“I voted ‘yes’ because, quite simply, this is a game changer,” National Institutes of Health hepatologist Dr. Marc Ghany said of Sovaldi, Gilead Science’s new pill designed to cure most cases of hepatitis C within 12 weeks.

Dr. Lawrence Friedman, a professor at Harvard Medical School, called it his “favorite vote” as an FDA reviewer, according to the .

What the panelists didn’t know was that the FDA’s drug quality inspectors had recommended against approval.

They issued a scathing 15-item disciplinary report after finding multiple violations at Gilead’s main U.S. drug testing laboratory, down the road from its headquarters in Foster City, Calif. Their findings criticized aspects of the quality control process from start to finish: Samples were improperly stored and catalogued; failures were not adequately reviewed; and results were vulnerable to tampering that could hide problems.

Gilead Foster City doesn’t manufacture drugs. Its job is to test samples from drug batches to ensure the pills don’t crumble or contain mold, glass or bacteria, or have too little of an active antiviral ingredient.

Recent news reports have focused public attention on poor quality control and contamination in the manufacturing of cheap generic drugs, particularly those made overseas. But even some of the newest, most expensive brand-name medicines have been plagued by quality and safety concerns during production, a Kaiser Health News analysis shows.

More disturbing, even when FDA inspectors flagged the potential danger and raised red flags internally, those problems were resolved with the agency in secret ― without a follow-up inspection ― and the drugs were approved for sale.

Erin Fox, who purchases medicines for University of Utah Health hospitals, said she was shocked to hear from KHN about manufacturing problems uncovered by authorities at the facilities that make brand-name products. “Either you’re following the rules or you’re not following the rules,” Fox said. “Maybe it’s just as bad for branded drugs.”

The pressure to get innovative drugs like Sovaldi into use is considerable, both because they offer new treatments for desperate patients and because the medicines are highly profitable.

Against that backdrop, the FDA has repeatedly found a way to approve brand-name drugs despite safety concerns at manufacturing facilities that had prompted inspectors to push to reject those drugs’ approval, an ongoing KHN investigation shows. This happened in 2018 with drugs for cancer, migraines, HIV and a rare disease, and 10 other times in recent years, federal records show. In such cases, how these issues were discussed, negotiated and ultimately resolved is not public record.

For example, inspectors found that facilities making immunotherapies and migraine treatments didn’t follow up when drug products showed evidence of bacteria, glass or other contaminants. At a Chinese plant making the new HIV drug Trogarzo, employees dismissed “black residue” found to be “non-dissolvable metal oxides,” assuming it “did not pose a significant risk,” federal records show.

Without a follow-up inspection to confirm drugmakers corrected the problems inspectors found, these medicines eventually were approved for sale, and at list prices as high as $189,000 a month for an average patient, according to health data firm Connecture. The cancer drug Lutathera was initially rejected over manufacturing problems at three plants but was approved a year later without a fresh inspection and was priced at $57,000 per vial.

John Avellanet, a consultant on FDA compliance, said data integrity problems, like those at Gilead’s lab in Foster City, should have sparked further investigation, because they raise the possibility of “deeper issues.”

Dr. Janet Woodcock, the director of the FDA’s Center for Drug Evaluation and Research, said an inspector’s recommendation to withhold approval can be “dealt with” without a follow-up. Woodcock said the agency can’t comment on specifics, and companies are reluctant to discuss them because the details of the resolution are protected as a corporate trade secret.

“That doesn’t mean that there’s anything wrong with the drug,” Woodcock said.

Dinesh Thakur, a former drug-quality employee turned whistleblower, called the secrecy a “red flag.” A follow-up inspection is critical, he said: “I’ve seen many times paper commitments are made but never followed through.”

What worries Fox is that a faulty drug could get through and nobody would know.

“In general, very few people suspect that their medicine is the problem or their medicine is not working,” Fox said. “Unless you see black shavings or something horrible in the product itself, the drug is almost the last thing that would be suspect.”

The Market Beckons

If the FDA finds problems at preapproval inspections for generics, the agency is likely to deny approval and delay the drug’s launch until the next year’s review cycle, according to industry and agency experts.

In fact, just were approved the first time their sponsors submitted applications from 2015 through 2017.

The calculus appears different for heralded new therapies like Sovaldi. In 2018, ― the newest of the new ― were approved on the first try, the FDA said.

Woodcock said the agency has “the same standards for all drugs,” but she emphasized that many of the manufacturing issues “are somewhat subjective.”

For new brand-name drugs, she said, the FDA “will work very closely with the company to … bring the manufacturing up to snuff.”

The manufacturer submits written responses and commits to resolve quality concerns, but the details are kept confidential.

An have hepatitis C and, before Sovaldi, treatment came with miserable side effects and a strong chance it wouldn’t work. Sovaldi promised up to a , though it came with an eye-popping $84,000 price tag for a 12-week course, putting it out of reach for most patients and health care systems.

But corporate pressure to get such therapies into the marketplace is also considerable.

Pharmaceutical firms pay hefty fees for FDA review and lobby the agency to speed products to market. For Gilead, time lost is money.

“If approval of sofosbuvir were delayed, our anticipated revenues and our stock price would be adversely affected,” Gilead wrote in an SEC filed Oct. 31, 2013, using the generic name for Sovaldi.

Since its debut in 2013, Sovaldi has been widely criticized for its price but recognized as a medical breakthrough. Gilead has never recalled it.

However, hundreds of patients who have taken the drug have voluntarily reported cancer or other complications to the FDA’s “adverse event” reporting database, including concerns that the treatment doesn’t always work. One in 5 Sovaldi patients and health care professionals who reported serious problems to federal regulators said the drug didn’t cure the patients’ hepatitis C.

“The FDA approved these products after a rigorous inspection process, and we are confident in the quality/compliance of these products,” Gilead spokeswoman Sonia Choi said.

Problems at Foster City

Gilead’s Foster City facility has been cited for an array of problems over the years. In 2012, FDA inspectors said the facility had failed to properly review how the HIV drugs Truvada and Atripla became contaminated with “blue glass” particles; some of that tainted batch was distributed. The company “made no attempt to recover” the contaminated drugs, according to FDA inspection records.

Gilead had just filed its application for Sovaldi’s approval when FDA inspectors arrived at Foster City for an unrelated inspection in April 2013. Inspectors slapped the facility with nine violations in what’s called a 483 document and said that the reliability of the site’s methods for testing things like purity were unproven and that its records were incomplete and disorganized, according to FDA inspection documents.

As a result, the FDA initially rejected two HIV drugs, Vitekta and Tybost. Gilead had to resubmit those applications, and it would take 18 months before the FDA approved them in late 2014.

On Sept. 19, 2013, FDA officials met to discuss Sovaldi with Woodcock, agency records show. Meeting minutes show inspectors recommended hitting Gilead Foster City with a formal warning letter based on the April inspection. (A warning letter is a disciplinary action from the FDA that typically includes a threat to withhold new approvals or place a foreign facility on import alert and refuse to accept its products for sale in the U.S.)

At the same meeting, FDA inspectors said their recommendation to approve Sovaldi would be “based on” removing an unnamed drug ingredient manufacturer from the application and “a determination that Gilead Foster City has an acceptable cGMP [current good manufacturing practices] status.”

Records show the FDA didn’t issue a warning letter or otherwise delay the approval process when Foster City failed its inspection.

Instead, the Sovaldi preapproval inspection started four days later and lasted two weeks. At the end, inspectors issued Foster City another 483, this time with 15 violations, formally outlining problems and requiring a written plan to fix them. Inspectors said they couldn’t recommend Sovaldi’s approval.

FDA officials gave Gilead two options during an Oct. 29 teleconference: Remove Foster City, a “major testing site” for Sovaldi, from the application, and use a third-party contractor instead; or use Foster City but hire another firm to monitor the site and sign off on its testing work.

