andrews writes the series Insuring Your Health, which explores health care coverage and costs.
To contact Michelle with a question or comment, click here.
This KHN story can be republished for free (details).
Nonetheless, as the tensions grow in Washington over the future of the health law, it is important to understand some of its effects on large-group plans.
No Copays For Preventive Services
The health insurance offered by big companies is typically pretty comprehensive, the better to attract and keep good employees. But Obamacare broadened some coverage requirements. Under the law, insurers and employers have to cover many preventive services without charging people anything for them. The services that are required with no out-of-pocket payments include dozens of screenings and tests, including mammograms and colonoscopies, that are recommended by the U.S. Preventive Services Task Force; routine immunizations endorsed by the federal Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices; and a range of services that are recommended specifically for children and for women by the federal Health Resources and Services Administration.
The change that affects the most people on an ongoing basis is likely the requirement that plans cover without cost sharing all methods of contraception approved by the Food and Drug Administration. (There are limited exceptions for religious employers.)Use Our Content This KHN story can be republished for free (details).
“In terms of sustained costs, birth control is probably the biggest,” said Caroline Pearson, a senior vice president at Avalere Health.
No Annual Or Lifetime Limits On Coverage
Even the most generous plans often had lifetime maximum coverage limits of a few million dollars before the health law passed, and some plans also imposed annual coverage limits. The health law eliminated those dollar coverage limits.
Annual Cap On Out-Of-Pocket Payments For Covered Services
The health law set limits on how much people can be required to pay in deductibles, copayments or coinsurance every year for covered care they receive from providers in their network. In 2017, the limit is $7,150 for individuals and $14,300 for families.
“Many employers often had an out-of-pocket limit anyway, but this guarantees protection for people with high needs,” said JoAnn Volk, a research professor at Georgetown University’s Center on Health Insurance Reforms, who has written on this issue.
Adult Kids’ Coverage Expanded
The law allowed workers to keep their children on their plans until they reach age 26, even if they’re married, financially independent and live in another state. Republicans have said they may keep this popular provision in place if they dismantle the law.
Guaranteed External Appeal Rights
Consumers who disagree with a health plan’s decision to deny benefits or payment for services can appeal the decision to an independent review panel.
The provision applies to all new health plans, including those offered by self-funded companies that pay their workers’ claims directly and who were previously exempt from appeals requirements.
No Waiting Periods To Join A Plan
Employers used to be able to make new employees wait indefinitely before they were eligible for coverage under the company plan. No more. Now the waiting time for coverage can be no more than 90 days.
No Waiting Periods For Coverage Of Pre-Existing Conditions
Prior to the ACA, employers could delay covering workers’ chronic and other health conditions for up to a year after they became eligible for a plan. Under the ACA, that’s no longer allowed. As a practical matter, though, coverage of pre-existing conditions was rarely an issue in large-group plans, say some health insurance experts.
“It was difficult administratively, and the law of large numbers” meant that one individual’s health care costs didn’t generally have a noticeable impact on the group, said Karen Pollitz, a senior fellow at the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)
Repeal could reopen the door to that prohibited practice, however.
Standardized Plan Descriptions
The law requires all plans to provide a “summary of benefits and coverage” in a standard format that allows consumers to understand their coverage and make apples-to-apples plan comparisons.
Basic Coverage Standards For Large-Group Plans
The health law isn’t as prescriptive with large-group plans about the specific benefits that have to be offered. They aren’t required to cover the 10 essential health benefits that individual and small-group plans have to include, for example. But the law does require that big companies offer plans that meet a “minimum-value” standard paying at least 60 percent of the cost of covered services, on average. Those that don’t could face a fine.
Initially, the online calculator that the federal Department of Health and Human Services provided to help large employers gauge compliance with the minimum value standard gave the green light to plans that didn’t cover hospitalization services or more than a few doctor visits a year. Now plans must provide at least that coverage to meet federal standards.
The result: Large employers generally no longer offer so-called “mini-med” policies with very skimpy benefits.
If the health law is repealed, that could change. In some industries with lower-wage workers and smaller profit margins, “they might begin to offer them again, and employees might demand it” to help make the premiums more affordable, said Steve Wojcik, vice president of public policy at the National Business Group on Health, a membership organization representing large employers.
Although the law strengthened coverage for people in large-group plans in several ways, consumer advocates have complained about shortcomings. It aimed to ensure that coverage is affordable by requiring that individuals be responsible for paying no more than 9.69 percent of their household income for individual employer coverage, for example.
If their insurance costs more than that, workers can shop for coverage on the marketplaces set up by the health law and be eligible for premium tax credits — if their income is less than 400 percent of the federal poverty level (about $47,000). But the standard does not take into consideration any additional costs for family coverage.
Consumer advocates also point to the wellness regulations as a problematic area of the law. The health law increased the financial incentives that employers can offer workers for participating in workplace wellness programs to 30 percent of the cost of individual coverage, up from 20 percent.
Such incentives can effectively coerce people into participating and sharing private medical information, critics charge, and unfairly penalize sick people.
“It potentially allows [plans] to discriminate against people with medical conditions, which the ACA is supposed to eliminate,” said Linda Blumberg, a senior fellow at the Urban Institute’s Health Policy Center.
