Trump FY 2019 Budget Calls for 180-Day Exclusivity Changes for Generic Drugs

Posted 12 February 2018 | By Zachary Brennan 

Trump FY 2019 Budget Calls for 180-Day Exclusivity Changes for Generic Drugs

Drug pricing is front and center in President Donald Trump’s FY 2019 budget proposal released Monday, including, among other provisions, a call to change the way generic drugs come to market.

The plan is to give the US Food and Drug Administration (FDA) greater ability to bring generics to market faster by ensuring that first-to-file generic applicants “awarded a 180-day exclusivity period do not unreasonably and indefinitely block subsequent generics from entering the market beyond the exclusivity period.”

The proposal comes as FDA in January issued draft guidance on 180-day exclusivity.

“Under this proposal, when a first-to-file generic application is not yet approved due to deficiencies, FDA would be able to tentatively approve a subsequent generic application, which would start the 180-day exclusivity clock, rather than waiting an indefinite period for the first-to-file applicant to fix the deficiencies in its application,” the budget plan says.

Part of the reason for this proposal, according to the budget in brief for the Department of Health and Human Services (HHS), is that some companies that file their abbreviated new drug application (ANDA) first can block subsequent generic competitors from receiving approval. Similarly, first filers that receive tentative approval but then intentionally delay seeking final approval can also block competition.

Robert Pollock of Lachman Consultants told Focus that there may be issues that make this plan "unworkable. It is always difficult to comment on an issue where the full story and details are not available. My view is that tinkering with Hatch Waxman without fully understanding the implications could be dangerous."

Kurt Karst, director at the law firm Hyman, Phelps & McNamara, told Focus that the changes to the 180-day exclusivity would need Congressional action and “don’t make a lot of sense” as they would make the exclusivity period “much less attractive” for generic drugmakers. The change could also create headaches for generic first filers that would presumably not know if another ANDA received tentative approval while the first filer was preparing to launch, he added.

Peter Maybarduk, director of Public Citizen's Global Access to Medicines Program, told Focus that any attempt to stop the gaming of the exclusivity system would be positive and it "does seem like they're addressing an inefficiency," though "we're not aware that this is responsible for any great cost."

The plan estimates that such a change to exclusivity would save $118 million in 2019 and $1.79 billion over 10 years.

Overall, however, Trump’s plan looks to cut HHS’ budget by 21% from the 2017 enacted level, though Congress does not have to adhere to the request and did not last year. The budget does call to increase funding to fight the opioid crisis, and includes $10 million for FDA regulatory science activities to develop tools to stem the misuse and abuse of opioids.

The nonprofit Alliance for a Stronger FDA noted that under the request, FDA’s budget authority appropriation would grow by $473 million, with most of the monies targeted for major expansion of FDA’s capabilities in advancing the availability of innovative drugs and medical devices.

"This is the largest increase ever proposed for the FDA," the alliance said.

Drug Pricing

The budget plan includes several proposals to decrease drug spending in the US, noting that Medicare Part D prescription drug spending is projected to total $94 billion in 2017, an increase of 97% since 2007.

“The Budget would provide true catastrophic coverage for all beneficiaries through a newly established out-of-pocket maximum. In addition, the Budget eliminates cost sharing for generic drugs for low-income seniors to encourage the use of higher value products, requires plans to share a substantial portion of savings from negotiated rebates with beneficiaries at the pharmacy counter, and enables tougher Part D plan price negotiations with drug manufacturers through increased plan formulary flexibilities,” the plan says. “The Budget would also permanently authorize a Medicare Part D demonstration that provides retroactive and point-of-sale (POS) coverage to certain low-income beneficiaries through a single plan.”

In addition, the budget seeks to require all Medicare Part B drug manufacturers to report average sales price (ASP) data and provide the HHS secretary with the authority to penalize companies who do not report required data.

The budget would also place a limit on increases in Medicare's ASP-based payment for a drug based on inflation as measured by the consumer price index, and to modify hospitals' payment for drugs acquired through the 340B drug discount program to reward them based on the charity care they provide and to reduce payment if they provide little to no charity care.

“Finally, the Budget would provide the Secretary of Health and Human Services with authority to consolidate certain drugs currently covered under Part B into Part D where there are savings to be gained through increased price competition,” the plan says.

The plan also notes that when ASP data are not available, Medicare usually reimburses new, single-source Part B drugs at 106% of the wholesale acquisition cost (WAC).

“Unlike an ASP, a drug's WAC does not incorporate prompt-pay or other discounts benefitting the manufacturer. If discounts are available on these new Part B drugs, Medicare is paying more than it otherwise would under the ASP-based formula. MedPAC found evidence that Medicare payments do not reflect discounts available when drugs were priced based on WAC. To reduce excessive payments, the Budget would reduce the payment rate for drugs currently paid at 106 percent of WAC to 103 percent of WAC,” it says.

Savings expected from eliminating wasteful spending in Medicare and improve drug pricing and payment is estimated to hit $236 billion over 10 years.

The budget also notes that the administration is updating a study from 2004 to analyze drug prices paid in countries that are a part of the Organization for Economic Cooperation and Development.

HHS, working in conjunction with the Department of Commerce and the US Trade Representative, will develop the knowledge base to “understand the unfair disparity between the drug prices in America and other developed countries,” it says.

Fiscal Year 2019 Budget

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