Gilead was optimistic. “Based on recent communications with the FDA, we do not expect these [inspection] observations to delay approval of sofosbuvir,” the company said in its Oct. 31 SEC filing.

Gilead chose to replace the Foster City plant with a contract testing site, federal records show. By December, Sovaldi was approved for distribution, and the company soon announced its $1,000-per-pill price tag.

Not Just Generics

Recent media reports, and the ongoing recall of the widely used blood pressure medicine valsartan, have led consumers ― and ― to question whether generics are manufactured safely. Valsartan pills made in China and India were found to contain cancer-causing impurities.

Branded-drug quality, in large part, has been spared from congressional scrutiny. But many factories ― overseas and in the U.S. ― make branded and generic drugs.

In January 2018, FDA inspectors hit a Korean manufacturing plant that makes Ajovy, a migraine drug, with a warning letter. With the problems still unresolved in April, an agency reviewer recommended withholding approval. When they returned in July, inspectors wanted to give the plant the worst possible classification: “Official Actions Indicated.” Among other problems, inspectors found that glass vials sometimes broke during the manufacturing process and that the facility lacked protocols to prevent the particles from getting into drug products. The FDA’s Office of Manufacturing Quality eventually downgraded the inspection to just “Voluntary Actions Indicated.”

The drug was approved in September 2018 and priced at $690 a month. FDA records indicate no further disciplinary action was taken. Teva, the maker of Ajovy, did not respond to requests for comment.

Similarly, when FDA inspectors visited a contract manufacturing facility in Indiana used to make Revcovi, which treats an autoimmune disease, they noted that a redacted drug lot had failed a sterility test because the vials tested positive for a bacterium called Delftia acidovorans, which can be detrimental even in people with healthy immune systems, . But the drug-filling machine stayed in use after the contaminant was discovered, the FDA determined. Inspectors recommended withholding approval.

The drug was approved in October 2018 even after another inspection turned up problems, with a list price of $95,000 to $189,000 per month for an average patient, according to health care data firm Connecture.

Revcovi’s manufacturer, Leadiant Biosciences, said through an outside public relations firm that its contract manufacturer’s written responses to the FDA observations were considered “adequate” by two FDA offices, adding, “We do not have any more information to share with you at this time as pharmaceutical manufacturing processes are confidential.”

Problems with drugs can take years to discover ― and then only after patients are injured. So, many health researchers say, more caution is warranted.

“They’re doing so few of these [FDA] inspections pre-market,” said Diana Zuckerman, president of the nonprofit National Center for Health Research. “The least they can do is listen to the ones they’re doing.”

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Then she saw three more patients at her Utah telehealth clinic with similar symptoms. They did not have infections, but all had been vaping. When Harris heard several teenagers in Wisconsin had been hospitalized in similar cases, she quickly alerted her state health department.

As patients in hospitals across the country combat a mysterious illness linked to e-cigarettes, federal and state investigators are frantically trying to trace the outbreaks to specific vaping products that, until recently, were virtually unregulated.

As of Aug. 22, 193 potential vaping-related illnesses in 22 states had been . Wisconsin, which first put out an alert in July, has at least 16 confirmed and 15 suspected cases. Illinois has reported 34 patients, one of whom has died. Indiana is investigating 24 cases.

Lung doctors said they had seen warning signs for years that vaping could be hazardous, as they treated patients. Medically it seemed problematic, since it often involved inhaling chemicals not normally inhaled into the lungs. Despite that, assessing the safety of a new product storming the market fell between regulatory cracks, leaving doctors unsure where to register concerns before the outbreak. The Food and Drug Administration took years to regulate e-cigarettes once a court determined it had the authority to do so.

“You don’t know what you’re putting into your lungs when you vape,” said Harris, a critical care pulmonologist at Intermountain Healthcare in Salt Lake City. “It’s purported to be safe, but how do you know if it’s safe? To me, it’s a very dangerous thing.”

Off The Radar

When electronic cigarettes came to market about a decade ago, they fell into a regulatory no man’s land. They are not a food, not a drug and not a medical device, any of which would have put them immediately in the FDA’s purview. And, until a few years ago, they weren’t even lumped in with tobacco products.

As a result, billions of dollars of vaping products have been sold online, at big-box retailers and in corner stores without going through the FDA’s rigorous review process to assess their safety. Companies like Juul, Blu and NJoy quickly established their brands of devices and cartridges, or pods. And thousands of related products are sold, sometimes on the black market over the internet or beyond.

“It makes it really tough because we don’t know what we’re looking for,” said Dr. Ruth Lynfield, the state epidemiologist for Minnesota, where several patients were admitted to the intensive care unit as a result of the illness. She added that if it turns out that the products in question were sold by unregistered retailers and manufacturers “on the street,” outbreak sleuths will have a harder time figuring out exactly what is in them.

With e-cigarettes, people can vape — or smoke — nicotine products, selecting flavorings like mint, mango, blueberry crème brûlée or cookies and milk. They can also inhale cannabis products. Many are hopeful that e-cigarettes might be useful smoking cessation tools, but some research has called that into question.

The mysterious pulmonary disease cases have been linked to vaping, but it’s unclear whether there is a common device or chemical. In some states, including California and Utah, all of the patients had vaped cannabis products. One or more substances could be involved, health officials have said. The products used by several victims are being tested to see what they contained.

Because e-cigarettes aren’t classified as drugs or medical devices, which have well-established FDA databases to track adverse events, doctors say there has been no clear way to report and track health problems related to vaping products.

And this has apparently been the case for years.

Multiple doctors described seeing earlier cases of severe lung problems linked to vaping that were not officially reported or included in the current CDC count.

Dr. Laura Crotty Alexander, a pulmonologist and researcher with the University of California-San Diego, said she saw her first case about two years ago. A young man had been vaping for months with the same device but developed acute lung injury when he switched flavors. She strongly suspected a link, but did not report the illness anywhere.

“It wasn’t that I didn’t want to report it, it’s that there’s no pathway” to do so, Alexander said.

She said she’s concerned that many physicians haven’t been asking patients about e-cigarette use and that there’s no way to document a case like this in the medical coding system.

Dr. John E. Parker of West Virginia University said he saw his first patient with pneumonia tied to vaping in 2015. Doctors there were intrigued enough to report on the case at the annual meeting of the American College of Chest Physicians. Parker and his team didn’t contact a federal agency, and Parker said it was unclear whom to call.

Numerous other cases have been reported in medical journals and at professional conferences in the years since. The FDA’s voluntary system for included 96 seizures and only one lung ailment tied to e-cigarettes from April through June of this year. The system appears to be utilized most by concerned citizens, rather than manufacturers or health care professionals.

But several lung specialists said that due to the patchwork nature of regulatory oversight over the years, the true scope of the problem is yet to be identified.

“We do know that e-cigarettes do not emit a harmless aerosol,” said Brian King, a deputy director in the Office on Smoking and Health at the CDC in a call with media on Aug. 23 about the outbreak. “It is possible that some of these cases were already occurring but we were not picking them up.”

Regulatory Limits

The FDA has had limited authority to regulate e-cigarettes over the years.

In 2009, Congress passed the Family Smoking Prevention and Tobacco Control Act, empowering the FDA to oversee the safety and sale of tobacco products. But e-cigarettes, still new, were not top of mind.

Later that year, the FDA tried to block imports of e-cigarettes, saying the combination drug-device products were unapproved and therefore illegal for sale in the United States. Two vaping companies, Smoking Everywhere and NJoy, , and a federal judge ruled in 2010 that the FDA should regulate e-cigarettes as tobacco products.

It took the agency six years to finalize what’s become known as the “deeming rule,” in which it formally began regulating e-cigarettes and e-liquids.

By then, it was May 2016. The e-cigarette market had swelled to an estimated $4.1 billion, now project that the global industry could reach $48 billion by 2023.

