A New Lawsuit Suggests Employees Might Be the Force that Stops Markup Madness

If we’re being honest, the force that is going to end the ever-escalating trend of PBM-fueled rebates and the accompanying shell game is probably not going to be legislative action, which can’t happen quickly enough to keep up with morphing PBM business practices. 

Instead, it’s going to be the folks who end up holding the bag for medical costs that will be most successful in pushing back. Once employers start taking a hard look at their contracts and the way that medicines are priced, the flywheel of increasing rebates will start to slow. 

This is, in a nutshell, the Mark Cuban argument … the idea that if executives realize how and where they’re being taken for a ride, we’ll get real reform. 

That awakening, though, might get pushed by employees, too, who -- through their premiums and benefit design -- also have a ton of skin in the game. 

Anyway: that awakening just got a lot closer with a lawsuit filed against Johnson & Johnson that accuses the company of violating its fiduciary duty to its employees by adopting a health plan that foists higher-than-needed drug costs on beneficiaries. 

The example given was that J&J was paying $10,000 for a generic MS drug that could have been had for $30, but the actual lawsuit -- which is worth a skim if you have 15 minutes -- is full of examples, especially for specialty generics, of enormous gaps between negotiated prices and acquisition prices. 

As I frequently disclaim around here, I’m not a lawyer and have no idea whether the legal claims here have any merit. But the general idea -- that employers need to be keeping a much closer eye on health plan costs and design -- absolutely has a ton of merit.

OK. Now that the government has officially (if privately) made its initial offer-you-can’t-refuse to drugmakers as part of the IRA, I’d love to level-set with you all here. There’s going to be a lot of hyperbole, and I’m hoping that we can agree about what’s really worth getting worked up about. 

The law itself is a BFD and it could really have a huge impact in the years to come. But I’m having a hard time believing that there’s anything that the initial 10 medicines are going to tell us about CMS or the process (with one exception, which we’ll get to in a moment). 

In two cases, the CMS-set price is almost certainly meaningless because the drugs are likely to have generic/biosimilar competition. The assumption is that both Stelara and Entreso will have copycats on the market by the time the price controls kick in in 2026, so it will be hard to assign any significance to those prices. 

Six more of the medicines are almost certainly already rebated at levels below the “ceiling price” and therefore could see pretty massive list-price cuts that are, nonetheless, commercially meaningless. The most obvious example here is Fiasp/Novolog, but the same logic can be applied to Eliquis, Xarelto, Jardiance, Farxgiva, and Januvia. 

It’s not hard to imagine CMS-mandated prices there that make for great headlines (“prices slashed by more than half!”) that really don’t otherwise dent net prices. It’s certainly possible that the government could seek truly extreme discounts, but it would probably be easiest to come up with a number where everyone feels like they get a W (or, at the very least, don’t take a huge L). 

That leaves two meds. 

One is Enbrel, which was approved during the Clinton administration. Because it’s been on the market so long, the government is required to cut its price by at least 60%. So there’s not any room for CMS to pull its punches, and unless -- again -- the government wants to be punitive, their actions around Enbrel won’t say much about methodology. 

So that leaves Imbruvica. It’s interesting because its the only cancer medicine on the list, and probably the least-rebated med, too. It’s in a competitive space without a clearly superior product profile. The government could just take the “ceiling price” discount -- 25% -- and be done with it, but if CMS wants to “send a message,” then this is the place where it might really leave a mark, even if, numerically, the fixed price isn’t much below the ceiling price. 

I’m going to keep writing about the topic, including whatever goofy speculation arises between now and Sept. 1, when the prices become public, but I will make a solemn promise to you: Unless I hear about a price that doesn’t just sound outrageous but actually kicks a company in the shins, commercially, I’m going to play it cool. 

Cool?

• If you want to know where Bernie Sanders and the Democratic majority on the Senate HELP Committee will go with its questioning of pharma CEOs on Thursday, this new report should give you a roadmap. It’s a wide-ranging collection of red herrings and low-context statistics that have been carefully engineered to embarrass rather than enlighten. I’d love to do a line-by-line set of counterarguments, but there are only so many hours in the day.

• BTW: that hearing will have an undercard, too, consisting of Peter Maybarduk from Public Citizen, Tahir Amin from I-MAK, and poor Darius Lakdawalla from USC, who has the unenviable job of explaining how the system really works to a bunch of pols who don’t care. 

• This STAT piece -- about the Democrat who signed on to the latest effort to fix the IRA’s 9 vs 13 disparity -- is notably mostly for the subtle bias against industry. It’s entirely possible to believe that the IRA is a good idea (or a mostly good idea) and still think that the disincentivizing small molecule development is a dumb oversight, but it looks like the media will treat any effort to fix the pill penalty as carrying water for pharma. Sigh. 

• It’s been a big couple of weeks for thinking about drug prices in the context of value, and now we have a thoughtful Real Clear piece by PhRMA CEO Steve Ubl that lays out some of the ways that prescription drug spending can drive down overall health spending. I liked the callout to generic drugs, too, because it’s generally overlooked that today’s breakthroughs become tomorrow’s nearly free workhorse generics. 

• This Journal of the American Medical Assocation research by the Harvard PORTAL folks suggests that there are device patents on GLP-1 drugs listed in the Orange Book that can or will be used to delay generic entry. I just don’t have the context to assess those claims. Injection devices are not remotely a new concept … are there a lot of device patents that have extended exclusivity?

• I still feel like march-in rights is great politics but a long-shot way of actually affecting change. But because it’s good politics, on both sides, you have things like a concerted effort by Democratic members of Congress to push for a harder line on march-in, this bipartisan group of bureaucrats offering a warning about moving ahead, and this erstwhile patent litigator suggesting that even a tough policy won’t make much practical difference.