This investigation examines the booming orphan drug business and how drugmakers have rushed into the marketplace with hundreds of drugs for rare diseases, helping patients while landing lucrative federal incentives and monopoly control for every drug that gets approved.In This Series:
- The Orphan ‘Monopoly’ Game
- Coming Next: Saving Lives … But At What Price?
- Lookup Tool: Orphan Drugs Database
- Video: Interview With Henry Waxman
- Timeline: The Orphan Drug Act
More than 30 years ago, Congress overwhelmingly passed a landmark health bill aimed at motivating pharmaceutical companies to develop new drugs for people whose rare diseases had been ignored.
By the drugmakers’ calculations, the markets for such diseases weren’t big enough to bother with.
But lucrative financial incentives created by the Orphan Drug Act signed into law by President Ronald Reagan in 1983 succeeded far beyond anyone’s expectations. More than 200 companies have brought almost 450 “orphan drugs” to market since the law took effect.
Yet a Kaiser Health News investigation shows that the system intended to help desperate patients is being manipulated by drugmakers to maximize profits and to protect niche markets for medicines already being taken by millions. The companies aren’t breaking the law but they are using the Orphan Drug Act to their advantage in ways that its architects say they didn’t foresee or intend. Today, many orphan medicines, originally developed to treat diseases affecting fewer than 200,000 people, come with astronomical price tags.
And many drugs that now have orphan status aren’t entirely new. More than 70 were drugs first approved by the Food and Drug Administration for mass market use. These medicines, some with familiar brand names, were later approved as orphans. In each case, their manufacturers received millions of dollars in government incentives plus seven years of exclusive rights to treat that rare disease, or a monopoly.
Drugmakers of popular mass market drugs later sought and received orphan status for the cholesterol blockbuster Crestor, Abilify for psychiatric conditions, cancer drug Herceptin, and rheumatoid arthritis drug Humira, the best-selling medicine in the world.This KHN story also ran on NPR. It can be republished for free (details).
More than 80 other orphans won FDA approval for more than one rare disease, and in some cases, multiple rare diseases. For each additional approval, the drugmaker qualified for a fresh batch of incentives. Botox, stocked in most dermatologists’ offices, started out as a drug to treat painful muscle spasms of the eye and now has three orphan drug approvals. It’s also approved as a mass market drug to treat a variety of ailments, including chronic migraines and wrinkles.
Altogether, KHN’s investigation found that about a third of orphan approvals by the FDA since the program began have been either for repurposed mass market drugs or drugs that received multiple orphan approvals.
“What we are seeing is a system that was created with good intent being hijacked,” said Bernard Munos, a former corporate strategy advisor at drug giant Eli Lilly and Co. who reviewed the KHN analysis of several FDA drug databases. It’s “quite remarkable that it has gone on for so long.”
And the proportion of new drugs approved as orphans has ballooned. In 2015, 21 orphan drugs were approved, accounting for 47 percent of all new medicines, up from just 29 percent in 2010; in 2016, nine more orphans won approval, 40 percent of the total.
When a drugmaker wins approval of a medicine for an orphan disease, the company gets seven years of exclusive rights to the marketplace, which means the FDA won’t approve another version to treat that rare disease for seven years, even if the brand name company’s patent has run out. The exclusivity is compensation for developing a drug designed for a small number of patients whose total sales weren’t expected to be that profitable.
But the exclusivity is a potent pricing tool. Drugmakers can charge whatever they want by shielding their medicine from competition. The market exclusivity granted by the Orphan Drug Act can be a vital part of the protective shield that companies create. What’s more, manufacturers can return to the FDA with the same drug again and again, each time testing the drug against a new rare disease.
Critics have assailed drugmakers in the past for gaming the orphan drug approval process. But the extent to which companies have been winning approval for drugs that aren’t what advocates call “true orphans” hadn’t been documented until the Kaiser Health News investigation.
Munos said he was “shocked” by the sheer number of mass market drugs being repurposed as well as those approved multiple times.
Even agency officials said they weren’t aware of the scope of the issue. After reviewing KHN’s findings for two weeks, Dr. Gayatri Rao director of the FDA’s Office of Orphan Products Development said she “appreciated the work” and expressed interest in studying how often drug companies are “repurposing” a drug for a new rare disease, or taking “multiple bites of the apple.”
“We are going to look into this,” she said, adding that she could consider a regulatory change.
Rao pointed out that the “repurposing” of drugs does have scientific and patient benefits. For example, cancer drugs approved for one type of malignancy can be tested and approved for others. Gleevec, a drug that revolutionized the treatment of chronic myeloid leukemia, now has nine orphan approvals.
But in a 2015 commentary published in the American Journal of Clinical Oncology, Dr. Martin Makary at the Johns Hopkins University School of Medicine focused on cancer drugs including Gleevec, arguing that the drug was never meant to serve an orphan population. Instead, Makary and his team wrote, drugmakers purposely identify small patient populations to gain additional approvals — a process he described as “salami slicing.”
“By salami slicing the disease into subgroups, it allows them to get the orphan drug approval with all the government benefits and even some of the subsidies,” Makary said. The prices of such medications often rise because they have seven years without competition for a new set of patients, Makary added.
The FDA has taken a different view of repurposing.
“We always talked about how we permit the second bite of the apple, third bite of the apple, as one small way to incentivize repurposing,” Rao said, noting that industry and patient groups have been pressing the FDA for even stronger incentives. “Now, all of sudden, it seems like, wow, this practice may be driving up prices.”
