1 big thing: Medicare Advantage debate rekindled by watchdog report

2. Praise for FDA's proposed menthol ban

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3. Watch out for a blockbuster obesity drug

4. Tackling the multiple sclerosis mystery

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5. Dog of the week

Good morning. Happy Friday. It's Caitlin Owens filling in for today.

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Axios Vitals: Medicare Advantage under fire

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1 big thing: Partisanship undermines pandemic playbook

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2. Children's health issues getting worse

3. "Family glitch" fix on the horizon

4. As masks lift, spirits rise

5. Catch up quick

Today's word count is 987, or a 4-minute read.

Plus, we may not be learning our pandemic lessons.

1 big thing: Americans' COVID culture war

2. America's giant medical debt

3. Out-of-pocket limits aren't silver bullets

4. Having a baby isn't cheap

5. How COVID can damage the brain

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6. Dog (news) of the week

🎧 Listen: The second episode of "How It Happened: Putin's Invasion" came out this morning and features Axios world editor David Lawler, politics managing editor Margaret Talev and climate and energy reporter Andrew Freedman breaking down the consequences of the war in Ukraine.

Today's word count is 1,039, or a 4-minute read.

1 big thing: America's other public health threat

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2. Another European warning

3. A potential case of telehealth gone wrong

4. Opioid overdose rate's racial reversal 

5. While you were weekending

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Today's word count is 790, or a 3-minute read.

1 big thing: Pharmacists push for enhanced role in post-pandemic life

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2. COVID cases continue to plummet

3. New COVID funding in legislative trouble

4. Border dispute may threaten plasma supply

Today's word count is 890, or a 3-minute read.

Democrats' drug pricing plan could end drugmakers' practice of taking out overlapping patents around one drug — a strategy which fends off competitors but that the industry argues incentivizes innovation after a drug is approved.

Why it matters: Patenting new uses, delivery methods or ingredients can often ensure monopoly prices for years after a drug's market exclusivity expires. But the Democrats' proposal would allow Medicare to negotiate much lower prices for those drugs after a set period of time, slashing drugmakers' revenues years before competition enters the market.

The big picture: Patient advocates, health policy experts and politicians from both parties have for years decried "thickets" of patents they say let the pharmaceutical industry game the system, flout antitrust laws and keep prices higher for longer.

Critics zero in on instances where companies patent minor components of a drug, then reformulate those components and take out more patents, to deter potential competitors from making a cheaper copycat version.

AbbVie is the poster child for using patent litigation to delay generic competition, having kept biosimilars of its blockbuster Humira off the U.S. market for years after they became available in Europe. 

The other side: The drug industry says cutting the benefits of prolonged market protections is a huge problem, because manufacturers won't be incentivized to find new uses for drugs that have already come to market. 

"If this bill becomes law, it will change a lot how companies think about investment and ongoing clinical trials to identify new indications for approved medicines," said Jocelyn Ulrich, deputy vice president for policy, research and membership at the Pharmaceutical Research and Manufacturers of America. "Any of those more complex diseases — immunology, orphan diseases and oncology in particular — will be significantly impacted by these shorter time frames.” 

State of play: Democrats' party-line reconciliation bill would indirectly address patent stacking.

The bill gives Medicare the authority to negotiate prices directly with drug manufacturers and creates ceilings for what those prices can be. 

Only drugs without competition that have been on the market for a certain amount of time — nine years for small molecule drugs and 13 for biologics — can be subject to negotiation.

Current law gives small molecule drugs five years of exclusivity after approval, and biologic products 12 years. 

Yes, but: In reality, exclusivity periods are significantly longer. 

Small molecule drugs usually have, on average, around 14 years of market protections, according to one study — which often results in monopoly pricing. Another study found that exclusivity periods are even longer for biologics. (Drugs do sometimes see competition from other branded products before generics come to market.) 

Research published Monday in Health Affairs found that small molecule drugs approved in 2019 and 2020 had patent protections that extended for a median of 10.3 years after approval. The authors note that these are likely only the drugs' first batch of patents.

What they're saying: “That patent litigation sort of pushes out generic entry is the norm. It’s the rule rather than the exception," said Aaron Kesselheim, a professor at Harvard Medical School and an author of the Health Affairs study.

"The negotiation process would help ensure there are slightly more reasonable prices and reduce investors’ incentives to invest in those strategies," he added.