Critics say the FDA took too long to act.

“I think the fact that FDA has been dillydallying [has made] figuring out what’s going on [with this outbreak] much harder,” said Stanton Glantz, a University of California-San Francisco professor in its Center for Tobacco Control Research and Education. “No question.”

The agency began by banning e-cigarette sales to minors and requiring all new vaping products to submit applications for authorization before they could come to market. Companies and retailers with thousands of products already on the market were granted two years to submit applications, and the FDA would get an additional year to evaluate the applications. Meanwhile, existing products could still be sold.

But when Dr. Scott Gottlieb arrived as the new FDA commissioner in 2017, the rule hadn’t been implemented and there was no formal guidance for companies to file applications, he said. As a result, he pushed the deadline back to 2022, drawing ire from public health advocates, who called foul over his previous ties to an e-cigarette retailer called Kure.

“I thought e-cigarettes at the time — and I still believe — that they represent an opportunity for currently addicted adult smokers to transition off of combustible tobacco,” he said in an interview, adding that other parts of the deeming rule went into effect as planned. “All I did was delay the application deadline.”

Gottlieb’s thinking changed the following year, when a national survey showed a sharp rise in teen vaping, which he an “epidemic.” He announced that the agency would rethink the extended deadline and weigh whether to take flavors that appeal to kids off the market.

A judge that e-cigarette makers would have only 10 more months to submit applications to the FDA. They’re now due in May 2020.

Asked about the lung injuries appearing now, Gottlieb, who left the FDA in April, said he suspected counterfeit pods are to blame, given the geographic clustering of cases and the fact that, overall, the FDA is inspecting registered e-cigarette makers and retailers to make sure they’re complying with existing regulations.

“I think the manufacturers are culpable if their products are being used, whether the liquids are counterfeit or real,” he said. “Ultimately, they’re responsible for keeping their products out of the hands of kids.”

Juul, the leading e-cigarette maker, agreed that children shouldn’t be able to vape its products, and said curtailing access should be done “through significant regulation” and “enforcement.”

“When people say ‘Why aren’t these being regulated?’ They actually are all being regulated,” Gottlieb said.

For example, companies are required to label their products as potentially addictive, sell only to adults and comply with manufacturing standards. The agency has conducted thousands of inspections of e-cigarette manufacturers and retailers and taken enforcement actions against companies selling , and .

Health departments investigating the outbreak told Kaiser Health News that e-cigarettes’ niche as a tobacco product instead of a drug has presented challenges. Most weren’t aware that adverse events could be reported to a database that tracks problems with tobacco products. And, because e-cigarettes never went through the FDA’s “gold standard” approval process for drugs, doctors can’t readily look up a detailed list of known side effects.

But like other arms of the FDA, the tobacco office has tools and a team to investigate a public health threat just as the teams for drugs and devices do, Gottlieb said. It may even be better equipped because of its funding.

“I don’t think FDA is operating in any way with hands tied behind its back because of the way that the statute is set up,” he said.

Teen vaping has exploded during this regulatory tussle. In 2011, 1.5% of high school students reported vaping. By 2018, , according to a CDC report.

Unknown Components

Still, doctors and researchers are concerned about the ingredients in e-cigarettes, and how little the public knows about the risks of vaping.

In Juul’s terms and conditions, posted on its website, it says, “We encourage consumers to do their own research regarding vapor products and what is right for them.” Many ingredients in e-cigarette products, however, are protected as trade secrets.

Since at least 2013, the flavor industry has expressed concern about the use of flavoring chemicals in vaping products.

The vast majority of the chemicals have been tested only by ingesting them in small quantities, as they’re encountered in foods. For most of these chemicals, there have been no tests to determine whether it is safe to inhale them, as happens daily by millions when they use e-cigarettes.

“Many of the ingredients of vaping products, including flavoring substances, have not been tested for … the exposure one would get from using a vaping device,” said John Hallagan, a senior adviser to the Flavor and Extract Manufacturers Association. The group has sent cease-and-desist letters to e-cigarette companies in previous years for using the food safety certification of the flavor industry to imply that the chemicals are also safe in e-cigarettes.

Some flavor chemicals are thought to be harmful when inhaled in high doses. Research suggests that cinnamaldehyde, the main component of many cinnamon flavors, may impair lung function when inhaled. Sven-Eric Jordt, a professor at Duke University, says he presented evidence of its dangers at an FDA meeting in 2015 — and its relative abundance in many e-cigarette vaping liquids. In response, one major e-cigarette liquid seller, Tasty Vapor, .

In 2017, when Gottlieb delayed the FDA application deadline, the product was back. A company email to its customers put it this way:

“Two years ago, Tasty Vapor allowed itself to be intimidated by scaremongering tactics. … We lost a lot of sales as well as a good number of long time customers. We no long see reason to disappoint our customers hostage for these shady tactics.”

At the time of publication, Tasty Vapor’s owner did not reply to a request for comment.

Jordt said he is frustrated by the delays in the regulatory approval process.

“As a parent, I would say that the government has not acted on this,” he said. “You’re basically left to act alone with your addicted kid. It’s kind of terrifying that this was allowed to happen. The industry needs to be held to account.”

KHN correspondents Cara Anthony, Markian Hawryluk and Lauren Weber and reporter Victoria Knight contributed to this report.

This story was produced by , which publishes , an editorially independent service of the .

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It launched its own generic version of Tekturna, a pill taken daily by thousands. PDL’s “authorized” copycat hit the market in March, stealing momentum from the new rival and protecting sales even though Tekturna’s patent ran out .

PDL’s version sold for $187 a month versus $166 for the competing generic, made by Anchen Pharmaceuticals, according to Connecture, an information technology firm. PDL’s brand-name Tekturna runs about $208 a month.

The plan is “to maximize profit at this point,” Dominique Monnet, PDL’s CEO, told stock analysts in March. With the boost of PDL’s house generic, “the economics would still be very favorable to us” even against the generic rival and even if prescriptions plunged for the brand, he said.

Lawmakers who created the modern generic-drug industry in the 1980s never imagined anything like this — brand-pharma companies maximizing profits by appearing to compete with themselves.

But it goes on all the time. In fact, there are now nearly approved in the U.S., according to the Food and Drug Administration. While these might look like products that would push prices down, authorized generics can be as profitable as, if not more profitable than, brand-name drugs.

“Authorized generics are not generic drugs,” Dr. Sumit Dutta, chief medical officer for drug-benefit manager OptumRx, told Congress in April. “The marketing and production of authorized generics is exclusively controlled and directed by brand-drug manufacturers. They do nothing to promote competition.”

Last year, authorized generics appeared at the rate of about once a week. High-profile examples in recent years included anti-allergy injector, introduced to soothe public outrage after the company raised the brand price 400%. In March, Eli Lilly said it would launch a less expensive insulin, whose branded list price has also soared.

Of all the ways drug companies try to protect sales as patents expire — changing doses, adding ingredients, seeking approval to treat new diseases — authorized generics are by far the most profitable, returning $50 for every dollar invested, research firm

Brand-drug companies say authorized generics increase competition even if they’re not an independent product.

This “reduces prices and results in significant cost savings,” said Holly Campbell, spokeswoman for the Pharmaceutical Research and Manufacturers of America, or PhRMA, the brand-drug lobby. “Congress should reject attempts to delay, restrict or prohibit authorized generics.”

But critics say authorized generics hurt long-term competition and often perversely increase costs, even in the short term.

Authorized generics don’t just steal sales from existing generic rivals. Critics say they erode incentives to make generic drugs, partly by thwarting the intent of Congress to let one company temporarily have generic business to itself after a brand patent expires.

Tactics like this can “stave off generic competition and make sure that generics can’t get much of a foothold when they do get to market,” said Robin Feldman, a professor at the University of California Hastings College of the Law, who studies pharma policy. “That’s the game. And drug companies have become masters at this.”