Novartis, which owns Gleevec, said in an email statement that the company is advancing research and following the science to “bring the right treatments to the right patients based on unmet need, not the size of the patient population.”
Two KHN reporters spent six months analyzing data and talking to lawmakers, patients, advocates, doctors and companies to understand how the FDA’s orphan drug program has evolved amid a national uproar over soaring drug prices. President-elect Donald Trump vowed on the campaign trail to bring down prescription drug prices and during a Jan. 11 press conference said the drug industry is “getting away with murder.”
The investigation examined how drugmakers use the law to their advantage — often with the guidance of former FDA officials — and have made the development of medicines that were once thought to be business backwaters into one of the pharmaceutical industry’s hottest sectors.
Orphan drugs now account for seven of the 10 top-selling drugs of any kind, ranked by annual sales, according to EvaluatePharma.
“Orphans are wicked hot,” said Dr. Tim Coté, a former FDA official who now runs a consulting firm that advises drugmakers on orphan drugs.
No one disputes that orphan drugs have helped or saved hundreds of thousands of patients suffering from debilitating or even fatal rare diseases. Exactly how many is difficult to estimate because the FDA doesn’t track such information.
And drug industry officials say companies should be rewarded, not punished, for making those treatments possible and for pursuing new drugs that aren’t always an economic success.
Research and development is “long, costly, risky,” said Anne Pritchett, vice president, policy and research at industry lobbying group PhRMA. “When you look at cystic fibrosis it was 25 years to the development of an effective therapy … I think we would be concerned about anything that would undermine the current [orphan drug] incentives.”
Dead children … people are willing to pay a lot to prevent that.Tim Coté Click here to watch the full interview.
Former U.S. Rep. Henry Waxman, D-Calif., a champion of the 1983 Orphan Drug Act takes a different view.
“The Orphan Drug Act has been a great success because many people with diseases that affect very few people now have drugs available to them,” Waxman said. “But it’s been in some ways turned on its head when it becomes the basis of manipulating the system for the drug company to make much more money than they would in an open, competitive market.”
On a late summer day, Tim Coté sat in a corner office of his Sandy Spring, Md., consulting firm, Coté Orphan. He leaned into his computer microphone to dispense insider knowledge about the orphan drug approval process on a webcast hosted by FDAnews, a trade news organization. Listeners paid about $300 a head, but Coté said he wasn’t paid for doing it.
The FDA is more flexible in evaluating drugs for rare diseases, he said, explaining that “about half of them get through with just one pivotal clinical trial. Not so for common diseases.” The FDA, citing a report from the National Organization for Rare Disorders, said about two-thirds of orphan drugs were approved with one adequate and well-controlled trial with supportive evidence. It typically requires two or three such trials to approve a mass market drug.
Coté also told the webinar audience that clinical trials for orphan drugs are usually smaller and the approval is a “different scientific and regulatory experience.”
Coté knows his stuff. He was Rao’s immediate predecessor as chief of the FDA’s Office of Orphan Products Development. It’s not unusual for government officials to leave FDA and other regulatory agencies and obtain jobs as consultants or industry executives.
Coté’s website, headlined “The Inside Track,” notes that he oversaw applications that led to the approval of at least 150 orphan drugs when he was at the FDA and that his firm is now the largest submitter of orphan drug applications.
“We write the entire application,” the website for Coté’s company notes, adding that his staff of 25 includes regulatory scientists with deep knowledge and experience in FDA’s “unwritten rules” regarding orphan drugs.
Many of Coté’s more than 300 clients are small biotech companies begun by researchers or even passionate parents who found investment backing. Parents Ilan and Annie Ganot, for example, started Solid Biosciences to find treatments and potentially a cure for their son with Duchenne muscular dystrophy.
Coté guides them through the regulatory process since most don’t have the expertise. He can offer his expertise and develop an application that makes it easier for the FDA to designate and approve the drug.
“When you make the FDA smile, the value of your asset goes up. And that’s how the game is played,” he said in an interview, adding quickly, “It’s really not a game because people’s lives are what is in balance.”
Coté and other ex-FDA officials play a vital role in helping drugmakers choose rare disease targets and get through the FDA approval process.How orphan drugs win the "monopoly" game:
Check out all the drugs the FDA has approved to treat rare diseases. You can search by brand name, or by disease, and see familiar names that were first sold on the mass market or all the drugs that won FDA approval to treat more than one rare disease. Each approval gives the drugmaker seven years of exclusive rights to the market. Drugmakers are companies that sought orphan approval, not necessarily current drug owners. Some drugs appear in more than one tab.Search for drug or disease
- 302 Original orphan drugs for single rare disease
- 72 Orphans that served the mass market first
- 84 Orphans approved for multiple orphan diseases
KHN used multiple datasets from the FDA, relying primarily on the orphan drug designations and approvals database. If a drug had an approval date before the first marketing approval date in the orphan database, we put it in the mass market first category.
A small cottage industry has grown around the Orphan Drug Act. Dr. Marlene Haffner, who preceded Coté in the FDA’s orphan office, started her own consulting firm, too, to advise small and large companies on orphan drug applications. A third company is Camargo Pharmaceutical Services, led by industry veterans and former FDA officials, which advises companies focused on repurposing drugs for orphan approval. The firm tries “to be in front of the FDA a lot — three to four times a month,” said Jennifer King, Camargo’s director of marketing. Fees for consulting on orphan drugs industry wide range from $5,000 to $100,000, depending upon what services are provided, Coté said.
