Pharmaceuticals

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A lifeline for antibiotics research?

May 14, 2012 in Current Events, Pharmaceuticals | 1 comment

Antibiotics such as penicillin have helped to fight numerous diseases such as syphilis, and infections caused by staphylococci and streptococci.  However, overuse of antibiotics is a problem.  Physicians sometimes prescribe antibiotics to fight viral infections even though antibiotics are only effective against bacterial infections.  Because of this overuse, more and more strains of drug-resistant bacteria are appearing.  The Economist estimates that drug-resistant bacteria cost Europe alone €1.5 billion per year in health care cost and lost productivity.

Creating new antibiotics to fight drug-resistant bacteria is one of the most important challenges facing mankind.  Drug companies, however, are less enthusiastic about producing these types of drugs.  Patients take drugs for chronic diseases for a lifetime; drugs for antibiotics are usually only taken for a few week.  ”Between 1983 and 1992 American regulators approved 30 new antibiotics. Since 2003 they have approved just seven.”  Funding drug research for antibiotics, however, could change these priorities.

In the fight against drug-resistant bacteria, Europe is leading the way.  On May 8th the European Commission and Europe’s pharmaceutical association gave details of a plan to boost antibiotics research by up to €590m ($760m).

Will the U.S. match the European initiative with similar funding levels? Only time will tell.

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All-or-Nothing P4P

April 4, 2012 in P4P, Pharmaceuticals, Quality | No comments

Many of Medicare’s value-based purchasing (VBP) initiatives offer a continuum of rewards based on provider performance.  Whereas all-or-nothing VBP initiatives only grant bonuses to providers who exceed a single threshold, the Medicare VBP programs–such as its hospital VBP program–reward hospitals based a value-based modifier that is proportional to its quality score.

One of the reasons to avoid the ‘all-or-nothing’ framework is that providers who are far from the threshold may give up; they may not invest significant efforts to improve quality since the change of reaching the threshold may be small.

A paper by Dowd, Feldmand and Nersesian (2012) finds that providers do in fact ‘give up’ in practice if the threshold is set too high.  The paper examines a physician network’s efforts to improve their generic prescription rate (GPR).  The authors find that:

“The GPR-maximizing target would induce an improvement in average GPR from 58.3% to 65.8% or 7.5 percentage points.  When the target is set above 80%, practices with equilibrium GPR below 58.3% will ‘give up’ in the sense that they will not improve relative to their equilibrium value.”

Source:

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Fighting Obesity by Popping Pills?

February 26, 2012 in Current Events, Pharmaceuticals | No comments

Drug-makers have had little success gaining FDA-approval for diet pills.  According to The Economist:

“It has been 13 years since the FDA approved a prescription diet pill. That drug, Roche’s Xenical, has notorious gastrointestinal side-effects. The FDA rejected Vivus’s Qnexa in 2010 over concerns for the safety of pregnant women and the quickening of patients’ heart rates.”

This may soon change…or maybe not:

“A committee advising America’s Food and Drug Administration (FDA) recommended that it approve Vivus’s diet drug, Qnexa. However, the pill’s long-awaited final approval may not come until April, if at all. The announcement mostly served as a reminder of what a struggle it is to turn fat into gold.”

Diet and exercise are the key to losing weight.  Pills can make you lose weight, but with what side-effects?  Remember that cigarettes are a well-known appetite suppressant, but you don’t see doctors prescribing obese individuals a pack of Marlboros.

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Why are there so few vaccine suppliers?

February 7, 2012 in Contagious Disease, Pharmaceuticals, Regulation, Supply of Medical Services, Vaccinations | No comments

In many cases, only a handful of suppliers produce vaccines for a given disease.  In fact, for several vaccine types the U.S. has fewer suppliers than countries with a smaller market and a higher level of government purchase.

One reason for this finding could be strict government regulation.  All vaccines must be approved by the FDA.  Further, the CDC provides guidelines to physicians regarding who should get which vaccines.  The CDC also is a large purchaser of vaccines.  Thus, at first glance, it seems that government regulation may be causing industry consolidation in the vaccine market.

A paper by Danzon and Pereira, however, finds this not to be the case.  They find that the likelihood a supplier exits from a particular vaccine market is not effected by whether the CDC is a purchaser of the vaccine, the amount of vaccine the CDC purchases, or the CDC price at the time the firm exits.