Authorized copycats may help explain why relatively few true generics are reaching the market despite a surge in approvals, analysts say.

The 1984 Hatch-Waxman Act founded the modern generic business by establishing rules for safety and competition, including granting six months of market exclusivity to the first generic rival to each brand. The idea was to give the first mover a profitable head start to attack the established pill.

Few realized the law left room for brand companies to launch their own generics at the same time as or even earlier than rivals, often slightly lower in cost and nearly indistinguishable to patients and doctors from the brand as well as any independent generics.

PDL acquired Tekturna from Novartis and soon learned that Anchen was planning a generic. It moved quickly to fight back.

PDL’s authorized generic version of Tekturna “was timed to secure us the benefit of being first to market,” before Anchen’s version was even on the shelves, PDL’s CEO, Monnet, told analysts. “We believe this provides [PDL] with a distinctive competitive advantage.”

PDL was so confident the authorized generic, called aliskiren, would produce substantial revenue without much effort that it got rid of its Tekturna salesforce of 60 people.

“There’s a lot of parts of the system that just automatically switch” to generics, whatever the source, said Maxim Jacobs, who follows PDL’s stock for Edison Investment Research. So even if the authorized generic isn’t much cheaper than the brand, “it’s almost like a no-brainer” to roll one out, he said.

Monnet was unavailable for an interview, a spokesperson said. Anchen did not respond to requests for comment.

Oddly enough, authorized generics can be more profitable than the brand-name drug even if their list prices are much lower, OptumRX’s Dutta told Congress. That’s because they usually aren’t subject to rebates that flow from the drugmaker to middlemen such as OptumRX and effectively lower a brand’s revenue.

“These authorized generics often result in net prices higher than the brand drugs they replace,” he told Congress. “Authorized generics are just another tactic for drug manufacturers to improve profitability.”

The list price for the authorized generic of Humalog insulin is — $137 versus $275. That apparent discount offered limited relief to uninsured patients paying cash and generated spirited headlines saying Lilly had lowered the price significantly.

But the move won’t cost Lilly any money, said another senior pharmacy benefits executive who asked for anonymity to speak candidly about a vendor. After rebates, $137 is about what the drug giant nets for Humalog now, the executive said. And it’s still far higher than what insulin costs in other countries.

“It’s a parlor trick,” the executive said. “They’re bending to political pressure, but are they taking any money out of the system? They’re not.”

Lilly’s Humalog generic, called insulin lispro, and Mylan’s EpiPen copycat departed from the traditional playbook by launching well before patents for those brands expired. The companies were trying to calm outrage over rising prices rather than fend off generic rivals, analysts said.

Generic Humalog “was made available to help people paying full retail price for their insulin” because of coverage gaps or lack of insurance, said Lilly spokesman Greg Kueterman.

The mere threat of an authorized generic can also smother competition.

A 2013 Supreme Court ruling challenged deals in which brands blatantly paid rivals to keep generics off the market. So pharma firms came up with an alternative: They could would hold fire on an authorized clone if generic firms agreed to delay launching their products or gave some other concession,

Both sides win. The brand stretches its monopoly beyond the life of the patent, while the generic firm avoids facing an authorized rival later on.

Authorized generics can generate outsize profits in yet another way: as a method to game Medicaid contracts that costs taxpayers hundreds of millions of dollars a year, according to investigators for the Health and Human Services Department.

Brand-pharma companies routinely “sell” authorized generics to a corporate affiliate at a sharp discount, establishing an artificial wholesale price, said Edwin Park, a research professor who studies Medicaid at the Georgetown University Center for Children and Families.

Because of complex discounting formulas, this strategy minimizes rebates the drugmakers owe to Medicaid, of Inspector General.

Congress is eyeing to close that loophole, which the would save the federal government $3.15 billion over 10 years.

The next frontier in authorized generics involves harder-to-make biologic drugs, such as generic Humalog, which are made from components of living organisms, analysts say.

Such products tend to be expensive and highly profitable, producing especially strong incentives for brand companies to preserve their franchises.

Makers of valuable biologics such as arthritis drug Humira have avoided the kind of competition from generic-like “biosimilars” that exists in Europe, partly due to patent extensions .

But once patents do expire, authorized biosimilars are likely to be an integral part of their profit-preservation tactics, analysts say. In February, Lilly on “branded biosimilars” — a clear indication of its interest.

The query is “part of a number of questions Lilly and others have posed” about shifting FDA treatment of biologics, said Lilly spokesman Kueterman.

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After two decades of keeping the public in the dark about millions of medical device malfunctions and injuries, the Food and Drug Administration has published the once hidden database online, revealing 5.7 million incidents publicly for the first time.

The newfound transparency follows a Kaiser Health News investigation that revealed device manufacturers, for the past two decades, had been sending reports of injuries or malfunctions to the little-known database, bypassing the public FDA database that’s pored over by doctors, researchers and patients. Millions of reports, related to everything from breast implants to surgical staplers, were sent to the agency as “alternative summary” reports instead.

Here’s what we found in those newly public reports:

1. Blood glucose meters for patients with diabetes had more unique incidents than any other device in the database, logging 2.4 million reports over the past 20 years.

Almost all the products were made by LifeScan, which had been a Johnson & Johnson company until it was sold to a private equity firm in 2018. Common problems included displaying incorrect messages, losing power or being damaged before customers started using them, according to the database.

“When you’re trying to manage a chronic disease, and especially if your numbers are dangerously high, that’s life-threatening,” said Linda Radach, who chairs the medical device committee for the Patient Safety Action Network.

LifeScan did not return requests for comment.

The FDA said the number of glucose meter problems in the alternative summary reporting database shouldn’t be a surprise.

“Approximately 10% of the U.S. population has diabetes and most rely on these devices several times a day,” said FDA spokesman Michael Felberbaum. The agency also sees a “high volume” of adverse events for glucose meters in its longtime public database, called MAUDE, he said.

He reiterated that the alternative summary reporting program was intended for “well-understood” adverse events “so that we could focus more resources on identifying and taking action on new safety signals and less understood risks.”

2. There were 2.1 million reports for bad dental implants. And 114,200 were reported last year.

This kind of implant goes into the bone to support an artificial tooth or implant. Many of the reports were for problems with connections between the device and the bone.

“A lot of people have gone out and gotten these and probably don’t know about these risks,” said Madris Tomes, a former FDA manager who now runs a to make the notoriously clunky MAUDE easier to work with.

Dental implants were among the last device types to lose permission to report harm via alternative summary reports instead of the public database. Although the device harm data doesn’t include what happened to patients, Tomes said that if a dental implant has to be removed, it often can’t be replaced because the underlying bone is so damaged.

Felberbaum said that the high number of reports for dental implants is expected because these are commonly used devices, and that more companies have brought new products to market in the past two decades.

3. There were 176 deaths reported through the alternative summary reporting system.

Alternative summary reports are not supposed to include deaths, except for cardiac arrest potentially caused by certain kinds of heart valves that were implanted at least five years beforehand. Those accounted for two-thirds of the deaths in the hidden database, KHN found.

The most recent death was reported last fall by Medtronic, and it was related to a MiniMed Paradigm insulin pump that was hard to program or calibrate. Deaths reported to the once-hidden database also included fatalities associated with two kinds of pacemakers, a breast implant, an intra-aortic balloon pump and a ventilator.

When asked why these were there, the FDA said its “standard practice” was to reach out to the manufacturer for more information when it detected an “ineligible event” in the alternative summary reports. Sometimes, a death was reported in error. Sometimes, the FDA required the manufacturer to report an incident to the public database as well.

KHN found that of the 59 ineligible deaths, only eight appeared to be revised in updated alternative summary reports.