Getting through the orphan approval process involves a series of steps.
First, drugs must be designated by the FDA as potential candidates for approval. A company has to demonstrate that its drug is a promising treatment for a disease that affects fewer than 200,000 patients. If the FDA agrees and makes the formal designation, financial incentives kick in, including a 50 percent tax break on research and development (R&D) and access to federal grants.
When drugs get orphan designation, companies often reap other financial rewards. Shares in publicly traded companies often rise on the news — sometimes soaring as high as 30 percent. That happens, in part, because orphans have a track record of being approved at much higher rates than drugs for common diseases.
The 50 percent R&D tax credit pays off, too. In 2012, one of the biggest orphan drug companies, BioMarin, received $32.6 million from a combination of federal and state of California tax credits. BioMarin spokeswoman Debra Charlesworth confirmed that the orphan credit made up the “vast majority” of that deferred tax benefit. She also noted that credit “has successfully fueled an industry that didn’t previously exist” and led to more rare disease research.
Industry-wide, orphan drug tax credits cost the federal government $1.76 billion in fiscal 2016 — roughly what President Barack Obama asked Congress to spend to fight the Zika virus before a $1.1 billion expenditure was approved. And, because so many orphan drugs are under development, the U.S. could grant nearly $50 billion in tax credits from 2016 to 2025, estimates the Treasury Department.
There’s a lot of creativity behind figuring out how to make a drug an orphan.
In Coté’s webinar and in multiple interviews, he described many ways companies can win orphan status. They can test their drugs on children with adult diseases, such as schizophrenia, or find drugs for ailments like malaria that are uncommon in America.
“African sleeping sickness: horrible problem in Africa but not here, not in the U.S.,” Coté told his webinar audience. “So a drug development effort that was aimed toward some of these tropical diseases can actually get all the benefits of the Orphan Drug Act.”
People have played games with the Orphan Drug Act since it was passed.Marlene Haffner
Another popular strategy is to create “follow-on drugs” that represent incremental steps forward.
About 30 percent of Coté’s clients are companies looking to improve upon some other orphan drug “which just made billions and billions,” he said in an interview.
Repurposing an already approved drug is another strategy his firm promotes. In a video posted on his website in July, Coté explained the advantages for companies that can move directly into a clinical trial without much preparatory work because the drug’s safety has already been demonstrated.
“All you gotta do is establish that the product can work in this new orphan indication,” he said, adding tips on how to do it and still make money.
‘That Is Not A True Orphan Drug’
Turning mass market drugs into orphans has been a familiar path for some of the most popular drugs ever discovered.
AbbVie’s Humira is the best-selling drug in the world, and most of its sales are in the U.S. where revenue reached $7.6 billion through the third quarter of 2016 and $11.8 billion worldwide, according to the company’s latest financial report.
Humira was approved by the FDA in late 2002 to treat millions of people who suffer from rheumatoid arthritis. Three years later, AbbVie asked the FDA to designate it as an orphan to treat juvenile rheumatoid arthritis, which they told the FDA affects between 30,000 and 50,000 Americans. That pediatric use was approved in 2008, and Humira subsequently was approved for four more rare diseases, including Crohn’s and uveitis, an inflammatory disease affecting the eyes.
The ophthalmologic approval would extend the market exclusivity for Humira for that disease until 2023. When asked why AbbVie sought multiple orphan designations and approvals for Humira, the company declined to comment.
Peter Saltonstall, executive director of the National Organization for Rare Disorders, said that Humira is “not a true orphan drug.” But, he said, the company has “the ability to go out and get orphan designation. That’s the way the law reads right now … they can do whatever they want to do.”
It is difficult to say exactly how or if orphan exclusivity affects the price of Humira, which is a complex biologic drug and also has been protected by numerous patents. The drug has long been AbbVie’s top seller, accounting for 63 percent of its revenues, according to its most recent financial filing.
EvaluatePharma notes in its recent report that Humira, as well as a handful of other top drugs, receive less than 25 percent of their sales from orphan uses. Still, if Humira’s orphan uses accounted for just 10 percent of annual sales, the revenue would surpass $1 billion.
By stacking up a series of orphan disease approvals, one seven-year exclusivity period leads into another, maximizing the length of a company’s monopoly. Sigma-Tau Pharmaceuticals, for example, had some form of orphan exclusivity over its metabolic disorder drug for more than 20 years. The drug, Carnitor, received a second orphan approval four months before its first exclusivity was set to expire. And it won its third orphan approval, for an IV formulation of the drug, just one day before its second exclusivity period was set to expire in December of 1999.
“The sequence and timing of regulatory filings for Carnitor reflect the time required to conduct large controlled clinical trials, as well as evolving medical strategies and regulatory pathways pursued by different sponsors over many years,” said GianFranco Fornasini, senior vice president of scientific affairs at Sigma-Tau.
The FDA’s Rao said each new exclusivity period is disease-specific and once any seven-year period runs out, generics can come in. Gleevec, for example, won FDA approval to treat several kinds of rare cancer. All but one of its orphan exclusivity periods had expired by 2015, allowing two generics to enter the marketplace. But Gleevec still has exclusivity until 2020 to treat newly diagnosed Philadelphia chromosome-positive acute lymphoblastic leukemia in patients who are also on chemotherapy.
