Signaling growing federal scrutiny of pharmaceutical access, the Justice Department and the CMS have sent letters to drug manufacturers asking about their pricing. The CMS also warned state agencies about limiting access to hepatitis C medications.
Those warnings come the same week as congressional committees and HHS schedule hearings and forums to discuss high drug prices and question the companies responsible for setting those prices.
The Justice Department and the U.S. Attorney's Office for the Eastern District of Pennsylvania are investigating Eli Lilly and Co.'s “treatment of certain distribution service agreements with wholesalers when calculating and reporting Average Manufacturer Prices in connection with the Medicaid drug rebate program,” according to an Eli Lilly filing with the Securities and Exchange Commission.
Merck & Co. disclosed in an SEC filing that it has received a civil investigative demand from the same U.S. attorney's office seeking information about Merck's contracting and pricing of Dulera aerosol inhalant with certain pharmacy benefit managers and Medicare Part D plans.
Both companies said in their filings that they were cooperating with the inquiries.
A Merck spokeswoman declined to comment on the company's disclosure.
Mark Taylor, a spokesman for Eli Lilly, said in a statement that the company believes “our accounting practices related to average manufacturer prices and the Medicaid drug rebate program are correct.” He also emphasized that the inquiry is not about the way Eli Lilly sets list prices for its drugs, but rather the way it calculates the Average Manufacturer Price used in determining Medicaid rebates.
Those numbers aren't intended to reflect true marketplace value, but are used instead as a basis for price negotiations, said Jason Doctor, an associate professor in the School of Pharmacy at the University of Southern California.
Doctor said the Eli Lilly investigation touches on a perpetual hot topic in drug pricing.
“There are typically complaints that average wholesale prices are too high, and there's a lot of murkiness around what is the real price of drugs,” Doctor said. “Manufacturers will start negotiations with average wholesale prices, and there's potential for abuse there.”
Federal officials also raised concerns this week over the price of hepatitis C medications.
In a letter to Gilead Sciences, AbbVie, Johnson & Johnson and Merck, the CMS asked for information on what value-based purchasing arrangements, if any, being offered to payers and state Medicaid agencies, and what the companies are doing to make their medications more affordable.
“These medicines are changing the lives of many individuals, but they are also expensive, costing tens of thousands of dollars, sometimes even more than $100,000 per patient,” Andy Slavitt, The CMS' acting administrator, said in a Nov. 5 blog post. “These costs have strained personal as well as public budgets, particularly state healthcare budgets,” he said.
According to an analysis published this past summer in the Annals of Internal Medicine, 42 state Medicaid systems limit payment in some way for hepatitis drugs. Two-thirds of states restrict who may prescribe them, and about three-quarters allow access only when liver damage has resulted in fibrosis or cirrhosis.
In related concerns, states also received notices questioning whether they were creating unnecessary barriers to drug access. The CMS specifically flagged a practice of restricting drug availability to patients until they reached Stage 3 or Stage 4 liver fibrosis. It also expressed concern about policies that require patients to abstain from alcohol or other drug use for a period of time before being granted access to needed medications.
Most states limit drug access based on alcohol and drug use, and some restrict access based on HIV status.
The CMS said such limitations may not be legal because states are prohibited from adopting policies that result in the denial of access to effective, clinically appropriate and medically necessary treatment.
“States should, therefore, examine their drug benefits to ensure that limitations do not unreasonably restrict coverage of effective treatment,” the CMS letter said.
“We're very hopeful the letters will lead to a reverse of course in many states and for many plans that have restrictions,” said Amy Killelea, senior manager for healthcare access for the National Alliance of State and Territorial AIDS Directors, a national advocacy group.
Medicaid managed-care plans have been a specific area of concern for advocates, who say many of the plans create unnecessary administrative hurdles that hinder access to drugs. Some managed-care plans didn't approve a single plan member to receive Sovaldi in its first year of release, according to Dr. Robert Gish, a hepatologist and consulting faculty at Stanford University.
Jeff Myers, CEO of the trade group Medicaid Health Plans of America, said he doubts the CMS letters will lead to any significant changes to prior-authorization policies by health plans or states.
Myers defended barring heavy alcohol users from having access to hepatitis drugs, since the ongoing damage to their livers could counteract the drug's effectiveness. He also said intravenous drug users might not have the mental capability to complete a full course of hepatitis treatment.
“Even if states made the decision to significantly open, or increase access to hep C meds, they would have to make sure that cost was built into plan rates,” Myers said. “In several states, we have plans that are owed tens of millions for spending on hepatitis C meds.”
Matt Salo, executive director of the National Association of Medicaid Directors hailed the CMS letters, calling it an almost unprecedented move. But he took issue with the letter sent to state agencies.
"When official HHS guidance references a series of coverage criteria and guidelines that advocate for essentially unlimited access, we are concerned that will place the entire burden on state government payers without the concomitant need to bring costs in line at the same pace," Salo said.
An HHS forum this month will be another of many discussions on Capitol Hill regarding prescription drug costs. The invite-only forum on Nov. 20 will touch on drug innovations, value-based purchasing programs and patient-access issues. It will involve consumers, manufacturers, health insurance companies, healthcare providers, employers and government representatives.
Next month, the Senate Special Committee on Aging will zero in on companies under fire, such as Valeant Pharmaceuticals, which slashed its research and development funding while massively increasing prices and focusing almost exclusively on profit. Turing Pharmaceuticals has also received criticism for acquiring an anti-parasitic drug and immediately raising the price from $13.50 a pill to about $750.
Democrats on the House Committee on Oversight and Government Reform recently asked committee leadership to consider subpoenaing Valeant CEO Michael Pearson and Turing CEO Martin Shkreli.