“In some cases, the FDA revoked ASR exemptions following continued reporting of ineligible events in ASRs,” said Felberbaum, adding that ineligible deaths represented “0.001% of all reports received through the ASR program.”

The FDA contacted Medtronic “a number of weeks ago” about the 2018 insulin pump death, said company spokeswoman Pamela Reese. The death was not reported to MAUDE because the “alleged” device malfunction “did not cause or contribute to the patient death,” she said, adding that it was actually caused by “stroke and pneumonia.” She said that the company was in compliance with reporting rules and that the FDA has not asked Medtronic any additional questions about it.

“One has to wonder what other information wasn’t made public if something that clear-cut [the instruction not to include deaths in the ASR] was included and hidden from the public,” said Diana Zuckerman, president of the nonprofit National Center for Health Research. “Did FDA notice?”

4. Surgical stapler-related malfunctions accounted for more than 66,000 previously hidden incidents since 2001.

The KHN investigation spotlighted problems with staplers, which tend to be used in minimally invasive surgery to cut and seal tissue and vessels quickly. Although the FDA received only 84 reports for stapler-related harm in the public database, it acknowledged earlier this year that it had received nearly 10,000 reports through alternative summary reporting.

The most common problems were staplers that failed to fire or fired malformed staples. Nearly 4,700 stapler problems were reported through the hidden database in 2017 alone. If a stapler fails to seal tissue properly during surgery, it can lead to serious bleeding or infection.

An FDA advisory panel last month recommended the agency switch staplers to a higher-risk classification with more safety requirements.

5. Breast implant injuries and malfunctions accounted for nearly half a million unique reports over two decades, including implants that leaked, deflated or migrated.

More than 6,600 incidents have been reported in 2019 by three companies: Allergan, Mentor and Sientra. The most common problem was rupture.

Tomes was especially concerned about cancer attributed to breast implants, which was the subject of an last fall. But without publicly available data tracking patient problems, which exists in adverse events data for drugs but not devices, it’s impossible to say.

“How is the public supposed to make sense of this if they’ve redacted patient safety codes?” she asked.

Plus: Thousands of medical device types are still eligible for reporting outside the FDA’s public database.

There are still ways that device makers can avoid submitting individual injuries and malfunctions to the MAUDE database.

To replace the ASR program, the FDA has launched the Voluntary Summary Reporting Program. More than 5,600 device types — or 87% of them — are eligible for summary reporting of device malfunctions, according to FDA .

Patient advocates say they fear that these will be just as difficult to tally and track as ASRs. For example, a summary report for 156 injuries would appear to be a single MAUDE report with a note that it represents 156 injuries, not one.

“Why would you end one [hidden data program] just to start another?” Radach asked.

Methodology

To avoid double-counting adverse events, KHN counted each event identified with a unique report ID only once, unless otherwise noted.

Although this isn’t the norm, some companies appear to have recycled report IDs, using them for more than one event. As a result, our counts may be underestimated.

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The newly acknowledged reports were detailed in an executive summary for FDA advisers. The agency convened a meeting of experts this week to help it determine whether surgical staplers should be moved out of its lowest-risk category — reserved for simple devices like tongue depressors and bandages — to a higher grade that may require testing and additional oversight. Surgical staplers are used to cut and seal vessels and tissues inside the body.

When the FDA initially announced the meeting in March, it acknowledged in that “many more device malfunction reports” were reported to the agency than it had publicly disclosed. The FDA executive summary published this week shows that the total reports more than doubled when the agency took nonpublic reports into account, totaling nearly 110,000 malfunctions or injuries from 2011 through 2018.

“It shocks the conscience,” said Chad Tuschman, a lawyer representing Mark Levering, 62, of Toledo, Ohio, who suffered a serious brain injury after a stapler malfunction caused massive bleeding in 2018. The surgeon, hospital and device maker Covidien, a division of Medtronic, have all denied allegations of wrongdoing in an ongoing legal case.

Surgical staplers have a unique ability to harm patients if they malfunction. Often used in minimally invasive surgeries, they are meant to both cut tissue and vessels and then quickly seal them. Patients have been gravely harmed when staplers have failed to fire or seal tissue, suffering from massive bleeding or infections if stomachs or intestines aren’t sealed properly.

The nonpublic reports were sent to the FDA as “alternative summary” reports, the topic of a recent Kaiser Health News investigation that focused on the agency accepting millions of hidden reports related to medical devices — including for surgical staplers.

The agency had previously acknowledged that in 2016, even as it posted fewer than 100 stapler-related injuries in a public database called MAUDE, it accepted nearly 10,000 reports into its little-known internal alternative summary reporting database. (The data in the FDA’s executive summary contains reports for staplers and staples, which experts have said were just different names for the same problem.)

Tuschman said he was stunned that there were more hidden reports than public ones in the executive summary. “The first question should be ‘Why?’ Why would they have the right to submit to a hidden database?”

Leading surgical stapler makers include divisions of Medtronic and Johnson & Johnson. Medtronic has said the FDA granted it exemptions for stapler-related malfunctions; Johnson & Johnson said it has not. (Ethicon is the name of its subsidiary medical devices company.)

On Thursday, the advisory panel recommended switching surgical staplers to a higher-risk classification with additional safety requirements, according to meeting attendee Jack Mitchell, director of health policy for the nonprofit National Center for Health Research. FDA spokeswoman Stephanie Caccomo declined to confirm this, citing a media office policy against telling reporters what happens at advisory committee meetings, which are open to the public.

“Every surgeon that I have ever worked with has had stapler failures,” said Dr. Doug Kwazneski, a Michigan surgeon who authored a survey in 2013 about “unacknowledged” stapler problems after searching the FDA’s public database of device incidents and coming up empty-handed.

“Going into something without data is dangerous,” Kwazneski said. “If the information exists, we should have access to it.”

More than 400 deaths have been reported since 2011 in the FDA’s public MAUDE database; fatalities can’t be reported to the alternative summary reporting database. Deaths were associated with Ethicon and Covidien products.

In recent communications about stapler safety to doctors, the FDA has advised against using the staplers on large blood vessels.

Kwazneski said surgical staplers are a time-saving tool, which lessens the risk of anesthesia complications during surgery, for example. But it’s important for physicians to remember they can fail.

Diana Zuckerman, president of the National Center for Health Research, said that alternative summary reports are “a well-kept secret” and that any reports related to their existence were “done in a way that was not understood as a repository for hundreds of thousands of serious adverse event reports.”

Mitchell said he was surprised the FDA didn’t reclassify surgical staplers “a long time ago,” considering the agency had the additional 56,000 alternative summary reports all along. “They were the only ones who had this information, and it was nonpublic.”

Kwazneski suspected that there were a high number of hidden reports for stapler malfunctions, but he said the numbers revealed in the FDA’s executive summary still came as a shock.

“The sheer magnitude of seeing it all at once kind of blew my mind,” he said.

Staplers lost their eligibility to report malfunctions through the hidden system in February 2019, and the FDA announced it would end the alternative summary reporting program earlier this month. It has promised to make that data public in the “coming weeks.”

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President Donald Trump wants to control spending on drugs. One of his big ideas: include prices in advertisements, just like warnings about side effects.

That’s not as simple as it sounds.

Apart from legal questions about whether the has the authority to require pricing in ads, other uncertainties arise.

For example, what is the right number to use?

There is a dizzying array of ways to look at drug prices, including average wholesale and average sales prices.

And dosage factors in. Would the price be pegged to a monthly cost? A per-dose cost? Or, even more inscrutable, a “unit cost,” which may not equal a single dose?

A final complication: The prices likely would not be what most consumers actually pay.

Most patients with insurance typically shell out either a flat-dollar copayment or a percentage of the drug’s cost. Some patients get coupons that can reduce their cost to zero.

An FDA working group is currently studying these issues.

