Odd, This: Big Pharma On Losing End of Pricing Dispute

In the latest effort to curtail the controversial 340B Drug Pricing Program, a coalition of drugmakers, biotechs and pharmacy benefit managers have released a scathing report that criticizes government oversight, warns against skyrocketing growth in the number of participating hospitals and complains that lucrative pricing discounts are being unfairly exploited by both hospitals and some physician practices.

“Without concerted efforts to achieve program integrity, the potential for continued program misuse is high,” the report states. “Lack of appropriate oversight and the absence of rules consistent with Congressional intent, along with the booming explosing growth of the 340B program, highlight the need for program reform.” The key to understanding this language is that the discounts anger the manufacturers.

Just the same, the missive comes two years after the US Government Accountability Office released a report saying the Health Resources and Services Administration Agency oversight is inadequate to ensure that participating hospitals use drugs purchased under the 340B program are administered only to eligible patients, and that drugs are sold to eligible hospitals and clinics at or below stipulated prices (covered in earlier Pharma news).

Big pharmaceutical companies, of course, have had a hard time of late generating revenue growth, as patents expire on existing drugs and company labs develop too few new drugs. Thus, the industry – including Pfizer (PFE), Merck (MRK), GlaxoSmithKline (GSK), Sanofi (SNY), Bristol-Myers Squibb (BMY), and Eli Lilly (LLY) -- have been resorting to a range of strategies to extend patent lives and prop up pricing.

PFE Revenue TTM Chart

PFE Revenue TTM data by YCharts

The GAO report then prompted four Republicans to write several organizations – including PhRMA and BIO, which circulated the new report – to ask for detailed information about pricing, audits and hoarding, as well as policies that would effect access to medications that are supposed to be eligible through the program, which was designed to serve as safety net for the indigent (explained in prior Pharma news).

Some quick background: the 340B program was created in 1992 to give certain ‘safety net providers’ discounts on outpatient drugs that are supposed to be comparable to pricing made available to state Medicaid agencies. These hospitals and clinics, or ‘covered entities,’ spend about $6 billion annually on drugs, but the report from the industry trade groups cites data indicating this could double to $12 billion by 2016.

To read the remainder of this article, go to Pharmalot.

Ed Silverman, a contributing editor of YCharts, is the founder and editor of Pharmalot. He previously reported on the pharmaceutical industry and other business topics for the Star-Ledger of New Jersey, New York Newsday and Investor’s Business Daily. He can be reached at editor@ycharts.com.

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