Senator Warren (D-MA) introduced a bill that would authorize the federal government to directly manufacture or contract for some high cost generic drugs including insulin. I don’t have a well formed opinion about this bill yet as I am still trying to think through the dynamic effects. But there is one very good point that Alexander Gaffney is making
I know i'm late to the party on this Warren drug manufacturing bill. Plenty of other comments aside for now — I seriously doubt the government could even *hire* a staff for this office within a year, let alone start manufacturing. https://t.co/VGeCRUNBu5
— Alexander Gaffney (@AlecGaffney) December 19, 2018
The bill has an aggressive schedule for success:
MANUFACTURING LEVELS.—Not later than 1 year after the date of enactment of this section, the Office shall manufacture, or enter into contracts with entities for the manufacture, of not less than 15 applicable drugs. Not later than 3 years after such date of enactment, the Office shall manufacture, or enter into contracts with entities for the manufacture, of not less than 25 applicable drugs.
This is a new program. The federal government does not do new programs quickly. For success to be achieved, especially first year success, the agency would need to find at least an interim director, recruit at least a core staff including several exceedingly hard to find and hire scientific, manufacturing and legal advisors, lease office space, find the coffee pot, get complex contracts negotiated and reviewed and then get things started. This is a complex undertaking even if we assume there are no significant legal challenges from any of the entities that are probably going to be losing money from this policy.
As we think about healthcare bills and changes, we need to think about implementation timelines. If there is anything other than shifting money flows, the federal government needs time especially if program success counts on private sector actors active and enthusiastic participation. They need to know what the rules are, they need to prepare their bids, they need to rework their internal processes.
This applies for any of the pharmacy bills. It will apply to ACA 3.1 or Medicare for All or Medicare Buy-in. I was recently having a beer with a fellow health policy nerd, and we were stuck debating whether or not the earliest major implementation of anything that re-opens Title 1 of the ACA (the coverage requirement section for guaranteed issue and community rating) would be a twenty four or a thirty six month slog. I’m leaning towards thirty six months. My friend thought that depending on the definition of “major”, twenty four months would be a plausible time frame. Medicare for X packages would need several years to ripen after a Presidential signature before implementation could proceed well for large parts of the population.
Implementation timelines are not sexy. They are not fun. The project managers who have to think about these things scare me. But these timelines partially define what is plausibly promised.
Cheryl Rofer
TIMELINES ARE ESSENTIAL! Thank you for pointing this out.
Taking a step back from that, we keep kludging these fixes onto health care. Antitrust laws might well be used to beat back the inhumane desire of the pharma bros to take money from the suffering just because they can. Or we might remove the law that says that the government can’t use Medicare (Medicaid) power to negotiate with the drug companies.
As you point out, this would take time. So would an antitrust suit, although there probably would be some instant effects. The fastest would be to remove that no-negotiate horror.
JPL
What about a public/private partnership, that would provide some price protection?
Steve in the ATL
Whew *fans slef* is it getting warm in here or is it just me?
OzarkHillbilly
Oh well, nothing to it. trump will hire only the BEST PEOPLE to take these positions. People like Flynn, Manafort, and Papadapoulous.
Cheryl Rofer
The probability is that the manufacture would be contracted out to private parties, so there still would be a motivation to exploit the fact that some people will die without these medications. The contractors’ unconscionable profit would come from the taxpayer, rather than the vulnerable.
p.a.
The bill could have just used “with all deliberate speed”- it’a a classic. (And STILL not achieved.)
David Anderson
@p.a.: If this bill was being written for implementation, that is a probable course of action. Realistically, this bill is being introduced to be workshopped for improvements, build stakeholders and serve as campaign ad fodder in nineteen months.
Jeffro
Petri SO on point today as per her usual: NO, Not The Trumpov Foundation!!!
LOLOL
Larch
I wonder if Warren intends it to be a negotiation ploy — “Oh, you don’t like that? What if we extend the timeline? Well, we could always just allow M/M to negotiate….” In the unlikely event she gets agreement on the whole thing, fine, but there are multiple fallback positions, and overall it makes the current debate (M/M negotiating) look more palatable by comparison.
