Scott Gottlieb on the Widening Drug Price Gap Between the Rich and Poor

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It’s not exactly news that politicians are taking aim at drug pricing. This was a hot-button topic during the 2016 U.S. presidential election and although it faded a bit after the election, it has become a hot topic again with the start of the 2020 U.S. presidential election.

Former commissioner of the U.S. Food and Drug Administration (FDA), Scott Gottlieb, although not running for office (that we are aware of), recently published commentary urging the United States to avoid making it more difficult for poor people to gain access to cutting-edge medications.

An example is Biogen’s Spinraza (nusinersen) for spinal muscular atrophy (SMA), which is a rare disease. SMA is a severe neuromuscular disease caused by a mutation in the SMN1 gene, which codes for SMN, a protein necessary for motor neuron function. The disease is noted by the loss of motor neurons, which leads to progressive muscle weakness and paralysis. It is rare, occurring in about one in 10,000 live births. Type 1 is lethal and typically results in death by the age of two years.

Currently, Spinraza is priced at $750,000 for the first year and $375,000 for every year after. It is approved for all forms of SMA, types 0 through 5. In April, a drug-price watchdog organization, the Institute for Clinical and Economic Review (ICER), issued a report questioning the effectiveness, value and price of the drug. It also evaluated a likely competitive product, not-yet on the market, Novartis/AveXis’ Zolgensma.

The ICER report doesn’t have a binding effect on the FDA, insurers or the companies themselves, but they all pay attention to these reports, particularly as new therapies, especially gene therapies, come on the market with extremely high price tags.

In this case, Spinraza requires regular treatments. Zolgensma, should it be approved, is believed to be a one-and-done therapy requiring no follow-up treatments. At this time, Zolgensma is only being evaluated for one type of SMA.

In his commentary, Gottlieb doesn’t discuss these drugs specifically, but does say, “A therapy that can cure diseases in a single treatment isn’t a unit of drug. It’s a public health solution. So instead of pricing it per dose like we currently do for traditional medications, companies should negotiate with states to offer Medicaid recipients a multi-year solution to their total population’s health.”

Following that line of reasoning, Gottlieb brought up Louisiana’s project to treat Hepatitis C (HCV) for its Medicaid patients and prison population.

In this deal, which is being called a “Netflix model,” Louisiana would pay a flat fee over a number of years—like a subscription—and the drug company would provide the drug to all the patients in the state requiring the drug without limit. The advantage for both the state and the company is financial certainty. The state also benefits from being able to spread its costs out over several years.

In the case of HCV, these drugs would cure the disease. This model has been implemented in Australia for HCV and it is estimated to have saved $4.9 billion over five years, according to a New England Journal of Medicine study.

Gottlieb noted, “Louisiana entered into a contract in March with Gilead Sciences subsidiary Asegua Therapeutics to pay a fixed annual fee for an unlimited supply of its hepatitis C medication, a generic version of Epclusa, for five years.”

Overall, Gottlieb’s commentary isn’t focused on drug prices per se, but on ensuring that poorer populations, which in the U.S. often means Medicaid recipients, will continue to have access to these drugs. He points out that when a cure for HCV was approved in 2014, “many Medicaid plans delayed access to the drug or rationed its use because they couldn’t absorb the one-time cost of rolling out the therapy and curing their population straightaway.”

Medicaid budgets are fixed via appropriations, Gottlieb says, meaning they can’t, in any single year, handle a spending surge. “But when it comes to a safe and effective drug for a vexing disorder, there’s an imperative to deliver it to as many patients as possible, especially when the therapies address a disease where disabilities accumulate with time like inherited muscle disorders such as muscular dystrophy.”

A recent report by the Henry J. Kaiser Family Foundation noted that, “While millions of people have gained coverage through the expansion of Medicaid under the Affordable Care Act (ACA), state decisions not to implement the expansion leave many without an affordable coverage option.”

The ACA expansion was intended to be national, but a Supreme Court ruling in June 2012 made it essentially optional for states. As of March 2019, the Kaiser Family Foundation notes, “14 states had not expanded their programs.”

In those states, according to the report, “the median income limit for parents in these states is just 43% of poverty, or an annual income of $8,935 for a family of three in 2018, and in nearly all states not expanding, childless adults remain ineligible.”

This results in a coverage gap. And in the U.S., about 2.5 million poor uninsured adults fall into that gap, largely based on those 14 states’ decisions not to expand Medicaid. “They earn too much to qualify for Medicaid, but not enough to be eligible for ACA Marketplace premium tax credits,” the report notes.

Gottlieb writes, “The drug debate is often focused on price, but the real imperative turns on these questions of access. Drugmakers have a compact with the society. Consumers finance high-cost, high-risk science needed to deliver pharmaceutical innovation through the premium prices that are paid on the resulting successes. And Americans have long supported life science innovation. But that support—and the commitment to fund new drug treatments through the prices paid on the successful outcomes—comes with an implicit belief that a patient who needs access to a critical therapy will have the opportunity to alter his or her destiny through innovation.”

To make sure the gap doesn’t get worse and that people who need drugs, regardless of income, have access to the best drugs, Gottlieb believes we need to “re-think what’s being sold when a new drug reaches market.”

He outlines some potential approaches. Some of it involves “federal legislation that frees drugmakers from the mandatory discounting, restrictions and reporting requirements that hobble innovative payment schemes.”

He applauds the Louisiana program, and points out the possibility of states having the option to end a contract early if a new drug for the same condition showed non-inferiority to the existing treatment. This would give pharma companies incentives to develop better treatments, although it would seem to disincentivize drug companies from being involved in these schemes.

“The debate over price is fundamentally a debate over access,” Gottlieb stated. “Gene therapies and other treatments that can cost millions of dollars can still be a relative bargain for what they give patients and society if they’re able to cure a disease that would severely limit or even end life. But the high cost of providing early and uniform access can mean the underinsured go without these opportunities.”