Last Thursday, the House Committee on Government Oversight and Reform Committee heard testimony from 2 former members of Purdue Pharma’s board, David and Kathe Sackler and Craig Landau, the Chief Executive Officer at Purdue since 2017. The significance of the hearing is far greater than Purdue’s admitted misdeeds: it’s a reflection of the big challenge facing U.S. drug manufacturers.
CONTEXT: PURDUE PHARMA
Purdue is best known for marketing the OxyContin painkiller in 1996 earning $30 billion for the company’s shareholders and $10.8 billion for the Sackler family. In 2007, the company paid a $634 million settlement with the Department of Justice for misleading the public about the addictive potential of its drug and now faces more than 2000 lawsuits for its role in opioid overdose deaths now averaging 130/day in the U.S.
The company has filed for bankruptcy, pleading guilty to civil charges while petitioning federal authorities for reorganization as a public benefit company. As part of the overall $10 billion settlement, the Sackler family also offered a $3 billion settlement in exchange for family immunity for continued criminal and civil proceedings.
The tone throughout House hearing Thursday was intense. The 3 witnesses expressed regret for harms caused by misuse of the drug but denied any culpability, blaming management decisions that were responsible.
In response, the House Committee members did not hold back: Rep. James Comer (R-Ky) said “We don’t agree on a lot on this committee in a bipartisan way, but I think our opinion of Purdue Pharma and the actions of your family, we all agree are sickening.” Rep. Kelly Armstrong, R-N.D. described the Sacklers’ claim that they didn’t understand the danger posed by their company’s products “defies believability and is absolutely abhorrent and appalling to the victims of opioid addiction.” And Jim Cooper (D-Tenn.) added “Watching you testify makes my blood boil. I’m not sure I’m aware of any family in America that’s more evil than yours.”
THE BIG PHARMA CHALLENGE
The Purdue testimony came at a delicate time for Big Pharma. Amidst hope for Warp Speed’s success in bringing a Covid-19 vaccine to market, with Moderna shipping its first 6 million doses this week after Pfizer’s release of 2.9 million doses last week, two COVID-19-related issues have surfaced that are problematic Big Pharma:
Almost one in three Americans say they do not intend to be vaccinated fearing safety concerns. Per Kaiser Family Foundation, 29% do not intend to be vaccinated. Per the University of Michigan, 42% of seniors are concerned about vaccine safety and unlikely. Issues around mixed messaging, fears about side effects and lingering distrust of drug companies in certain populations have prompted many to take a wait and see attitude. 70% is the threshold targeted for herd immunity, so any erosion of confidence in the safety and efficacy of any of the vaccines is an issue.
The attention to Purdue draws attention to Big Pharma business practices including those of vaccine manufacturers. AstraZeneca (AZ) has stated its intent to not to make a profit from its vaccine during the pandemic promising to sell it at $3 to US$4 per dose– one-fifth to one-tenth the cost of the other leading vaccines from Pfizer, Moderna, Johnson & Johnson and others. Only 6 of 13 major vaccine manufacturers have joined international efforts to get vaccines to low- and middle-income countries: As of mid-November, high-income countries reserved 51% of nearly 7.5 billion doses of different Covid-19 vaccines, although these countries comprise just 14% of the world’s population. In the U.S., initial data from last week’s vaccinations in hotspots showed uneven access in poor communities. The Trump administration implemented 3 executive orders targeting drug price transparency. The incoming Biden team is expected to do more: for example, this month, HHS nominee Xavier Becerra signed on to a letter to Big Pharma as California AG calling on drug companies to stand-down from their efforts to cut/eliminate 340B drug discounts for safety net providers.
But beyond the pandemic and vaccines, the biggest issue for pharma is public trust. The majority of U.S. Americans think the drugs they’re prescribed are safe and effective, but they don’t trust the companies that make them. Consider:
In 2019, Kaiser Family Foundation found 71% % of U.S. adults trust drug companies to deliver safe and effective drugs, but only 47% trust them to deliver timely information about a drug’s safety and 53% say manufacturers price drug fairly.
In Gallup’s August 2020 polling about the public’s confidence in its institutions, the pharmaceutical industry was the least trusted of 25 tested and its overall negative score second only to the federal government.