It’s also true, Rao explained, that some of the drugs that go through the orphan process may not specifically treat a rare disease. For example, a very toxic cancer drug might may not work well in earlier stages because its risks outweigh the benefits. But the company may propose that it will help a smaller group of later-stage cancer patients and win orphan approval just for that group.
Former FDA orphan drug director Haffner said her FDA office worked on rules defining how companies could legitimately pursue approval for a small group of patients with a specific unmet medical need.
“People have played games with the Orphan Drug Act since it was passed,” said Haffner, who first took a job with drugmaker Amgen after leaving the FDA and then became an independent consultant. “It’s the American way, I don’t mean that in a nasty way. But we take advantage of what’s in front of us.”
In 2013, the FDA clarified the Orphan Drug Act’s regulations and said it wanted to avoid the possibility that some companies could “potentially ‘game’ approvals by seeking successive narrow approvals of a drug.”
In reality, Rao said, the regulations did not really change “much of what our practice was.” The agency wanted to address what Rao said were “common misconceptions” and frequently asked questions so officials changed wording in the regulations to better define exactly what could be considered an orphan drug.
Breaking down larger, broader diseases into smaller groups is still allowed under certain conditions and companies can still win multiple orphan approvals for a single drug — even if the total population served rises above the 200,000 mark.
Amgen Inc.’s Repatha won marketing approval and exclusive rights in 2015 for the orphan disease homozygous familial hypercholesterolemia, which affects a population of about 300 people in the U.S. On the very same day, the drug was approved as a mass market drug to treat up to 11 million people with uncontrolled levels of LDL cholesterol, said Amgen spokeswoman Kristen Davis.
Dr. Steven Nissen of the Cleveland Clinic, who ran a broader trial on Repatha, said, “It’s certainly not considered by any of us to be an orphan drug.”
Safeguarding The ‘Prize’
Considering the long history of what’s happened, Tim Coté acknowledges that there are “some loopholes” in the Orphan Drug Act. Perhaps 3 percent or less of approved orphans were not in the “spirit” of the law, he said.
But Coté, rare disease advocates, patients and people in the drug industry expressed fear that changing the Orphan Drug Act or questioning its success would hurt the development of drugs for rare patients.Click here to watch the full interview.
Former U.S. Rep. Jim Greenwood, R-Pa., now president of the Biotechnology Innovation Organization, an industry trade group, said that concerns about high prices for orphan drugs aren’t justified. The incentives, he said, should not be altered because rare diseases are “tragically killing and brutalizing mostly children.”
Greenwood seemed unaware that dozens of orphan approvals stemmed from the repurposing of mass market drugs, like Humira or Enbrel, another drug developed first for rheumatoid arthritis. Still, he said, “I would argue that the risk of losing incentives in the system far outweighs the benefit of trying to save a few pennies on the health care dollar.”
It’s a sentiment that Coté and other advocates share. While talking about the $311,000 annual price tag for cystic fibrosis drug Kalydeco, Coté said any parent whose child has the disease would be a big fan of the drug.
“The price point is justified because actually it has a dramatic effect on the children. Dead children … people are willing to pay a lot to prevent that,” Coté said. “And that’s a real good thing that we have this drug. OK?”
The first drug to specifically target the underlying biochemical defect of cystic fibrosis, Kalydeco is approved to treat a subset of patients who have specific mutations in their genes. Development of the drug was financed by the Cystic Fibrosis Foundation, which sold its rights to sales royalties from Kalydeco and other cystic fibrosis drugs for $3.3 billion in 2014.
Others, including Henry Waxman, are far more critical and have tried to do something about it over the years. Waxman proposed multiple bills to rein in corporate profits by amending the orphan drug law that he sponsored, but none succeeded.
The FDA has also tried but failed, to keep corporations in check.
In 2012, drugmaker Depomed Inc. filed suit against the FDA for refusing to give its drug Gralise seven years of market exclusivity as a treatment for pain related to shingles.
Rao said the agency wanted to see proof that Gralise was clinically superior to other drugs, noting there “were a bunch of other generics on the market” with different formulations and dosing requirements. Grasile’s active ingredient, gabapentin, is the same one as in Pfizer’s mass market blockbuster Neurontin, which is also approved for treatment of shingles pain.
The FDA approved Gralise but denied seven years of exclusivity.
In response, the drugmaker sued the agency and won its case, arguing that according to the law, they didn’t have to prove their drug was clinically superior to gain the monopoly.
Today, the drug is one of Depomed’s top products with sales of $81 million in 2015. And, in a recent proxy statement, Depomed listed “protecting Gralise exclusivity” as a corporate objective under the category of “enhance and protect future cash flow.” Its orphan exclusivity ends in 2018. Depomed spokesman Christopher Keenan said Gralise wanted patent exclusivity to block competition. But, Keenan said, “Had the patent effort failed on all fronts, the Orphan Drug Designation would have been very important.”
After reviewing KHN’s analysis, Rao said she wants to better understand why drugmakers are applying for multiple approvals and has asked for a case-by-case review of all orphan designations granted in 2010 and 2015. She said the agency lacks the resources to run an analysis of the entire orphan drug database.
“Our goal is to try to get it right,” she said. “There are over 7,000 rare diseases, likely more, the vast majority of which have nothing … I want to ensure that we continue to keep our eye on that prize.”