The authors propose that the large economies of scale in vaccine production are the cause of the lack of competition in the vaccine market.

“The vaccine industry is characterized by large fixed costs of initial vaccine development as well as substantial ‘semifixed’ costs of producing an individual batch (a process that may take 6 to 18 months) but low marginal costs of producing an additional dose, up to the batch limit, and low storability. If there are multiple competing suppliers with large sunk costs and low marginal costs, competition may drive the price low enough that it is relatively unattractive for multiple firms to remain in the market and for new firms to enter.”

Further, the demand for vaccines is price sensitive.  Insurers (public and private) typically pay physicians and hospitals a fixed payment per vaccine administered.  Increases in vaccine costs come directly from the provider’s bottom line.

Some observers may point to the 2004-2005 influenza vaccine shortage and claim that government regulation had to cause this shortage.  The authors note that although several suppliers did exit the market before the shortage years, “…this cannot be blamed on government purchase and price controls, as less than 20 percent of the flu vaccine is publicly purchased.”

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How to get cheap Lipitor tomorrow

November 30, 2011 in Pharmaceuticals | 1 comment

Is this a spam post?  Is the Healthcare Economist working for Pfizer?  The answer to these questions are no and no.

However, there are two easy ways to get the cholesterol lowering drug Lipitor for a lower price tomorrow:

  • Buy the generic form of Lipitor
  • Buy Lipitor

According to Marketplace, on Friday Lipitor will go off patent. On Thursday, the Indian drug company Ranbaxy will launch its generic at a low price. Pfizer will also lower the price of Lipitor to the generic levels.  Using its monopoly pricing power, Pfizer has made $81 billion from this blockbuster drug.

Although the arrival of generic Lipitor is good news, consumers could have saved more money earlier if it weren’t for a phenomenon known as pay-for-delay. Pay for delay occurs when a brand drug pays a generic company to delay certain lawsuits to bring a drug off patent. In essence, the generic forces the brand to split the rents from their monopoly power. In many cases the profits from splitting these rents will exceed the profits the generic drug could make by entering the market. By allowing pay-for-delay, however, consumer access to affordable drugs is also delayed. Drugmakers win; American patients and taxpayers lose.

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Does Prescription Drug Coverage Save Money?

August 30, 2011 in Medicare Part D, Pharmaceuticals | 5 comments

Many experts have claimed that increasing Medicare beneficiary’s access to prescription drugs through Medicare Part D is cost saving.  Even if it does increase cost, by increasing patient adherence to various prescription drugs, Medicare could prevent certain expensive hospitalizations and emergency room visits.

The only problem is that it doesn’t.

According to Liu et al. (2011) :

“After adjustment, Part D was associated with a U.S.$179.86 (p=.034) reduction in out-of-pocket costs and an increase of 2.05 prescriptions (p=.081) per patient year. The associations between Part D and emergency department use, hospitalizations, and preference-based health utility did not suggest cost offsets and were not statistically significant.”

In fact, increased drug coverage could increase the number of prescriptions the elderly take and lead to a higher number of harmful drug interactions, leading to increased hospitalizations.

Another paper, however, disagrees.  Afendilus et al. (2011) use HCUP data and and find that for selected ambulatory care sensitive conditions:

“…our point estimates suggest that Part D reduced the overall rate of hospitalization by 20.5 per 10,000 (4.1 percent), representing approximately 42,000 admissions, about half of the reduction in admissions over our study period…The increase in drug coverage associated with Medicare Part D had positive effects on the health of elderly Americans, which reduced use of nondrug health care resources.”

The debate rages on.

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What does drug ‘price’ mean anyway?

August 25, 2011 in Pharmaceuticals | 2 comments

How much do drugs cost?  The answer to this question depends who you are and how you want to measure cost.  For instance, MediSpan‘s Master Drug Data Base (MDDB) defines drugs prices as follows:

  • Wholesaler Acquisition Cost (WAC) – the cost reported to Medi-Span by a manufacturer at which wholesalers purchase drug products from that manufacturer. The WAC does not necessarily represent the actual sales price in any single transaction, as any manufacturer may agree to sell its products to one or more wholesalers at a lower price with that wholesaler through the inclusion of any number of methods, such as discounts or rebates.
  • Average Wholesale Price (AWP) – the most common wholesaler price charged to its customers
  • Direct Price (DP) - represents the price reported to Medi-Span by a manufacturer at which non-wholesalers, who may re-sell directly or indirectly to retailers, purchase drugs from that manufacturer.
  • Manufacturer’s Suggested Wholesale Price (SWP) – The SWP represents the manufacturer’s suggested price for drug products sold by wholesalers to their customers.
  • CSM Federal Upper Limit (CMS FUL) – CMS has developed a list of multiple-source drug products with upper price limits for each specific strength and dosage form in its Medicaid Manual. The manual establishes ceiling prices for each set of therapeutically equivalent drug products according to the formula in the Medicaid final regulation published July 31, 1987 by CMS’s parent organization, the Department of Health and Human Services (HHS). The rule’s aggregate reimbursement ceiling is set at 150% of the lowest published price for therapeutically equivalent multiple-source drug products. CMS periodically updates the list of covered drug products.
  • Average AWP (AAWP) – average of all AWPs for each multi-source drug product in a given Generic Product Packaging Code (GPPC), not including the originator drug products.
  • Generic Equivalent Average Price (GEAP) -  The GEAP is a generic price applicable for all drug products sharing the same GPPC.

The correct price to use depends on your particular research question.

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What most reduces adherence: increasing copayments or decreasing prescription lengths?

July 20, 2011 in Pharmaceuticals | No comments

According to this article, the answer is:

“Both policies decreased medication adherence. The days’ supply policy [decreasing the days supply of each prescription from 100 to 34 days] had a much larger effect on adherence than did the copayment increase. Total Medicaid spending declined from the days’ supply policy, but the copayment policy resulted in a net increase in Medicaid expenditures.”

If someone is very sick, the time/inconvenience cost to refill a prescription seems to be a more important factor than the out-of-pocket cost.  This is true even for the Medicaid population, which is of course made up of exclusively low income individuals.  Many economists measure the elasticity of demand with respect to price, but health economists may need to start constructing a demand elasticity measure with respect to inconvenience.

 

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Dose Chek

July 14, 2011 in Pharmaceuticals, Quality | No comments

How do you know if a patient is receiving the correct dose?  Better yet, how can you check if your entire patient panel is on the right dosage?

Although identifying the ‘right’ dosage is difficult, it is much easier to see if your patients are on the wrong dosage.  Medi-Span’s Dose-Chek data provides information on the following:

  • Screening for inappropriate daily dose
  • Screening for individual doses that exceed maximum recommended values
  • Screening for inappropriate duration of therapy

The Dose-Chek data describing minimum, usual, and maximum daily dosages, as well as maximum individual dosages for a drug product. Because appropriate dosage varies by patient type, Dose-Check has this information for normal adult, geriatric, pediatric, and infant patients in their database.

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Setting FDA Standards

July 5, 2011 in CER, Pharmaceuticals, Regulation | 1 comment

To what standard should the FDA hold new drugs?  The FDA has a number of choices.  Drugs companies could be required to prove that the drugs they make:

  • Do no harm.
  • Are more effective than placebos
  • Are more effective than existing drugs
  • Are more cost-effective than existing drugs, or
  • Are both more effective and more cost effective than existing drugs.

For my money, I believe the standard should be the first and second ones.  The drug company should simply have to show that the drug does no harm and is more effective than placebos.

Due to asymmetric information, however, the FDA could require the drug companies to compare their drug’s effectiveness against existing treatments or gauge the cost-effectiveness of the treatment.  Although these effectiveness and cost-effectiveness tests need not affect drug approval, insurance plans could use this information to determine if they should cover the drugs.

GoozNews has some interesting commentary regarding calls for the FDA to perform Stage III CER testing.

“I do not support the position of advocates like former New England Journal of Medicine editor Marcia Angell who think new drugs should have to be proven better than what exists before they are approved. If companies want to bring comparable therapies to market, that’s their business. It may even be the case that some me-too drugs work in some sub-populations, but not in others. So if one drug fails to achieve lower cholesterol, or offer arthritis pain relief, for instance, the doctor can switch her patient to the newer drug. But if the new drug is not proven to be better than what exists in a large Phase III trial, then physicians, patients and payers will have the information they need to insist that people start on the cheapest, comparably effective medicine that is available. For most drug classes, that will mean a generic.“

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