Big Pharma is Big Business. It’s a $400 billion industry in the U.S.—10% of total health spending. Almost half (48.4%) of the U.S. population used a prescription drug in the last 30 days; 24% used 3 or more. The U.S. market represents 5% of the world’s population but 30% of the global market for prescription medicines. Thus, prescription drug spending increased 5.4% last year—higher than overall spending growth of 4.6% with no slowdown in sight. That’s why Big Pharma is highly protective of its financial interests in the U.S. and why the 34 companies that are members of the Pharmaceutical Research and Manufacturers of America (PhRMA) wield enormous influence in the U.S. on prescribers and elected officials.
The news about Purdue Pharma and eventual resolution of claims about its complicity in opioid addiction and deaths will continue for years. The roles played and strategies implemented by its advisors, Board and management will face scrutiny: already, McKinsey and Company has issued an apology (December 5) and others will follow.
But the bigger story is the role of Big Pharma in the U.S. health system—its business practices and the regulatory environment that enables its significance.
Other developed systems of the world use comparative effectiveness research to determine which meds work best for specified conditions and populations, and their governments negotiate prices directly with manufacturers to make them available. By contrast, U.S. policy relies on drug manufacturers to develop and price its products, having received approvals from the FDA to enter markets through contracts with state Medicaid formularies, Medicare Part B and D, Medicare Advantage Plans, private group and individual insurance carriers, retail and online pharmacies, pharmacy benefits management companies, distributors, and others. It’s complicated and expensive.
Purdue Pharma has admitted wrongdoing. The courts will decide its fate. But for Big Pharma, the court of public opinion will be a greater concern in tandem with regulator investigation and legislative actions.
P.S. Congress will vote on a Relief Package today that includes $600 direct payments to individuals making up to $75,000 per year and couples making $150,000 per year — with payments phased out for higher incomes — with $600 additional payments per dependent child; unemployment insurance at $300 per week through March 14; pandemic benefits for “gig” workers; extended period for state-paid jobless benefits to 50 weeks; consumer protections from surprise medical bills; additional Payroll Protection Program funding and $25 billion for federal rental assistance program to help people who have fallen behind on their rent and may face eviction.
Meryl Kornfield “Members of family that led maker of OxyContin deny responsibility for opioid crisis in congressional hearing”; December 18, 2020; Washington Post
“Sacklers Deny Wrongdoing During House Panel Over Purdue Pharma Oxycontin Sale”; December 17, 2020; NPR
“What do people really think of generic medicines? A systematic review and critical appraisal of literature on stakeholder perceptions of generic drugs”; July 2015; BMC Medicine
“McKinsey Apologizes For Helping Purdue Pharma ‘Turbocharge’ Opioid Sales”; December 9, 2020; NPR
“McKinsey statement on its past work with Purdue Pharma”; December 5, 2020; McKinsey & Company
University of Michigan National Poll on Healthy Aging
Emma Vickers “The Sacklers Shifted $10.8 Billion of their Opioid Fortune”; August 26, 2020; Bloomberg
Pharmaceutical Research and Manufacturers of America
Confidence in Institutions; Gallup
Tichy et al “National trends in prescription drug expenditures and projections for 2020”; August 1, 2020; American Journal of Health-System Pharmacy
Study: 13% of Households Face Hunger Challenge, Triple Pre-Pandemic Rate
27 million adults — 13% of all adults in the country — reported that their household sometimes or often didn’t have enough to eat in the last seven days vs. 3.4% of adults who reported that their household had “not enough to eat” at some point over the full 12 months of 2019.
Adults in households with children were likelier to report that the household didn’t get enough to eat: 17%, vs. 10% for households without children. And 11 to 17% of adults with children reported that their children sometimes or often didn’t eat enough in the last seven days because they couldn’t afford it, well above the pre-pandemic figure.
“Tracking the COVID-19 Recession’s Effects on Food, Housing, and Employment Hardships”; December 18, 2020; Center on Budget and Policy Priorities
KFF: 71% Say They’ll Get Vaccination, Public Concern Peaks
Per Kaiser Family Foundation’s December tracking poll:
71% polled between Nov. 30 and Dec. 8 said they would definitely or probably get a vaccine–up from 63% in September. Vaccine hesitancy is highest among Republicans (42%), rural residents (35%) and Black adults (35%).