Contributors: John Hillkirk, Scott Hensley at NPR, Diane Webber, Marilyn Thompson (editors); Elizabeth Lucas (data editing); Joe Neel at NPR (radio editing)
Interactives, video and presentation: Lydia Zuraw, Emily Kopp, Meredith Rizzo at NPR (digital presentation); Francis Ying (videos, motion graphic); Heidi de Marco (videos, photos, audio); Alley Interactive (database lookup)
KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.
If “repeal and replace” of the Affordable Care Act is Republicans’ job one, defunding Planned Parenthood is a close second.
In fact, the two priorities might be paired. House Speaker Paul Ryan, R-Wis., told reporters Jan. 5 that efforts to defund the organization “would be in our reconciliation bill,” referring to a measure Congress has put on a fast track aimed at repealing major pieces of the health law.
But just as Republicans are discovering that undoing the health law could be complicated, so, too, is separating the controversial reproductive health care provider from its federal funding. Efforts to hastily jettison Planned Parenthood from federal ledgers could actually jeopardize GOP efforts to repeal the health law.This KHN story also ran on NPR. It can be republished for free (details).
One problem is that Planned Parenthood gets its funding from several different government sources. According to the group’s most recent annual report, covering 2015, Planned Parenthood affiliates, got $553.7 million from federal, state, and local governments, accounting for almost half of total funding.
According to the organization, about 75 percent of that government support comes from the Medicaid program to pay for direct medical services provided to low-income patients, including contraception, cancer screenings and sexually transmitted disease testing and treatment. The remaining quarter comes from other sources, primarily the Title X federal family planning program. The Congressional Budget Office estimated last year that the group gets approximately $390 million annually from Medicaid and $60 million from Title X.
None of the funds from either program may be used for abortion, under longstanding federal prohibitions. Only half of the Planned Parenthood affiliates even offer abortion services, the group says. But it is still the largest single provider of the procedure in the nation, which has made it a target for anti-abortion lawmakers since the 1980s.
In recent years one of the most ardent foes of the organization has been Vice President-elect Mike Pence. When he was a member of the House of Representatives, he led unsuccessful efforts to defund the program. As governor of Indiana he was able to accomplish some of his goals. He also vowed to stop federal spending for Planned Parenthood during the campaign last fall.
Yet federal lawmakers have been stymied in these efforts.
One big reason is that taking away Planned Parenthood’s access to Medicaid funding would require a change in the federal law that guarantees most Medicaid patients with a choice to use any qualified provider. The Department of Health and Human Services has repeatedly warned states that have tried to evict Planned Parenthood from their Medicaid programs that they cannot legally do that because such a move would violate that law. Federal courts have consistently blocked states that have tried to end Planned Parenthood’s Medicaid funding.
Changing that section of Medicaid law likely would require 60 votes in the Senate to break a filibuster by Democrats. Republicans currently have 52 votes. The budget reconciliation bill, however, that is expected to be used to repeal portions of the health law operates under special rules. It cannot be filibustered and needs only 51 votes to pass.
That presents two problems for Republicans. According to CBO, permanently changing Medicaid law to make Planned Parenthood ineligible would cost, not save, money – approximately $130 million over 10 years. That is because, said CBO, taking away contraceptive access for some women would result in more pregnancies, and “additional births that would result from enacting such a bill would add to federal spending for Medicaid.”
That is not just theoretical. In 2013 Texas kicked Planned Parenthood out of its family planning program, and gave up its federal funding. The result was fewer women using birth control and more babies being born, according to an analysis published last March in The New England Journal of Medicine..
The second problem is political. While the House under GOP control has been strongly in favor of cutting off Planned Parenthood’s access to federal funds, there are a handful of Republican senators who oppose the idea. And a handful – three to be exact – is all it would take to threaten passage of the health law repeal effort.
“Obviously I’m not happy that the speaker has decided to include the defunding of Planned Parenthood — an extremely controversial issue — in the (budget reconciliation) package,” Sen. Susan Collins, R-Maine, told reporters on Jan. 5.
A spokeswoman for Sen. Lisa Murkowski, R-Alaska, said “she is concerned about defunding Planned Parenthood as she is a longtime supporter of Planned Parenthood and has opposed broadly defunding the organization.”
Collins and Murkowski fought against the inclusion of a one-year defunding of the organization in a 2015 health law repeal bill that President Barack Obama vetoed last January.
Although neither senator has said she would vote against the upcoming budget bill if it includes the Planned Parenthood defunding, they join a growing list of Senate Republicans who in recent days have questioned the idea of repealing major portions of the health law before devising its replacement.
Meanwhile, eliminating Planned Parenthood’s access to funding under Title X also would likely be addressed in an appropriations spending bill. The current spending bill for the Department of Health and Human Services (and most of the rest of the government) expires April 28.
But rather than simply making Planned Parenthood ineligible, Republicans in the House have proposed doing away with the 45 year-old federal family planning funding and instead send the money to the nation’s network of Community Health Centers.
Last September, the Trump-Pence campaign released a letter to anti-abortion leaders vowing to defund Planned Parenthood “as long as they continue to perform abortions, and reallocating their funding to community health centers that provide comprehensive health care for women.”
At a CNN Town Hall Thursday night, Ryan expanded on that. “We don’t want to effectively commit taxpayer money to an organization providing abortions. But we want to make sure that people get their coverage. That’s why there’s no conflict by making sure these dollars go to federal community health centers.”