It’s a much more effective strategy than starting from the point you want to win & giving up ground from there.
JPL
@Cheryl Rofer: You have to regulate greed and the republicans won’t.
Ruckus
I believe I understand negotiation, at least rudimentarily. But asking for the moon expecting green cheese doesn’t seem to be a realistic tactic.
Wanting to implement something as hard as large scale drug mfg in one year? That’s insane. I’ve seen biotech start ups with lots of money and specific goals and one end product take several years to get to fruition. One year?
As a person who’s owned 2 small businesses, one started from the ground up, I call bullshit on there being any level of realism in this concept.
TomatoQueen
Nay-saying and realism and of course the last time we tried something new notwithstanding, I want this for my best friend of more than 40 years, who is Type I and could burn Eli Lilly to the ground just by thinking of it. Besides. We Went to the Fucking Moon in 10 Years. We Can Do This. *arms folded.*
waldtest
Serious questions about whether the administration would want to implement this well, but if it did, it would be possible to contract out. The government does not need to hire new staff – it has staff at the FDA who inspect drug manufacturing facilities and staff at CMS and DOD who routinely contract out for large purchases of drugs and other commodities. These staff could be detailed over to get the program up and going. The expertise is there. Will and commitment of leadership is a different issue.
schrodingers_cat
Warren is running and thinks BS of Vt is going to be her main competition.
Burnspbesq
There has to be a way to put this particular stake in the ground without exposing yourself as utterly detached from reality. Try again, Senator.
And if you’re planning to nuke Lilly and Novo Nordisk from orbit, you might want to take out Mars and Frito-Lay at the same time.
randy khan
With the provision about entering into contracts, this doesn’t seem incredibly unrealistic. Sure, you’d probably want to push out the time frame, maybe to 2 years, or make it 10 drugs in the first time period rather than 15, but there are whole squads of people in the federal government (heck, within HHS) who do big contracts all the time. Certainly as a negotiation position, 1 year/15 drugs is a fine place to start.
tobie
My guess would be that this is a bill meant to highlight a problem, not necessarily to become a law. It’s hard to see how anything gets through the Senate in the next two years, but if a Democratic Senator can expose that her Republican colleagues don’t give a damn about prescription drug prices for essential medications like insulin, that could be worth something. I need to think about this. As a general rule, I’m opposed to ploys. It violates my sense of what politics is (the careful crafting of legislation that helps people achieve life, liberty, and the pursuit of happiness) and my fear that radical overhauls invariably have unintended consequences, but I also recognize that my tastes are completely out of step with the times, so it could well be that this is a clever move that shifts the conversation.
DavidC
Finally, something to do with my day job! First question is whether this comes with money – can’t do anything without an appropriation from Congress. As far as skills, if this went to HHS, the tasks could be done within BARDA/ASPR, which has expertise and contracts out manufacturing all the time. Do they have the bandwidth? Not without $$. They can hire skilled contractors to oversee government contracts – oh, and time would be required to develop and RFP, put it out on the street, etc., unless there’s an existing IDIQ with prequalified manufacturers.
Oops – she’s asking for an Office of Drug Manufacturing, with a presidential appointee – that would take time to set up. Is Alex Azar on board? He would be able to tell if they could make this happen.
I think that the idea is sound, but the implementation is not as easy as it sounds, and any objections based on logistics would be crowded out by cries of “Big Pharma shill!”
And showing bioequivalency to get FDA approval?
Martin
Honestly, this one isn’t hard.
The reasons the drugs Warren listed are there is because they’re commodity drugs, as much as drugs can be commodities. You can ALWAYS find a manufacturer for commodity goods because there are *always* players out there that are willing to take next to zero margins in exchange for massive revenue and cashflow. For most companies those are the must-haves, with profits to be worked out later. This was basically Amazon’s model – ignore profits, grab all of the dollars out there and build infrastructure and brand loyalty, and when you’re the big player, look for those profit opportunities. That might then mean no longer making that commodity drug, but by then someone else will be in that spot and take that market over for you.