89% support allowing the federal government to negotiate with drug companies to get a lower price on medications.
Majorities favor guaranteeing health insurance coverage to lower-income people whose states have not expanded their Medicaid program (76%), establishing a public option (71%), expanding government financial help for those who buy their own insurance on the marketplace (66%) and lowering the Medicare eligibility age to 60 (65%).
“KFF COVID-19 Vaccine Monitor: December 2020”; December 15, 2020; Kaiser Family Foundation
“KFF Health Tracking Poll – December 2020: COVID-19 and Biden’s Health Care Agenda”; December 18, 2020; Kaiser Family Foundation
VCU Analysis: COVID-19 3rd Leading Cause of Death
VCU researchers analyzed data from the Centers for Disease Control and Prevention during the period of March through October 20184 (the most recent year for which detailed cause-of-death data are available) with COVID-19 mortality rates during March through October 2020: “By October 2020 COVID-19 had become the third leading cause of death for persons aged 45 through 84 years and the second leading cause of death for those aged 85 years or older. Adults 45 years or older were more likely to die from COVID-19 during those months than from chronic lower respiratory disease, transport accidents (e.g., motor vehicle fatalities), drug overdoses, suicide, or homicide. In contrast, for individuals younger than age 45 years, other causes of death, such as drug overdoses, suicide, transport accidents, cancer, and homicide exceeded those from COVID-19.”
Woolf et al “COVID-19 as the Leading Cause of Death in the United States”; December 17, 2020; JAMA Network
CMS: Health Spending up 4.6% in 2019
According to the Center for Medicare and Medicaid Services latest report:
US health care spending increased 4.6% to $3.8 trillion in 2019 vs. 4.7%in 2018 and 4.5% yearly average since 2016.
The share of the economy devoted to health care spending was 17.7% in 2019 compared with 17.6% in 2018.
In 2019, spending increases for hospital care (+6.2% in 2019), physician and clinical services (+4.6%), and retail purchases of prescription drugs (+3.8%) accounted for 61% of total national health spending increases.
Price growth accounted for 1.1% of the 2019 healthcare spending growth, down from 2.3% in 2018.
Medicare Advantage enrollment (25.4 million) spending growth was double that of private insurance in 2019. MA plans accounted for 39% of all Medicare spending in 2019, a 14.5% year-over-year uptick. Fee-for-service spending accounted for 61% of total Medicare spending in 2019, down from 67% in 2016. Per-capita Medicare Advantage spending grew by 6.3% in 2019, compared with 2.4% on the fee-for-service side.
CMS Office of the Actuary “National Health Care Spending In 2019: Steady Growth For The Fourth Consecutive Year”; December 16, 2020; Health Affairs
Altarum: Health Spending 18.1% of GDP, Prices up 2% Led by Hospitals, Nursing Homes
Per Altarum’s latest Health Sector Economic Indicators report:
Spending: At $3.91 trillion (seasonally adjusted annual rate), national health spending in October 2020 was 0.8% higher than in October 2019. The October 2020 nominal gross domestic product (GDP) was 0.7% lower than in October 2019, and the resulting health-spending share of GDP was 18.1%, and 17.6% of potential GDP (PGDP). Spending in October 2020, year over year, declined in dental services, at -14.1% and increased in home health care by 18.2%
Prices: After reaching a peak year over year rate of 2.8% in April, overall US health care price growth has slowed in the second half of 2020, settling at 2.0% growth in November 2020: Hospital and nursing home care prices +3.3% and +3.8% growth, respectively. Physician services price +1.2% and prescription drug prices -0.4%.
“December 2020 Health Sector Economic Indicators”; December 15, 2020; Altarum
8% Uninsured, Highly Variable by Ethnicity
26.1 million people (8% of the population) lacked insurance last year vs. 14% without coverage in 1990.
68% of Americans are covered under a private plan, and about 34% are covered by government health insurance like Medicaid or Medicare.
