Author: Krista Maier

Are U.S. Health Care Program Drug Prices Based on “Competitive Market-Derived Prices”?

Recent U.S. free trade agreements have included language regulating the way in which member countries manage their pharmaceutical drug coverage and reimbursement programs.  The U.S.-Australia agreement was the first to such provisions, followed by the U.S.-Korea agreement which expanded upon the language included in the Australia agreement.  Currently U.S. Trade Representatives are negotiating the Trans Pacific Partnership (TPP) agreement, which is likely to include language very similar to that in the Korea agreement. The restrictions contained in the Korea agreement apply to health care programs operated at the “central level of government,” defined as “entities that are part of or have been established by a Party’s central level of government to operate or administer its health care programs.”[1] Applicable health care programs are “programs in which the health care authorities of a Party’s central level of government make the decisions regarding” coverage and reimbursement of pharmaceuticals. The agreement requires that when an applicable health care program has procedures for “listing” or “setting the amount of reimbursement” for pharmaceuticals or medical devices, the reimbursement be based on “competitive market-derived prices.”[2] If, however, the reimbursement amount is not market-derived, then a member country must calculate the reimbursement in a way that will “appropriately recognize the value of the patented pharmaceutical product,” and must permit manufacturers to apply for increased reimbursement based on clinical data and provide an opportunity for manufacturers to...

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The 340B Program is Not Exempt from the US-Korea Free Trade Agreement

The U.S. has recently begun to include in free trade agreements provisions regarding government health care programs which reimburse entities for prescription drugs.  The U.S.-Australia free trade agreement was the first to include such provisions, followed by the U.S.-Korea Free Trade Agreement (Korea FTA).  Similar language is likely to be included in the Trans-Pacific Partnership Free Trade Agreement (TPP FTA), which includes Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.[1] In response to outcry from state legislative associations, the Korea agreement included a footnote exempting Medicaid from the requirements of the agreement.  However, there remains confusion regarding whether the Medicaid footnote also applies to the 340B program.  This note outlines the differences between the programs, concluding that because they are two separate programs, the 340B program is required to follow the regulations of the Korea FTA. Medicaid Prescription Drug Program Medicaid is a joint federal and state program created under the Social Security Act.  Managed at the federal level by the Centers for Medicare and Medicaid Services (CMS), the program provides health care services to qualifying low-income and disabled individuals.[2] Each state receives federal funds to support the program, based on the services provided and the populations covered in the state.[3] Over 50% of Medicaid beneficiaries are children,[4] however, beginning in 2014, ACA requires that the program cover all individuals who fall under a certain income level.[5]...

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Do Free Trade Agreement Pharmaceutical Chapters Promote “Off-Label” Marketing?

Recent free trade agreements with Korea and Australia have included provisions regulating pharmaceutical reimbursement programs operated at the “central level of government” of member countries.  Currently, the U.S. is in negotiations to complete the Trans Pacific Partnership (TPP) Agreement, which insiders say will likely include language similar to that in the Korea agreement.  Each of these agreements binds all signing parties to the provisions it contains—including the U.S.  Compliance with these agreements could require significant changes to American federal health care programs. In particular, Article 5.2(c) of the Korea agreement requires health authorities to “permit a manufacturer… to apply for reimbursement of additional medical indications for the product, based on evidence the manufacturer provides on the product’s safety or efficacy.”  To comply with this provision, the U.S. may need to modify existing federal laws regarding “off-label” marketing by drug manufactures, and prohibit certain cost-saving mechanisms used by state Medicaid agencies. Under the Food, Drug and Cosmetic Act (FDCA), drug manufacturers are prohibited from selling “misbranded” drugs.[1] A drug is considered misbranded if “its labeling is false or misleading in any particular.”[2] As such, the drug label must include information regarding directions for use, adequate warnings regarding any unsafe dosage amounts or methods, or any medical conditions that increase the potential harm of the medication.[3] In addition, regulations promulgated by the FDA prohibit so-called “off-label” marketing—any drug advertisement recommending “any...

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New Trend in Free Trade Agreements Could Affect U.S. Health Care Programs

As the latest round of negotiations for the Trans Pacific Partnership (TPP) free trade agreement starts this week in Vietnam, some member countries are publicly defending their prescription drug reimbursement programs.  If the TPP agreement contains language similar to the pharmaceutical chapter of the Korea free trade agreement—which sources say is a likely possibility—they may have reason to worry.  For example, New Zealand’s government prescription drug program, Pharmac, has been under attack by the U.S. pharmaceutical industry, and may have to be modified to be compliant with the TPP agreement. Though there is no accompanying public outcry, the TPP agreement also raises the possibility of altering health care programs here in the U.S.  The pharmaceutical chapter of the Korea agreement regulates prescription drug reimbursement programs operated at the “central level” of government.  This is similar to the language in the Australia agreement (see Annex 2-C); but in response to pressure from states surrounding the Australia agreement, the Korea agreement includes a footnote stating that the agreement does not apply to Medicaid because it is a “regional level of government health care program.”  Yet there is still uncertainty about how pharmaceutical chapters like that in the Korea agreement will affect other U.S. programs such as 340B and Medicare Part B. Preliminary analysis indicates that three primary requirements contained in the pharmaceutical chapters are not met by the Medicaid, Medicare Part...

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The TPP Free Trade Agreement May Affect the Medicare Part B Program

The U.S. has recently begun to include in free trade agreements provisions regarding government health care programs which reimburse entities for prescription drugs.  The U.S.-Australia free trade agreement was the first to include such provisions, followed by the U.S.-Korea Free Trade Agreement (Korea FTA).  Similar language is likely to be included in the Trans-Pacific Partnership Free Trade Agreement (TPP FTA), which includes Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.[i] Because the language of the TPP agreement has not yet been made public, this paper applies the language in the Korea FTA—which is a likely template for the TPP FTA—to the Medicare Part B program.  Medicare is a federal health care insurance program for individuals over age 65 and those with certain disabilities.  Without amendment to the language used in the Korea FTA, Part B of the Medicare program may violate Korea FTA, as well as the TPP FTA. The Medicare Part B program is managed by the central level of government Medicare was created by Congress and is operated by the federal government through the Centers for Medicare and Medicaid Services (CMS).  It meets the Korea FTA definition of a program for which the central level of government makes decisions regarding coverage and reimbursement because CMS “manages procedures for listing pharmaceutical products,” ” indications for reimbursement,” and “set[s] the amount of reimbursement for pharmaceutical products” for...

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