But that might not work either.
“For health centers, which currently serve about 25 million total patients, to have to absorb an additional 2 million people is totally impossible,” said Sara Rosenbaum, a health policy and law professor at George Washington University who looked at the issue in 2015.
In some areas of the country, Planned Parenthood and community health centers may not overlap. Planned Parenthood says in a fifth of the counties it serves, it is the only provider for low-income women. Asking community health centers to move into new areas, said Rosenbaum, “displays a fundamental misunderstanding of how long it takes a new provider to move into a potentially new community.”
Despite the difficulties, however, the shifts in political control this year leaves Planned Parenthood concerned about its future.
While the organization has weathered funding threats before, “it is very true when you have people like Mike Pence and Paul Ryan, who have been laser focused for years (on ending funding), that they will make it a very high priority,” said Mary Alice Carter, Planned Parenthood’s vice president for communications.
She said the organization is counting on the 2.5 million patients it serves every year to make sure their elected officials know they oppose the defunding effort. Whether that will be enough remains unclear.
Follow the twists and turns of the orphan drug industry over the past three decades. Key moments in the history of orphan drugs range from a pivotal TV show to the AIDS crisis and a private meeting in a bathroom on Capitol Hill.
Timeline Contributors: Emily Kopp, Sydney Lupkin, Sarah Jane Tribble and Lydia Zuraw
KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.
Former U.S. Rep. Henry Waxman spoke with KHN reporter Sarah Jane Tribble about how the orphan drug program helps patients but can be abused by drugmakers seeking profits.
KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.
President-elect Donald Trump’s Cabinet pick Tom Price counts among his top contributors a Georgia company and its CEO, who sent managers an email demanding donations “IMMEDIATELY” to a political action committee supportive of GOP candidates and causes, according to documents reviewed by Kaiser Health News.
The PAC was operated by Georgia-based MiMedx, whose CEO Parker H. “Pete” Petit is among the top individual contributors to Price, a Georgia congressman and Trump’s pick for Health and Human Services secretary. Federal campaign finance records show MiMedx, through its PAC, chief executive and his relatives, has contributed more than $40,000 to Price’s campaign and joint fundraising committees since 2014. With combined PAC and individual donations, the company was ranked as Price’s top contributor for 2015-2016 by the nonpartisan Center for Responsive Politics.
A spokesman for Trump’s transition said Price had no knowledge of “internal issues” at MiMedx. He acknowledged that Price has helped the company, which is based in his congressional district, but said he gave it no special treatment.This KHN story also ran in The Daily Beast. It can be republished for free (details).
“Dr. Price assisted MiMedx in navigating regulatory waters, just as he would for any constituent,” said Phillip Blando, who did not elaborate on how Price helped the company.
Federal election law prohibits corporations from coercing employees to contribute to PACs.
The May 2015 email reviewed by KHN showed Petit demanding contributions from managers as the PAC was shaping its strategy with lawmakers.
“I’m going to ask one more time for our field management to send something to our PAC. And, IMMEDIATELY,” said the email sent under Petit’s name. “We have PAC business to transact, and we need at least 50 donors to do so.”
The same day the email was sent, text messages were sent out among some managers singling out certain employees who were expected to give.
MiMedx officials did not return calls or respond to detailed questions.
Experts in the law, who reviewed the email’s language at the request of KHN, said it could run afoul of legal restrictions on employer coercion.
The email arrived as Petit publicly pressed the Food and Drug Administration to change its stance on the regulation of MiMedx products, which could potentially affect the company’s bottom line or lead to a product recall. Petit, a prominent businessman in the Atlanta suburbs, served as a Trump campaign finance chair in Georgia.
Brett Kappel, a Washington, D.C. campaign finance lawyer who has represented both Democrats and Republicans, said Petit’s email would have to be reviewed by the Federal Election Commission for an official determination. But he said that “a complaint could be filed with the FEC alleging illegal coercion.”
In 2014, the MiMedx PAC was formed by the chief financial officer for the company, which makes controversial wound-healing products that are sold to Veterans Affairs hospitals or billed to Medicare. MiMedx told investors it built a business with $247 million in revenue in 2016 and a 86 percent gross profit margin by salvaging discarded placentas, fashioning them into skin grafts, paste or injections and selling them to wound- and burn-care physicians, as well as podiatrists.
The PAC contributed to a number of Republican causes and other members of Congress, according to a review of public records. Data from the Center for Responsive Politics show it gave $40,000 to the Trump Victory Fund and $30,000 to the National Republican Senatorial Committee.
The FDA declined to say whether it heard from Price about the company or to answer questions about its review of MiMedx products.
Price is scheduled to appear Wednesday before a key Senate health committee, but his formal confirmation hearing before the Senate Finance Committee has not been scheduled. Price is among the Trump Cabinet picks targeted by Democrats, and in recent days he has come under attack for his 2016 stock purchase at a discount price in a small Australian company that wants FDA approval for its multiple sclerosis drug.
In a statement issued to ethics officials in preparation for his confirmation hearing, Price has promised to divest himself of stock and recuse himself on matters in which he may have had a direct financial interest. As for how he will handle ethical questions involving former campaign contributors, Blando said Price “will be providing those views at his upcoming Senate confirmation hearings.”