Still, we wondered how drug prices pinned to ads might look, hypothetically.

We picked the top 10 most-advertised drugs by spending, courtesy of a list from Kantar Media, which advises clients on advertising and tracks spending, and showed how much each drug company spent last year on those ads. Another consulting group, Connecture, then figured the typical monthly costs, based on average wholesale prices. Those costs are based on typical dosages.

Here’s what we found:

Graphic presentation by producer Lydia Zuraw.

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Both major political parties have shown interest in remedying high drug prices, and drugmakers have bemoaned how rebates to middlemen keep them from reaping every dollar associated with those price tags.

Pharmacy giant the Trump administration’s proposal to end these post-transaction discounts as they apply to Medicare. Yet, in January the company rolled out a Medicare drug plan that experts say is similar “in spirit” to the administration’s proposal.

The CVS Caremark plan wasn’t popular with customers, and CVS Health, which owns CVS Caremark, was quick to point this out as evidence that consumers prefer the current rebate system.

“We had a very, I would say, small number of seniors enroll in that program,” Larry Merlo, CVS Health’s CEO on a February earnings with investors. “And we think one of the barriers to that was the increase that we saw in the monthly premium.”

The CVS plan’s premium was $80 a month, which is about the average Medicare Part D monthly charge. But since it is designed to pass on a portion of rebates directly to patients at the pharmacy counter, certain patients would wind up with smaller out-of-pocket costs than they previously paid.

“Even very well-informed consumers would not necessarily understand that a higher premium plan in this case means that they’re incurring smaller amounts at the point of sale,” said Rachel Sachs, an associate law professor at Washington University in St. Louis who specializes in health care.

So why did only 25,000 people sign up for the plan, called ? Either consumers didn’t want the plan or perhaps they just didn’t understand it.

We’ll break it down for you.

Untangling Jargon: The Way Things Are And How They Could Change

A pharmacy benefit manager, or PBM, handles drug claims for health insurance companies. The big ones are Express Scripts, CVS Caremark and OptumRx. Every time you fill a prescription and use your drug plan, your PBM is involved in paying the claim and determining how much money you owe the cashier.

A rebate is a discount the PBM negotiates with a drug manufacturer off the price the drugmaker sets, which is called a list price. Rebates are not made public, and they typically don’t get passed on to the patient at the pharmacy counter in the form of a lower copayment, experts say.

When the drugmaker eventually pays the rebate back to the PBM, the PBM often uses this money to lower premiums, which are the monthly fees that Medicare Part D plans charge beneficiaries. They differ for each drug plan.

In a way, patients taking drugs with high list prices and big rebates wind up subsidizing other patients’ premiums, said Erin Trish, the associate director of the University of Southern California Schaeffer Center for Health Policy and Economics. Premiums on average haven’t substantially increased in more than a decade, but it may be “unfair” to the patients paying higher prices for drugs at the pharmacy counter.

“Some may argue, ‘They’re sicker… Maybe they should [pay more],’” Trish said. “Look. We decided everyone should pay the same premium in this market. [Rebates] shouldn’t be a roundabout way to make a subset of beneficiaries pay more.”

That could all change under a new Trump administration proposal that would ban rebates as they exist today. The negotiated discounts would be applied at the pharmacy counter, meaning discounts would be passed on to patients as out-of-pocket costs that are calculated based on the discounted price, not the higher list price.

For patients taking drugs with high list prices and large rebates, like insulin, it could mean noticeable savings, Sachs said. For patients taking drugs without big rebates, like generics or brand-name drugs without other branded competition, they’re not likely to see much change at the pharmacy counter.

Everyone, however, will see premiums go up. It’s unclear yet how much, but Trish said the SilverScript Allure plan CVS Caremark is offering isn’t necessarily the best indicator. Consultants hired by the Department of Health and Human Services premiums will go up $3.20 to $5.64 per month if the rule takes effect in 2020. The average Medicare Part D premium for 2019 was $41.21, according to the Kaiser Family Foundation. (Kaiser Health News is an editorially independent program of the foundation.)

So Why Didn’t Patients Want The CVS Caremark Plan?

It’s not clear how well seniors shopping for drug plans understood the SilverScript Allure plan, among their many options. They could see it had a high premium, but no deductible. They might not have realized it required smaller payments on drugs at the pharmacy counter.

that the premium is the most important factor seniors consider when choosing a plan, Sachs said.

On top of that, people are unlikely to leave their current plans even if there’s a better one available.

What’s more, we don’t know how well CVS Caremark marketed the plan to seniors who would benefit. They wouldn’t tell us, despite multiple calls and emails.

OptumRx, a competing PBM, started offering customers similar discounts at the pharmacy counter — but for people with commercial insurance, not Medicare or Medicaid. Unlike CVS Caremark, it has a web page with basic language, like “point of sale discounts mean lower costs,” and a link to request more information about switching. OptumRx did not respond to a request for comment.

PBMs: Helping Or Hurting?

Rebates for individual plans and drugs are confidential, but in Medicare Part D, they’ve increased on average from 9.6% of total spending in 2007 to 19.9% in 2016, according to annual reports to the Medicare boards of trustees.

So it’s perhaps unsurprising the brand-name drug trade group, the Pharmaceutical Research and Manufacturers of America, said it “applaud[s]” the proposal to overhaul the rebate system. PhRMA says it pushes them to raise prices in order to offer larger rebates, because drugs with larger rebates often get preferential treatment by PBMs.

Still, PBMs offer the benefit of batting down net prices (the price after rebate), and keeping down drug spending overall.

There are multiple estimates on how much the rebate proposal would cost the Centers for Medicare & Medicaid if it took effect, and they indicate that unless there are other changes to Medicare Part D, it would likely cost more money than the current system, Sachs said.

“It is startling to see the administration moving forward so rapidly with this proposal without a better understanding of how different actors might respond,” she said. As a result, there’s a “huge amount of uncertainty” over how this could all play out.

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But a Kaiser Health News analysis found that about half of the groups representing patients have received funding from the pharmaceutical industry.

Drugmakers funneled more than $58 million to the groups in 2015 alone, according to financial disclosures in KHN’s “Pre$cription for Power” database, which tracks the little-publicized ties between patient advocacy groups and drugmakers. As patient organizations gain ground lobbying Congress and the administration, experts have begun to question whether their financial ties could push them to put drugmakers’ interests ahead of the patients they represent.

The advertisement, which ran in national newspapers, attacked proposed changes to Medicare Part D’s “protected” drug classes, which require that “all or substantially all” drugs must be covered by all insurers. The medicines involved include oral cancer drugs, HIV medicines and antipsychotics.

The protection can have the effect of guaranteeing sales to Medicare patients no matter the price tag.

The proposed rule would give insurers more opportunities to instead steer patients toward lower-cost therapies and generics using prior authorization or step therapy, in which patients must try cheaper drugs before they can switch to options that are more expensive.

It would also allow protected drugs to be left off Medicare Part D formularies when price hikes exceed inflation or new formulations of drugs don’t offer a “significant innovation” over existing versions.

“It’s wrong and it will put patients’ lives at risk,” reads the paid for by the American Cancer Society Cancer Action Network above a list of 56 other patient advocacy groups who presumably agree. Underneath, a link directs readers to an online form to send pre-written emails to members of Congress and the administration.

The government proposal’s goal, however, isn’t to end coverage for drugs in protected classes, said Rachel Sachs, an associate law professor at Washington University in St. Louis who specializes in health care. Its goal is to give plans more leverage to bargain for better discounts. If there’s a chance an insurance plan won’t cover a drug, the provider has more negotiating power.

The Cancer Action Network’s six-figure ad buy ran for three weeks starting Jan. 17. It appeared in print and online in The New York Times and The Washington Post, as well as local publications in Washington, D.C., according to Cancer Action Network spokeswoman Alissa Crispino. About 4,500 people used the online email tool.