I can’t imagine any scenario where the Feds would have to actually manufacture the drugs themselves. Their scale should always be able to get a contract. The fact that commodity drugs like insulin are being used as profit centers illustrates either a monopoly scenario (which I don’t believe exists) or a supply chain scenario between distribution and manufacturing, which I do believe exists. Normally in a retail setting, the distributors have more market leverage than the manufacturers do. That’s the whole MO for Walmart, Costco, Amazon. In Costco’s case if they don’t like your prices, they turn to Kirkland and make both a better product *and* sell it for less, because fuck, it’s just frozen lasagna. Walmart will simply squeeze you to death (don’t care for their model, but it can work). And Amazon, because they don’t have shelf space limitations will simply put your competitor in a more prominent spot because they can carry literally every product. So the competition at the retail level keeps prices in check. When Apple was smaller, they weren’t (only) struggling because of internal problems, but also because they had no leverage against the distributors. CompUSA wasn’t interested in their product. So Apple took control and did their own distribution.
In the drug market, the drug makers are larger than all of the US insurance companies save one – the VA. Drug makers cut deals with *governments*, and Anthem simply can’t compete in that space. But the VA can. Warren is correct in her diagnosis here, and correct in her remedy. Let the US government be the distributor for the commodity drugs. We negotiate in the same vein as the Govt of Canada does, and that takes care of the lack of market power our fragmented insurance landscape produces. I know this would all be interpreted as socialism, but capitalism is about allowing competition in the particular market you are operating in. Drugs are a very different market from frozen lasagna and require very different mechanisms to create competition. Capitalism focuses more on achieving the result of competition than on critiquing the mechanisms used to get there. The theory that focuses on the mechanisms rather than the result is corporatism. Drug contracts are competed over at the international level, for better or worse. That’s the reality, and the US can’t simply wish that away unless Congress plans on repealing every other country’s single payer laws as well.
The reason the ‘US govt will manufacture’ is in there is as a threat to the drug makers. Don’t collude against manufacturers that would enter into an agreement with the US govt or we’ll do it ourselves. We know they do that. If that’s not there, then all they need to do is stonewall the US efforts. With that there, it’s a lot harder.
*The single biggest problem my C-level relatives raised in running a BC/BS was their lack of market power in negotiating drug prices. They were nearly helpless on that front. They could go to Lilly and demand lower prices on insulin and Lilly would simply cut them off entirely. What the fuck did Lilly care if some subset of some state in the US couldn’t get insulin – they were over negotiating with the entire nation of Germany, and they knew that the BC/BS wouldn’t be long for this world if they told their policyholders they couldn’t get coverage for insulin. They knew that the competitive landscape in the US worked against their insurers and in their favor. They knew that Germany had other options if they couldn’t get a deal.
Felanius Kootea
@Martin: Love this analysis and the reminder that drug companies are multinationals used to negotiating with governments and US insurers have no real leverage when it comes to those negotiations.
David Anderson
@DavidC: Exactly, there is expertise available, but the structure of organizing that expertise in the federal government and getting all of the internal veto or slow-down point players on board will take time.
Looking at the set-up of CFRB, it was just under 2 years from Obama’s signature to the first published enforcement action. 18-24 months to me sounds like a reasonable time frame to me for 10-15 major drugs under contract. 12 months just sounds too ambitious.’
I think the fundamental logic of the proposal makes a lot of sense but the pragmatic details aren’t there (yet).
DavidC
Yeah – fifteen manufacturing contracts in a year for a group that hasn’t even been set up? It would take that long to get a staff (CORs and COs must be federal employees) and identify which drugs to manufacture. The only way they could get this to work is to then put together a complex IDIQ RFP – that in itself would take at least six months before going out on the street – so that they could get a pool of qualified CMOs. And then send out and negotiate Task Orders for each product. 18 months would be optimistic, IMHO. With that many contracts, what happens when some of them go south? Overruns? Will assay development go smoothly? The organization would need to have a strong regulatory group to work with the CMOs, which would be responsible for submitting the necessary applications to the FDA.
I do think that the idea is worth discussing – with hearings and analysis by people who know drug development, FDA regs, and federal contracting.