The intrigue: Key wording of the Democrats' bill eliminates what would have been a major opening for drug companies. 

In order for a drug to be exempt from Medicare negotiations, the competitor product must be both FDA-approved and marketed — meaning that competition thwarted by patent thickets doesn't count.

That doesn't negate patent protections. But it does remove the incentive to take out new patents, because the drug will be eligible for Medicare negotiations anyhow and see a reduced price.

Under the current system, that drug — think Humira — can retain monopoly pricing for years after its statutory exclusivity period has expired, even if generic products have been approved.

The bottom line: If Democrats pass this version of Medicare negotiations, it will effectively cap how long drugmakers can expect monopoly-generated revenues from new drugs.

Whether that's a good thing or a bad thing depends on who you ask.

“You have the Humiras of the world which are able to use these extensive patent portfolios to delay competition for 20 years or more, and that’s not the social bargain as we think of it," said Rachel Sachs, a Washington University law professor.

Democrats' backdoor crackdown on pharma "gaming"

The drug industry warns the bill will stifle innovation post-approval.

Illustration of a pile of money under a cracked glass dome with a gavel hovering overhead. 

Drug prices

Health care costs

Democrats&#x27; drug pricing plan could end drugmakers&#x27; practice of taking out overlapping patents around one drug — a strategy which fends off competitors but that the industry argues incentivizes innovation after a drug is approved.Why it matters: Patenting new uses, delivery methods or ingredients can often ensure monopoly prices for years after a drug&#x27;s market exclusivity expires. But the Democrats&#x27; proposal would allow Medicare to negotiate much lower prices for those drugs after a set period of time, slashing drugmakers&#x27; revenues years before competition enters the market.

The U.S. faces a range of health care flashpoints — unaffordable drugs, opioids, vaping — as we debate whether to adopt universal care. For now, the Affordable Care Act is the law of the land, but Republicans want to issue it a final death blow.

Health

Generic drugmakers are warning that Democrats' plan to let Medicare negotiate the prices of drugs may undercut competition from lower-cost copycats, inject massive uncertainty into their market and forfeit potential long-term savings.

Why it matters: Experts say the concern about downstream effects on generics is valid and point to larger questions about whether the overriding focus on negotiating prices skews drug development over time. 

State of play: The Senate on Sunday passed a $740 billion tax, climate and health care package, making good on longstanding promises to lower the cost of prescription drugs. 

The bill gives Medicare the ability to step in and negotiate the price of older drugs that still don't have any competition. The bill sets price ceilings for those drugs.

That ends the status quo, under which drugmakers can enjoy monopoly prices for far longer than the exclusivity periods granted under the law — either while they wait for competition or while they block it through patent litigation. 

Yes, but: The generic industry is warning that rather than removing brand manufacturer’s incentive to stall competition, the bill will make it harder for competitors to gain entry and ultimately lead to higher prices over time.

Robust generic competition often lowers drug prices to a fraction of the brand drug's, driving the vast majority of demand to the cheaper alternative. 

"The bottom line is that it's competition that works," said Dan Leonard, CEO of the Association for Accessible Medicines. "At the end of the day there will be less competition if this legislation goes into effect."

And for brand drugs that would otherwise be facing this kind of revenue loss, the Medicare-set rate at a higher market share could actually be a better deal. 

"We think this potentially sets up a series of perpetual monopolies for the brand products, where sure, they're going to make less than they would under price controls, but they’re going to make a whole lot more than they would from competition," said Craig Burton, executive director of the Biosimilars Council.

The big picture: Generic drugmakers may  be less willing to enter the market, the industry argues, given the enhanced uncertainty about how profitable it is for them. Some experts warn this isn't just industry fear-mongering. 

Once multiple products are on the market, generics are generally sold at low margins. The most money to be made is by the first generic drug to come to market, which is granted 180 days of its own market exclusivity.

That drug only has to offer a discount that's significant enough to attract a large portion of the market away from the branded drug. That discount is much less — and thus more financially lucrative ­— than the discounts seen once multiple generics are on the market. 

But if the first generic is competing against a drug priced at the Medicare-negotiated rate, the math is thrown off. And most brand drugs will likely be eligible for negotiations before their patent protections end, at least according to current averages.

"The concern is if this makes it so the first generic is less certain about the benefits of challenging patents," said Ben Ippolito, a senior fellow at the American Enterprise Institute.