Kappel said that the matter raises legitimate questions for Price. “Aside from the fact that he received campaign contributions from the same company, as the head of HHS he’s going to have oversight over the FDA and he should have a view on what are inappropriate interactions between regulated companies and the agency.”
In 2012, the FDA began to review whether liquefied tissue products made by MiMedx should be regulated more stringently.
A 2013 letter from the FDA questioning its products led to a decline in MiMedx’s stock price and to shareholder lawsuits. A case was settled in April for nearly $3 million.
The company continues to face uncertainty over “draft guidance” the FDA issued on tissue manipulation in 2015, potentially forcing the company to prove the effectiveness of its products or face tighter regulations.
The company says its growing enterprise, which has received a small amount of business from the federal agency Price would oversee, caters to an estimated 6.5 million Americans with chronic wounds.
Seeking to soothe investors’ concerns, Petit described his positive relationships with members of Congress during an October 2015 earnings call, according to a transcript.
“I have been personally involved,” he said. “I have walked the halls of Congress. [I have] been to FDA. I’ve [had] numerous conversations as well.”
Two former managers in interviews with KHN said they felt pushed to contribute or to nudge their subordinates into giving money to the PAC. The former managers asked to remain anonymous for fear of retaliation from the company.
On the same day the May 2015 email was sent under Petit’s name, another executive sent his own email to subordinates.
“So who hasn’t donated?” he wrote, according to a copy of the email reviewed by KHN.
Federal records show that dozens of company staffers make regular payroll-deduction contributions to the company PAC, ranging from $15 to $100 per week.
Experts said it’s unclear how the FEC would view MiMedx’s repeated requests to its employees.
“It’s clearly pressure. The legal question is whether it’s coercion,” Kappel said. “There’s a severe ideological split over what constitutes illegal pressure.”
Ellen Weintraub, a Democrat who serves on the FEC, said she couldn’t comment on the MiMedx matter, but is troubled by this gray area and voted in favor of investigating whether another company, Murray Energy, improperly pushed workers to support its political fund in an unrelated case.
“You go to work and you’re there to do the best job for your employer. You’re not there to support your boss’s political views,” Weintraub said.
MiMedx has cited help from other lawmakers in its dealings with regulators. In the November 2015 white paper, Petit directed investors to a letter that Rep. Tim Murphy, a Pennsylvania Republican, sent to the FDA. Murphy — a psychologist — served with Price on the House GOP Doctors Caucus. There is no record of donations to Murphy from the MiMedx PAC.
Murphy, chairman of a House subcommittee on oversight and investigations, sent a letter to the FDA outlining the woes of an unnamed company and pressed the FDA to answer questions about its use of “untitled letters” to raise questions about products. The FDA sent MiMedx such a letter in 2013.
Carly Atchison, a spokeswoman for Murphy, said lawmakers were raising concerns on behalf of “stakeholders” who complained “about inconsistencies across FDA centers,” an issue the agency she says later addressed. She declined to say whether the company referred to in the letter is MiMedx.
The company white paper also highlighted a May 2014 letter sent to then-FDA Commissioner Margaret Hamburg by several U.S. senators, who wrote to “express serious concern” about the agency’s use of draft guidance documents to explain policy. It did not name specific companies, but a MiMedx official spoke out during an FDA hearing last year on the draft guidance filings.
One senator who signed the 2014 letter was Georgia Republican Sen. Johnny Isakson, who will introduce Price at his confirmation hearing. Political funds benefiting Isakson since 2010 have received more than $47,000 from Petit, his family and the MiMedx PAC, campaign finance records show.
In the November 2015 white paper, MiMedx assured investors that “it is clear there is significant interest by Senators and Congressmen” in FDA regulations and “of the potential dire impact of regulatory changes without proper oversight.”
Isakson spokeswoman Amanda Maddox said the senator “has a long history of advocating for Georgians and Georgia companies that are seeking information from the federal government.” She did not elaborate or respond to detailed questions.
Elizabeth Lucas and Julie Rovner contributed to this report.
This week at CBPP, we focused on federal taxes, the federal budget, health care, state budget and taxes, family income support, poverty and inequality, and the economy.
Republican plans to repeal the Affordable Care Act (ACA), which will deliver billions in tax cuts to the nation’s highest-income households, won’t meet the test outlined by President-elect Trump’s Treasury nominee, Steven Mnuchin — that we won’t see an “absolute tax cut for the upper class.”
Dr. Martin Luther King Jr., whose life we celebrate next week, was a champion not only of civil rights but also of full participation in the economy for everyone. He envisioned an America where both our economic and justice systems worked for all people — and offered routes to prosperity for those whose families’ way forward the nation had long barred.
Although we’ve made significant strides, King’s goals have not yet been achieved.Although we’ve made significant strides, King’s goals have not yet been achieved.
Eliminating the Affordable Care Act’s (ACA) Medicaid expansion — or imposing even bigger Medicaid cuts by converting the program to a block grant or per capita cap, as leading Republicans favor — would jeopardize state innovations that are pioneering new ways to deliver care and improve beneficiaries’ health.
Senator Lamar Alexander, Chairman of the Health, Education, Labor, & Pensions Committee, said this week what more congressional Republicans are starting to acknowledge: policymakers shouldn’t repeal the Affordable Care Act (ACA) without first enacting “concrete, practical reforms” to replace it. But his plan lacks critical details needed to compare it to the ACA in coverage, affordability, and the adequacy of coverage it would provide.