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Why Are Cancer Drugs Commonly The Target Of Schemes To Extend Patent Exclusivity?

December 4th, 2013

The makers of branded pharmaceuticals have devised numerous ways to extend patent exclusivity for lucrative products in the United States. In June, the Supreme Court gave the Federal Trade Commission (FTC) clear authority to investigate and prosecute one of them, “pay-for-delay” agreements, but stopped short of making such deals presumptively unlawful restraints of trade. In the case the court decided, a manufacturer of a branded drug, a testosterone replacement patch, paid the maker of the generic to refrain from entering the domestic market with its product.

The more dramatic battles over the timing of a drug’s transition from branded to generic form are being fought in cancer. Cancer is the second-leading cause of death in the United States. Americans spent $157 Billion (B) on cancer care in 2010; $23B or 18 percent of total spending was devoted to oncologics, a 41 percent increase since 2006 and largely paid for by Medicare. Between 2006 and 2011, cancer drugs were the second most commonly litigated generic drug treatment class (70 unique cases), following cholesterol-lowering agents (123 unique cases).

Here, I argue that outsized potential profits, limited competition, and strong demand makes cancer drugs attractive for patent disputes. Several oncologics due for upcoming patent expiration illustrate important opportunities and caveats under current law. The outcomes of these and other cases will have significant consequences for cancer patients and their insurers.

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Winners And Losers From The Zaltrap Price Discount: Unintended Consequences?

February 20th, 2013

Soon after Sanofi Pharmaceuticals’ Inc. August 2012 launch of the biologic drug ziv-aflibercept (brand name Zaltrap) into the U.S. market, its price triggered an unusual act of defiance on the part of oncolAogists. Physicians from Memorial Sloan-Kettering Cancer Center stated in a New York Times op-ed piece that they wouldn’t prescribe the drug because it cost twice as much as Genentech’s Avastin (bevacizumab), a competing biologic drug with similar expected clinical outcomes for colorectal cancer patients. In response, Sanofi said they would reduce the price of the drug by 50 percent.

Doctors and prescribing hospitals stand to benefit hugely from Sanofi’s pricing move, while payers and patients do not, at least over the next several months and likely much longer.

To understand why involves questions about pharmaceutical price setting and the arcane world of ‘buy and bill’, the system for physician-administered drugs under which doctors first buy drugs at one price and then submit for reimbursement for the drug to a third party payer (and the patient). The system as applied in fee for service Medicare, the public insurer of adults aged 65 and older and the largest insurer of cancer-related treatment in the U.S., is illustrative of larger concerns. In 2009, Medicare spent approximately $11 billion on physician-administered drugs.

Below, we explain how this “buy and bill” pricing system works, and how it operates in the case of ziv-aflibercept. We also examine the policy implications of the ziv-aflibercept episode and offer some thoughts on how Medicare could improve the way it sets pharmaceutical reimbursement rates.

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