The other side: Even if the legislation weighs against the first generic entrant, the product can still be profitable, said Washington University law professor Rachel Sachs. 

And if drug companies could do a better job keeping generics off of the market, they’d have more incentive to be doing so under current law than under the new one.

"I would be very surprised if the government was negotiating for a 90% discount on a small molecule drug in its tenth year on the market. That would be unexpected," Sachs added. "Given that the expected results of this negotiation are smaller than that, I have a hard time understanding why generic competition would necessarily be impeded."

Be smart: This calculus could vary for different classes of drugs, as some will be much more dependent on the Medicare market than others. 

The intrigue: The biologics market for drugs made of living organisms is a much bigger wildcard, because we’re still gathering early-stage data on what happens when biosimilars come to market. 

The generic industry isn't predicting a good outcome for biosimilars.

"We're just getting going, and this legislation, we believe, could throw ice water on this nascent market," Leonard said.

Why generic drugmakers oppose Dems' drug pricing bill

They say it will lead to less competition over time.

Prescription drugs

Generic drugmakers are warning that Democrats&#x27; plan to let Medicare negotiate the prices of drugs may undercut competition from lower-cost copycats, inject massive uncertainty into their market and forfeit potential long-term savings.Why it matters: Experts say the concern about downstream effects on generics is valid and point to larger questions about whether the overriding focus on negotiating prices skews drug development over time.

Democrats have been campaigning for 30 years on promises they'd let Medicare directly negotiate the cost of prescription drugs — and after all that time, they might finally be about to achieve it.

Why it matters: The Senate's reconciliation bill would only open up negotiations for a small number of drugs, but even that is a threshold Democrats have never before been able to cross. And it opens the door to more aggressive policies in the future.

Flashback: Then-president Bill Clinton proposed direct negotiations between drug companies and the federal government in 1993. 

Clinton, Al Gore, Barack Obama, Hillary Clinton, Joe Biden — and even Donald Trump — each embraced the idea while in office or as candidates, only to be thwarted by arguments it would squelch new drug development or limit seniors’ choices.

Federal law has prohibited Medicare from directly negotiating how much it will pay for drugs since 2003.

“Finally eliminating the prohibition and empowering the secretary to negotiate is a historic precedent, and is something to protect and strengthen over time,” said Chris Jennings, a health policy advisor to Presidents Clinton and Obama.

Yes, but: The version of price negotiations contained in the Senate's bill is much narrower than most of those ambitious campaign proposals.

“A baby step is the way I would describe this,” said Zeke Emanuel, a health policy advisor to former President Obama and chair of the department of medical ethics and health policy at the University of Pennsylvania. 

“We’re talking about 10 drugs and moving up at the end of the decade to a whopping 20 drugs. And unless they can get insulin included, how many people are going to be affected is, I think, a big question," he said.

If negotiations make it into law now, however, future administrations and Congress could expand them and make more drugs subject to negotiations. 

And despite the limitations built into the measure, the drug industry is still warning that it will have a disastrous impact.

The other side: The drug industry and its allies have long argued that these sorts of policies — which they say are more like price controls than price negotiations — would weaken the incentives for smaller biotech firms to the take scientific risks required to develop new drugs. 

The Congressional Budget Office estimated that under Democrats’ plan, the number of drugs introduced to the U.S. market would fall by about 2 over the next decade, and by about 5 over the subsequent decade.

But the industry’s arguments aren't resonating as much now, with prices still on the rise and the public gripped by broader inflationary fears. Polls show large majorities support giving the government the power to negotiate prices.

“In a moment where not just health care costs, but inflation, is the issue of the day, this policy resonates like never before.” Jennings said.

The bottom line: “We only pass things in a hurry when there’s a war, major economic upheaval, a once-in-a-century pandemic,” Emanuel said. “There’s only so long that when 90% of voters, Democrat and Republican, say we want price negotiation, that Congress can stand in the way … this shows you that at some point, that ends.”

Biden poised to deliver on decades-long Democratic promise

Medicare may soon be able to negotiate the price of at least a few drugs.

Photo illustration of President Biden holding up a prescription pill bottle

Photo illustration: Sarah Grillo/Axios. Photo: Drew Angerer/Getty Images

Drug price increases

Democrats' drug pricing bill could lead to higher launch prices

The largest contributor would be a cap on how much prices could increase every year, CBO said.