It’s important to make sure cancer patients can get “cutting-edge” treatments, said Keysha Brooks-Coley, vice president of federal affairs for the Cancer Action Network. “This is really an access issue,” she said.

The lobby for brand-name drugmakers, the Pharmaceutical Research and Manufacturers of America, takes the same stance, according to its submitted comments on the proposal.

But access to drugs means more than insurance coverage, said Karuna Jaggar, the executive director of Breast Cancer Action, a patient group that was not invited to be listed in the ad and hasn’t accepted corporate funding for two decades to avoid the appearance of bias. “If people can’t afford it, the reality is they cannot access it.”

Given the ad’s selective understanding of “access” to exclude cost and the patient groups’ industry ties, she asked, “Can we trust them?”

The American Cancer Society Cancer Action Network communicates with its funders, which include drugmakers and others, but the group sets its own agenda, Brooks-Coley said.

KHN launched its Pre$cription for Power database in spring 2018. It now includes nearly 14,000 transactions, totaling $163 million in donations from 26 drugmakers to 650 patient groups, in 2015. The patient groups often don’t disclose their donors, so the information comes from drugmakers’ financial disclosures, some of which are voluntary. Not all companies publicly disclose their charitable giving, so KHN estimates are likely low.

Although there are occasions when what’s best for patients is the same as what’s best for drugmakers, people should consider patient advocacy group statements with a “skeptical eye” if groups have financial ties to the pharmaceutical industry, said Matthew McCoy, a medical ethics and health policy assistant professor at the University of Pennsylvania.

Drugmakers and patient advocacy organizations have fundamentally different missions, he said. One wants to make money for shareholders. The other wants to serve patients. Since their goals will inevitably diverge, it’s important that patient groups aren’t swayed by their funders, he said.

It can be easy to view a pharmaceutical company as an ally when its contributions help keep the lights on, McCoy said. “I think we have a lot of evidence from research on financial conflicts of interest in other areas of health care to know that the influence often is unconscious to the people who are actually experiencing it.”

Still, Sachs said she can understand why patient advocacy groups oppose changes to the six protected classes, even if they lead to lower drug prices.

“The question is, what happens if negotiations between pharmaceutical companies and the Part D plans fail?” Sachs said. “In at least some cases, the Part D plan will be able to say simply it’s going to exclude you from coverage because of the price of the drug.”

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The administration’s aggressive push to approve more generics is designed to spur more competition with expensive brand-name drugs, and drive prices lower, President Donald Trump at a last month. The Food and Drug Administration has approved more than 1,600 generic drug applications since January 2017 — about a third more than it did in the last two years of the Obama administration.

But more than 700, or about 43 percent, of those generics still weren’t on the market as of early January, a KHN data analysis of FDA and drug list price records shows. Even more noteworthy: 36 percent of generics that would be the first to compete against a branded drug are not yet for sale. That means thousands or even millions of patients have no option beyond buying branded drugs that can cost thousands of dollars per month.

“That’s shockingly high,” said former congressman Henry Waxman, who co-sponsored the 1984 law that paved the way for the generic approval process as we know it today. He said he’d like to know more, but suspects anti-competitive behavior is at least partly to blame and that revisions to the so-called Hatch-Waxman Act might be needed.

The approved generics that haven’t made it to American medicine cabinets include generic versions of expensive medicines like the blood thinner Brilinta and HIV medication Truvada. They also include six different generic versions of Nitropress, a heart failure drug, whose price spiked 310 percent in 2015.

Experts say a variety of factors are to blame. Generics sellers have fought for years against patent litigation and other delay tactics that protect brand-name drugs from competition. In recent years, vast industry consolidation has reduced the ranks of companies willing to purchase and distribute generics. And, in some cases, makers of generics obtain approvals and ultimately make a business decision to sit on them.

“It’s a real problem because we’re not getting all the expected competition,” FDA Commissioner Scott Gottlieb said in an interview, adding that it will be difficult to solve because it has so many causes. It takes five generics on the market to drive prices down to 33 percent of the original brand-name price, according to an FDA .

Without generics to lower drug costs, branded manufacturers can continue to increase their prices, at a rate of roughly 10 percent a year, said Scott Knoer, chief pharmacy officer at the Cleveland Clinic. “It makes health care costs go up across the board.”

Even if hospital patients don’t directly see high drug prices in their bills, the higher costs get passed to insurers, who pass them on as higher premiums, Knoer said. They also get passed to taxpayers, who pay for drugs covered by Medicare and Medicaid.

Consolidation on multiple tiers of the drug supply chain have changed the face of the generic drug market, warping supply and demand.

In some cases, key pharmaceutical ingredients are unavailable or a manufacturer doesn’t have the capacity to launch a product because it’s having difficulty meeting demand for existing products.

Manufacturing consolidation has dramatically reduced the production of injectable drugs, which are typically administered in a doctor’s office. This may be why 157 injectable generics that were approved in the past two years haven’t been brought to market.

Erin Fox, a pharmacist at the University of Utah who tracks drug shortages, said the KHN analysis of stalled generics “highlights that companies often have a lot of products ‘on the books’ but aren’t really making them.” A few generics on the list — like dextrose 10 percent injection, to treat patients with low blood sugar — would have been helpful to combat shortages the past few years. “This comes up with shortages a lot — it looks like there are more suppliers than there really are,” Fox said.

A lot can change between the time a drugmaker files a generic application with the FDA and the time it’s approved.

Some drugmakers that applied for generic approval years ago to more profitable products. Novartis, for instance, recently sold a generics division run by Sandoz so Sandoz could focus on other drugs, including biosimilars, which compete with expensive biologic drugs made from living organisms.

“Some of these [generic] drug applications have been sitting six, seven, eight years,” said Robert Pollock, a former acting deputy director of the FDA’s Office of Generic Drugs who now works for Lachman Consultants. By the time it’s approved, a generic can fall out of favor because patients taking the branded version reported new side effects, or because a more effective branded drug was approved.

For some generic manufacturers, there’s money to be made by waiting. Brand-name drugmakers will pay them to keep their products off the market as part of a tactic sometimes called “pay for delay.” The Federal Trade Commission that such deals cost consumers and taxpayers $3.5 billion a year.

The number of these potentially anti-competitive settlements decreased from fiscal 2014 to fiscal 2015, according to the latest FTC report. Still, Gottlieb said he hopes to crack down on such tactics. The first generic to take on a branded drug is granted 180 days of exclusivity before the second and third generics can be approved, giving those products a clear advantage.

“We don’t like that companies are able to just park [a generic for] 180 days while they cut a deal not to come to market,” Gottlieb said, adding that with help from Congress he hopes to force companies to forfeit exclusivity if they don’t launch on time.

In some cases, Gottlieb said, generic drugmakers wait until they’ve stockpiled a number of newly approved generics and have landed a contract with a purchaser before bringing their medicines to market.

These bundled contracts are secretive, so not much is known about them, but it means companies are filing generic applications just for the option of introducing generics, said health care economist Rena Conti, an associate professor at Boston University. They’ll wait until the most strategic time to launch, which could be after the competition shakes out, leaving them as “the last man standing,” Conti said. Then they can launch and hike the price.

To be sure, the FDA under Gottlieb’s leadership has taken steps to increase generic competition, from shaming brand-name drugmakers for blocking generics to publishing documents to help manufacturers win approval more easily. But approval doesn’t necessarily spur competition.

“We used to say it was all about getting in — once you got approval from the FDA, then you could go to market,” said Chip Davis, CEO of the Association for Accessible Medicines, the trade group for makers of generic drugs. The biggest challenges his members face is that there aren’t enough companies purchasing drugs, Davis said. Consolidation has led to three large buying groups covering 90 percent of the market, according to a Drug Channels Institute report. So, if you’re the fourth or fifth generic, you may have no one left to sell to.

