genetic testing

Scott Gottlieb, head of the Food and Drug Administration (FDA) has revealed that a “rigged payment scheme” between drug plans, insurers and pharmaceutical companies has blocked access to less-expensive versions of some of the most expensive drugs in the U.S.

According to Bloomberg, he fired particular blame towards giant pharmacy benefit managers that contract with health plans to administer coverage of drugs, suggesting that the industry’s tactic has stymied cheaper copies of expensive biotechnology drugs. 

“Consolidated firms – the PBM’s, the distributors, and the drug stories; team up with payors,” said Gottlieb. “They use their individual market power to effectively split monopoly rents with large manufacturers and other intermediaries; rather than passing on the saving garnered from competition to patients and employers.”

Despite the FDA not having any power over PBM’s. the remarks expressed by Gottlieb make clear that administration health officials place the blame for high drug costs not just on biotechnology and pharmaceutical companies, but also on other parts of the complex medical supply chain. 

Such arrangements have the potential to threaten the new market for what are known as biosimilars, cheaper versions of complex biotechnology drugs. These drugs, in particular, are made from living cells, and are injected or infused, and have advanced the treatment of many diseases. They also carry with them a very high price tag. 

Biosimilars were meant to be a cheaper alternative to the products, and Gottlieb called them necessary for a competitive market that works for patients. Back in 2010, a new law was created so that the FDA could approve the drugs and help doctors and patients decide how to use them. However, the uptake of this has been slowed by what Gottlieb believes were opaque contracts that favour the older, more costly drugs. 

He went on to describe a system which makers of the biotech drugs make exclusive arrangements with PBMs and insurers, who agree to cover only the old drug in return for rebates or discounts. 

“The rigged payment scheme might quite literally scare competition out of the market altogether,” Gottlieb added. “I fear that’s already happening.”

In addition, Express Scripts believes that drugmakers are to blame for the lag in getting biosimilars to the market. “They continue to be delayed by drugmakers who engage in non-stop litigation and enter into settlements that delay their availability in the U.S.,” said spokeswoman for the company, Jennifer Luddy. 

Even though President Donald Trump’s administration is looking to tackle high drug prices, Gottlieb has taken the lead by pushing for ways to speed low-cost generic drugs to market, and these efforts haven’t just focused on drugmakers. 

A report from the White House from the Council of Economic Advisers on drug pricing last month called out PBM’s, and steered clear of Trump’s previous threat to have the government negotiate prices directly. 

Typical generics are usually 80% cheaper than a brand-name drug, but biosimilars require more research, an expense that typically makes them about 15% to 20% cheaper than the drug they’re copying. As a result, the brand-name rebates continue to be attractive to PBMs and insurers who also get some of the cut. 

“Payors are going to have to decide what they want: The short-term profit goose that comes with the rebates, or in the long run, a system that functions better for patients, providers, and those who pay for care,” said Gottlieb. 

He has since urged PBMs and insurers to instead make biosimilars the default option for newly diagnosed patients and help the FDA educate doctors about the safety and value of the products.