In 2019, 16.7% of the US Hispanic population was uninsured vs. 9.6% for Blacks, 6.2% for Asian populations and 5.2% for whites.
“The State of Healthcare at the End of 2020”; December 10, 2020; USA Facts
Study: Genetics Play Minor Role in Pediatric Weight Problems
1198 children with overweight or obesity were genotyped by the German research team from January 6, 2006, to October 19, 2013: findings: 5 of 56 obesity single-nucleotide variants (SNVs) were statistically significantly associated with a reduction of body weight or body mass index. “Genes appear to play a minor role in weight reduction by lifestyle in children with overweight or obesity. The findings suggest that environmental, social, and behavioral factors are more important to consider in obesity treatment strategies.”
Heitkamp et al “Obesity Genes and Weight Loss During Lifestyle Intervention in Children With Obesity”; December 14, 2020; JAMA Pediatrics
Study: US Clinicians Struggle with EHR Use More than Peers in Other Developed Systems
This cross-sectional study analyzed the deidentified metadata of 371 ambulatory care health systems in the US, Canada, Northern Europe, Western Europe, the Middle East, and Oceania from January 1, 2019, to August 31, 2019. All used the EHR software from Epic Systems. Findings:
US clinicians spent more time per day actively using the EHR compared with non-US clinicians (mean time, 90.2 minutes vs 59.1 minutes).
US clinicians spent significantly more time performing 4 clinical activities: notes (40.7 minutes vs 30.7 minutes) orders (19.5 minutes vs 8.75 minutes), in-basket messages (12.5 minutes vs 4.80 minutes), and clinical review (17.6 minutes vs 14.8 minutes).
U.S. clinicians composed more automated note text than their non-US counterparts (77.5% vs 60.8% of note text) and received statistically significantly more messages per day (33.8 vs 12.8).
Holmgren et al “Assessment of Electronic Health Record Use Between US and Non-US Health Systems”; December 14, 2020; JAMA Intern Med
Census: 8% Population Growth Since 2010
Population growth: The U.S. population has grown about 8% over the past decade from 308.35 million in 2010 to 332.6 million people—the slowest growth rate since the 1930’s.
Age: The median age in the country is 38.5 vs. 37.2 in 2010. The number of Americans who are 65 or older rose 37% in that period, reaching 54.3 million; the number 85-plus increased 10% tp 6.1 million.
Birth rate: The general fertility rate last year fell to its lowest level since the government began tracking the figure in 1909.
“Census Estimates U.S. Population Grew 8% in Last Decade, Slowest Since the 1930s”; U.S. Census Bureau, Dec. 15, 2020; Wall Street Journal
Value-based Care Not Focus of Strategy for Most Providers
Findings from the NEJM Catalyst Insights Council survey of 528 health system leaders about value-based payment and care:
Four out of five health care provider organizations are suffering ongoing losses as a result of the Covid-19 pandemic.
75% do not believe the pandemic will be the tipping point toward value-based care.
Council members say their organizations haven’t budged in the balance of revenue they get from fee-for-service and value-based care reimbursements: a 75%–25% split in 2018 to 74%–26% in 2020.
Thomas Freeley “Covid-19 Hasn’t Been a Tipping Point for Value-Based Care, but It Should Be” Insights Report: January 2021; New England Journal of Medicine
MACPAC: Medicaid Enrollment up 5.6% Last Year
Wednesday, the Medicaid and CHIP Payment and Access Commission (MACPAC) reported that enrollment in Medicaid and the Children’s Health Insurance Program increased by 5.6% from July 2019 to July 2020. All states saw their Medicaid rolls grow except Montana and the District of Columbia, ranging from 0.2% in South Carolina to 30.2% in Idaho.
According to MACPAC, Medicaid accounted for 9.2% of the federal budget in 2019. Medicaid and MACPAC accounted for 16.9% of national health expenditures in 2020. More than 40% of people enrolled in Medicaid and CHIP in 2018 had family incomes less than 100% of the federal poverty. Enrollees were more likely to have fair or poor health than people with private coverage or no insurance. In addition, drug rebates lowered gross drug spending by more than half in 2019. Medicaid managed care plans made up over 63% of Medicaid’s gross spending on drugs.