Illustration of the score line on a pill in the shape of an upward arrow instead of straight across.

Democrats&#x27; party-line drug pricing legislation will likely cause manufacturers to raise the launch prices of new drugs, the <a class="gtmContentClick" data-vars-link-text="Congressional Budget Office projected" data-vars-click-url="https://www.cbo.gov/system/files/2022-08/58355-Prescription-Drug.pdf" data-vars-content-id="c6ee9cda-694e-4e44-b35e-61ac1af9d33e" data-vars-headline="Democrats&#x27; drug pricing bill could lead to higher launch prices" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.cbo.gov/system/files/2022-08/58355-Prescription-Drug.pdf" target="_blank">Congressional Budget Office projected</a> yesterday. The intrigue: The primary driver of the increases would be a cap preventing prices for existing drugs from rising more than inflation. That provision has received bipartisan support in the past.

Democrats are on the cusp of making the most significant changes to Medicare in more than a decade, which would bring lower drug prices and out-of-pocket costs for some of the program's 64 million enrollees.

Why it matters: New limits on how much patients will have to pay for medicines annually could offer a lifeline to seniors with conditions like cancer or multiple sclerosis who face thousands of dollars in drug bills, and lower overall prices would provide relief to even more enrollees.

The big picture: Nearly 1.5 million would benefit from a $2,000 cap on out-of-pocket spending in Medicare's Part D drug benefit, and 1.3 million from the elimination of a requirement they pay 5% of total drug costs if they exceed a catastrophic coverage threshold, the Kaiser Family Foundation estimates, based on 2020 data.

Yes, but: While the bill is projected to save taxpayers hundreds of billions of dollars over the next decade, opponents of the bill argue these savings won't be felt by patients.

The legislation also wouldn't touch prices in the commercial insurance market, where most Americans get coverage through work. 

It would only open up negotiations for a small number of drugs that are years past their FDA approval or licensure date, but estimates project that some of the drugs that cost the program the most money will be eligible for negotiations.

At least some of the policies could provide a tonic to seniors on fixed incomes who've been rattled by soaring prices and economic anxiety.

Beginning this fall, it would penalize drug companies who raise prices faster than inflation, and starting next year, would eliminate out-of-pocket costs for adult vaccines covered under Medicare's Part D drug benefit.

In 2024, the legislation would strike the 5% coinsurance requirement for catastrophic coverage while expanding eligibility for low-income subsidies. 

By 2025, it would cap out-of-pocket spending in Part D to $2,000.

And beginning in 2026, it would trigger direct government negotiations with manufacturers, making 10 yet-to-be-determined high-cost drugs subject to spending controls. That number would rise to 15 in 2027 and 20 in 2029.

From 2024 to 2029, the Democrats' plan would limit premium growth in the Part D program to 6%.

It also would delay the Trump administration's regulations on drug rebates that address payments drugmakers offer to pharmacy benefit managers to get products on their formularies. 

The other side: The pharmaceutical industry argues such negotiations would quash innovation and cut off venture capital funding for promising cures. 

The Congressional Budget Office estimates that 15 out of 1,300 drugs, or 1%, would not come to market over the next 30 years as a result of the drug provisions in the bill.

The bottom line: The Democrats' plan caps years of futile efforts to change the drug pricing equation and, despite its limitations, lets Medicare for the first time use its purchasing power.

Dems on the brink of sweeping Medicare changes

Democrats are on the cusp of making the most significant changes to Medicare in more than a decade. Here's what that means.

Drug coverage

Democrats are on the cusp of making the most significant changes to Medicare in more than a decade, which would bring lower drug prices and out-of-pocket costs for some of the program&#x27;s 64 million enrollees.Why it matters: New limits on how much patients will have to pay for medicines annually could offer a lifeline to seniors with conditions like cancer or multiple sclerosis who face thousands of dollars in drug bills, and lower overall prices would provide relief to even more enrollees.

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Stories

Dems on the brink of sweeping Medicare changes

Why generic drugmakers oppose Dems' drug pricing bill

Democrats' drug pricing bill could lead to higher launch prices

Democrats' backdoor crackdown on pharma "gaming"

Biden poised to deliver on decades-long Democratic promise

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Axios Vitals: Medicare Advantage under fire

Axios Vitals: Children's health crises

Axios Vitals: Another looming threat

Axios Vitals: Massive medical debt

Axios Vitals: COVID response imperiled