Yet another barrier relates to how drug middlemen select the drugs they’ll cover under industry formularies, which determine what products insurance plans will cover. In some cases, middlemen known as “pharmacy benefit managers” have made it clear they don’t have room on their formularies for another generic. Or they do, but they give branded drugs preferential treatment with lower copays, hurting the generic’s market share.

Barriers to entry are lower under Gottlieb’s FDA than they’ve been in years past, Conti said, and regulations can help foster competition. But, she said, “they can only do so much.”

Methodology

To identify approved drugs that have not reached the market, KHN used the FDA’s Orange Book database — as of Jan. 2 — to identify drug applications approved in 2017 or 2018. We then searched the FDA’s online National Drug Code directory for billing codes for the drugs associated with each application as of the same date. To account for a possible lag, we supplemented this list with a more complete billing code directory that we obtained via a Freedom of Information Act request. It includes codes with expected future launch dates that don’t appear in the online version.

According to experts, a billing code doesn’t necessarily mean a drug is on the market. However, every drug on the market needs a list price for reimbursement. We provided a list of application numbers and billing codes to information technology firm , which then told us whether each one was active, inactive or had no list price as of Jan. 17.

If an application had at least one billing code with a list price attached, we counted it as on the market, even if other billing codes did not have list prices.

Sometimes, a single generic application can have multiple approval dates. If one of these approval dates occurred in the past two years, we included it in our analysis.

To determine whether a drug was a first generic, KHN used the of first generics as of Jan 2.

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The list price for Lantus, a long-acting insulin made by Sanofi that she injected once a day, had nearly quadrupled over a decade.

With Basaglar, “I’ve never had my insulin cost drop so significantly,” said Crook, a legal assistant in Dallas who has Type 1 diabetes.

But many people with diabetes can’t get the deal Crook got. In a practice that policy experts say smothers competition and keeps prices high, drug companies routinely make hidden pacts with middlemen that effectively block patients from getting cheaper generic medicines.

Such agreements “make it difficult for generics to compete or know what they’re competing against,” said Stacie Dusetzina, an associate professor of health policy at Vanderbilt University School of Medicine.

Here’s how it works: Makers of established brands give volume-based rebates to insurers or intermediaries called pharmacy benefit managers. In return, those middlemen often leave competing generics off the menu of drugs they cover, called a formulary, or they jack up the price for patients. The result is that many can’t get the cheaper drugs unless they shoulder a bigger copay or buy them with no help from insurance.

Brand-drug sellers “pay for position” on the formulary, said Michael Rea, CEO of Rx Savings Solutions, which helps health plans and employers manage pharma costs. “In this country, the most cost-effective drugs don’t necessarily mean anyone will have access to them … [Companies with] the deepest pockets win.”

This so-called rebate trap joins a long history of efforts by makers of brand-name drugs to stifle generics, including protecting drugs with multiple layers of dubious patents, “pay for delay” deals to keep generics off the market and withholding key ingredients needed for generic production, critics say.

Because rebate contracts are secret, nobody knows the full extent of the practice nor how much it costs the health system in unrealized savings.

“The deals between the drug companies and the PBM middle players are guarded as fiercely as Fort Knox,” said Robin Feldman, a law professor at the University of California, Hastings College of the Law, who studies pharma policy. “No one gets to see them.”

But new research is turning up plenty of evidence of rebates distorting the market, such as numerous instances of effective, less expensive generics missing from formularies or patients burdened with higher out-of-pocket costs for generic drugs.

In unpublished research, Dusetzina found that only 17 percent of Medicare plans for seniors covered Basaglar, the biosimilar launched by Eli Lilly two years ago. Nearly all of them covered brand-name Lantus, sold by Sanofi, as of early last year.

Her research suggests rebates from Sanofi might have induced insurers to leave lower-priced Basaglar off their formularies, Dusetzina said.

Sanofi works with insurers and pharmacy benefit managers “to negotiate access for patients to our portfolio of products including Lantus,” said company spokesman Jon Florio, declining to disclose specifics.

Medicare plans covering Lantus but not Basaglar include numerous offerings from Anthem, the biggest for-profit, Blue Cross and Blue Shield insurer.

“After evaluating the total cost impact on consumers, taxpayers and the government, we chose to cover the brand drug, Lantus, over the biosimilar, Basaglar,” said Anthem spokeswoman Lori McLaughlin.

Replacement versions of complex drugs often made from living cells are called biosimilars, not generics. Basaglar is considered clinically equivalent to Lantus but, because of a legal wrinkle, won’t technically be considered a biosimilar by regulators until 2020.

Merck scrapped its own biosimilar version of Lantus last fall, despite receiving tentative approval by the Food and Drug Administration, after “assessing … the market environment,” the company said.

Coverage of Lilly’s Basaglar has grown, and the drug is now included in formularies used by slightly more than half the patients who have health insurance, said Eli Lilly spokesman Greg Kueterman.

In another forthcoming study, this one examining 2018 Medicare coverage, researchers at Johns Hopkins Bloomberg School of Public Health found that “almost every plan has at least one branded drug on the formulary that’s in a better place than the generic,” said Gerard Anderson, the professor leading the research.

(A grant from the Laura and John Arnold Foundation, which helps support Kaiser Health News, financed the Hopkins research.)

In 2015, only 19 percent of generic drugs covered by Medicare were in the preferred formulary tiers with the lowest out-of-pocket costs, found by consultants Avalere. In 2011, on the other hand, 71 percent of generics had been in the best tier, which helps determine what patients are prescribed.

The Association for Accessible Medicines, the generic drug lobby, paid for that study. Rebate-influenced barriers to generics are “increasingly problematic,” said AAM CEO Chip Davis.

Disputes over formulary choices have hit the courts. in 2017, alleging that rebates induced insurers to prefer Remicade, an anti-inflammatory biologic, at the expense of Pfizer’s lower-priced product.

Critics of rebate traps include top Trump administration officials, under pressure from a president who has promised to lower drug prices.

Because quick rebates from brands are often more attractive to PBMs and insurers than long-term savings from generics, “this is a real challenge in terms of biosimilars coming to market and gaining market share” Scott Gottlieb, head of the FDA, said in an interview.

Such objections add to a crescendo of grievances against hidden rebates. Consumers and advocates have complained for years that rebates cut costs for PBMs and insurers but do little for patients, who are often left paying their out-of-pocket share based on soaring list prices.

Crook’s out-of-pocket costs for Lantus rose steadily over the years to about $900 annually, she said. After switching to Basaglar last year, her cost was less than $100.

Mark Gooley, who has Type 1 diabetes and lives in Florida, said he started ordering Lantus by mail from Canada after the U.S. list price rose fourfold in a little more than a decade.

“I have a very low opinion of companies like Sanofi,” he said. “They could afford to sell it to me when it came out” at a much lower price, he said. “Inflation has not been 400 percent.”

Because of rebates paid to PBMs, Sanofi’s net price for Lantus has actually decreased over the past five years despite the list-price increases, said company spokesman Florio. “Unfortunately, these savings are not consistently passed through to patients,” he said.

PBMs say they respond to the terms drug companies offer and negotiate to save billions for government, insurers and employers. “Simply put, the easiest way to lower costs would be for drug companies to lower their prices,” the Pharmaceutical Care Management Association, the PBM lobby, said in an emailed statement.

For its part, PhRMA, the branded-drug association, the rebate system and have PBMs paid for services provided.

Congress has done little to fix the rebate problem despite widespread criticism, but senior legislators in both chambers have pledged to address high drug prices this year.

Last summer, the Department of Health and Human Services proposed changing “safe harbor” protections that shield pharma rebates from being viewed as illegal kickbacks. But the proposal, under review at the Office of Management and Budget since July, has never been publicly aired, leaving the industry to wonder how substantial it is and if it will ever take effect.

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