Editor’s Note: This month, we offer commentary on the following topics: Orphan Drug Exclusion, Rare Disease, Drug Shortages, Medicare Drug Price Negotiation Program, and the 340B court ruling changes. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.k you through it.

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Table of Contents

• IRA Implication on Rare Disease Orphan Drugs & Timing of Indication with Orphan Drug Exclusion
• Economic Challenges Underpinning Drug Shortages in the US
• Navigating the 340B Saga: Recent Court Rulings and Legislative Changes

IRA Implications on Rare Disease Orphan Drugs & Timing of Indications with Orphan Drug Exclusion

One aspect of the Inflation Reduction Act (IRA) related to the Medicare Drug Price Negotiation Program (DPNP) is the Orphan Drug Exclusion, and the impact the exclusion criteria may have on the timing of drug launches and additional indications.

The IRA allows for an orphan drug with a single indication to be exempt from the DPNP. In a study performed by the American Journal of Managed Care, in which they analyzed 50 of the top-spend Part D drugs in 2020, researchers found that of the 30 eligible products for negotiation, six of them (20%) were initially approved for an orphan drug indication but later expanded to multiple indications, subsequently losing the drug’s exemption from negotiation. Some manufacturers may look to these examples and consider delaying their initial drug indication launch until a subsequent indication launch (one garnering the largest patient population) has been approved.

While price erosion for orphan drugs has historically been anticipated at the point of loss of exclusivity (“LOE”), high spend drugs effectively move up to the minimum period of seven (7) years post-approval for negotiation selection if no generic alternative comes to market. Similarly, for non-orphan, high-spend drugs, if it is determined that a planned, subsequent, indication would have the single largest patient population, the manufacturer could opt to delay the initial launch until the approval of the latter indication, which depending on the study needed, could add years to the launch.

With the incentive to delay orphan drug indications in order to protect negotiation exemptions and the looming clock of seven years until negotiations could kick in for high spend drugs we may see an unintended delay to market for drugs and expanded indications. Now more than ever, manufacturers will need to weigh the benefits and drawbacks of each anticipated indication, its timing, and profitability.

Clear understanding of the regulatory impacts on product launches could lead to optimization of a drug launch in the ever-shifting pharmaceutical landscape.

Sources:

• Unintended Consequences of the IRA

Economic Challenges Underpinning Drug Shortages in the US

Drug shortages in the US have continued to pose a persistent challenge to public health. In the first quarter of 2024 alone, there were 323 active shortages. While any category of drug is susceptible to such shortages, the most affected this year are injectable medications including cancer chemotherapy, which make up about 46% of the shortages and about 50% of the shortages are oral solid medications.

For Generic manufacturers, the economic pressures are surmounted because of low-priced drugs which do not produce enough margins thus adding to supply chain grievances and eventually leading the manufacturer to discontinue manufacturing of the drug altogether. According to a United States Pharmacopeia (USP) report, many of the discontinued products in 2023 were generic oral solid medications under $4 and generic injectable medications under $80.

Additional factors for drug shortages can be attributed to Government legislation, such as the AMP cap removal, new drug price negotiations and inflation rebates enacted through the IRA, despite coinciding legislation to alleviate inflation penalties as shortages occur.

To find a solution to this problem, the US Department of Health & Human Services (HHS) published policies and regulations to prevent drug shortages. Some of the suggestions by HHS include transparency between hospital health systems and manufacturers, boost of funding into the supply chain to make it more robust, and the need to incentivize manufacturers to maintain sufficient supplies. Additionally, a CMS release dated July 24, 2024 also addresses a possible relief for manufacturers to preserve their margins by submitting appropriate documentation to be considered for rebate reduction related to shortages caused by supply chain disruptions.

In summary, drug shortages impose a challenge to public health however the implications are far-reaching, resulting in an obstruction of supply chains and causing economic disturbances. In light of this, some of the recent policy solutions offer short-term and long-term risk mitigation strategies that seek to prevent some of these shortages.

Sources:

• U.S. Drug Shortages Reach Decade-High
• Drug Shortages Reach New Highs During Early 2024

Navigating the 340B Saga: Recent Court Rulings and Legislative Changes

As IntegriChain has recently documented in previous blog posts, the 340B “saga” has continued to play out nationwide. As a brief reminder, in 2020, certain drug manufacturers began implementing restrictions prohibiting 340B covered entities from contracting with third-party pharmacies and limiting the number and kinds of contract pharmacies to which they would ship 340B products. These restrictions came as a response to not only 340B sales climbing over $40B since 2012 and resulting in over twice that amount in lost value when compared to the WAC price, but also due to issues related to diversion and program compliance. This has led to a number of manufacturers implementing similar restrictions, as well as lawsuits at both the federal and state levels. The latest updates in the 340B restrictions comes from the state of Missouri.

In June 2024, the Missouri legislature passed a bill making it illegal for manufacturers to refuse to provide discounts to qualifying hospitals and health clinics and their contracted pharmacies. The legislation has three main components:

• Manufacturers must deliver medications to all contract pharmacies without restriction.
• Violations are considered unlawful merchandising practices.
• The state Board of Pharmacy will enforce penalties for violations. 

The Governor of Missouri announced on July 12, 2024, that the legislation will automatically be enacted without his signature by August 28, 2024. 

To date, 9 states have implemented their own state legislation barring covered entity & contract pharmacy restrictions by manufacturers.

IntegriChain continues to monitor any updates related to the 340B program. Please reach out to your IntegriChain Advisory lead or email us at consulting@integrichain.com if you would like to better understand what this means for your business and how the legislations at the state are operationalized for GP purposes. 

Sources:

• Billions at Stake as National Battle Over Drug Pricing Plays Out
• Missouri’s 340B Distribution Law Could Take Effect
• Missouri Governor Allows ‘Flawed’ Bill on Drug Discounts to Become Law

If you have any questions or would like to review your customer contracts, please reach out to Consulting@IntegriChain.com or contact your Advisory lead. 

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