BILL ANALYSIS Ó
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Date of Hearing: August 31, 2016
ASSEMBLY COMMITTEE ON HEALTH
Jim Wood, Chair
SJR
29 (Hernandez) - As Introduced August 29, 2016
SENATE VOTE:
SUBJECT: EpiPen: pricing.
SUMMARY: Urges the Congress of the United States to investigate
the impact that Mylan's monopoly has had on the price hikes for
EpiPen, and urges the Congress and President to take action to
limit the unrestrained ability of drug manufacturers to increase
prices based only on what the market can bear rather than on
providing a fair return on investment. Specifically, this
resolution:
1)Finds that millions benefit from life-saving drugs and
devices, including Americans with allergies that can be
treated by epinephrine, and last year doctors wrote 3.6
million prescriptions for EpiPen, which stops allergic
reactions by quickly and safely injecting epinephrine.
2)Finds that in 2007 Mylan NV purchased the rights to EpiPen and
immediately began raising its price, and that in 2008 and
2009, Mylan raised the price by 5% and at the end of 2009 by
another 19%, and from the fourth quarter of 2013 to the second
quarter of 2016, Mylan raised EpiPen prices 15% every other
quarter.
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3)Finds that a pack of two EpiPen devices now has a list price
of over $600, an increase of 548% since Mylan began selling
the drug according to Truven Health Analytics.
4)Finds that the formula of EpiPen did not change, and it is no
more effective in protecting against allergic reactions in
2016 than it was in 2007 and that during the same time, Mylan
began an aggressive marketing and lobbying effort to increase
demand for EpiPen, which included the passage of federal and
state legislation.
5)Finds that the rising cost of EpiPen has implications for
taxpayers because over half of California's children are
insured through Medi-Cal, therefore taxpayers are paying a
large share of the cost of this medication.
6)Finds that Mylan has an effective monopoly that it is using to
maximize profit because there is no equivalent generic
competitor and that patients who have to pay retail prices are
being forced to buy EpiPen abroad, where it is cheaper, and
are resorting to other devices that deliver epinephrine,
including do-it-yourself syringes.
7)Finds that after recent widespread criticism, Mylan said it
would expand access and increase benefits to programs that it
uses to help consumers pay less, but those changes do not
alter the prices that insurers and employers pay and those
institutions will still face the brunt of the impact from the
price hikes.
8)Finds that offering co-payment assistance and free product to
consumers is part of the standard playbook for manufacturers
of expensive drugs and that efforts by drug makers to shield
consumers from the out-of-pocket costs associated with the
rapidly increasing cost of their medications ignores the fact
that insurance companies bear the brunt of these unreasonable
price increases, which results in higher premiums for all
consumers.
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9)Resolves that the Legislature declares unnecessary and
unexplained increases in pharmaceutical pricing is a harm to
our health care system that will no longer be tolerated
because the system cannot sustain it and that the Legislature
urges the United States Food and Drug Administration (FDA) to
reconsider its denial of approval for generic alternatives to
EpiPen.
EXISTING LAW:
1)Establishes the Medi-Cal program, administered by the
Department of Health Care Services (DHCS), under which low
income individuals are eligible for health care coverage.
2)Requires drug manufacturers, under federal law, to obtain
approval of new drugs from the FDA.
3)Establishes the Sherman Law, administered by Department of
Public Health (DPH), which, among other provisions, regulates
the packaging, labeling, and advertising of drugs and medical
devices in California.
4)Prohibits, in the Sherman Law, the sale, delivery, or giving
away of any new drug or new device unless it is either:
a) A new drug, and a new drug application has been approved
for it by the FDA, pursuant to federal law, or it is a new
device for which a premarket approval application has been
approved, and that approval has not been withdrawn,
terminated, or suspended under the FDA; or,
b)A new drug or new device for which DPH has approved a new drug
or device application, and has not withdrawn, terminated, or
suspended that approval.
5)Requires DPH to adopt regulations to establish the application
form and set the fee for licensure and renewal of a drug or
device license.
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FISCAL EFFECT: None.
COMMENTS:
1)PURPOSE OF THIS RESOLUTION. According to the author, during
the same time that Mylan was steadily increasing the price of
EpiPens to reach over 500% of its list price in 2007, the
company began a marketing and lobbying effort to increase
demand for this product, which included the passage of federal
and state legislation. The author states that in 2010, the
FDA changed its recommendations so that two EpiPens be sold in
a package instead of one and that they be prescribed for
at-risk patients, not just those with allergies. The author
notes that in 2013, Congress passed the School Access to
Emergency Epinephrine Act to provide an incentive to states to
boost the supply of epinephrine at schools. Following this, a
number of states, including California, passed laws requiring
public schools to have epinephrine. The author contends that
Mylan has an effective monopoly that it is using to maximize
profit because there is no equivalent generic competitor.
Furthermore, in California, over half of our children are
insured through Medi-Cal, therefore the public ends up paying
a large share of the cost of the drug. The author also notes
that after recent widespread criticism, Mylan announced that
it would expand access and increase benefits to programs that
it uses to help consumers pay less, but those changes do not
alter the prices that insurers, employers, emergency
responders, and schools pay. Those institutions will still
face the brunt of the impact from the price hikes and offering
co-payment assistance and free product to consumers is part of
the standard playbook for drug companies. The author states
that efforts by drug makers to shield consumers from the
out-of-pocket costs associated with the rapidly increasing
cost of their medication ignores the fact that insurance
companies bear the brunt of these unreasonable price increases
and results in higher premiums for all consumers. The drug
maker Mylan is taking advantage of its monopoly and exploiting
a life-saving medication that countless families across
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California and the nation rely on and something must be done
now to correct the market for this particular drug. The
author concludes that the federal Administration and Congress
have the power to limit the unrestrained ability of Mylan to
gouge our health care system, and they should use it.
2)BACKGROUND.
a) Anaphylaxis. According to the National Institutes of
Health, anaphylaxis is a severe, whole-body allergic
reaction to a chemical that has become an allergen. After
being exposed to a substance, such as bee sting venom, the
person's immune system becomes sensitized to it. When the
person is exposed to that allergen again, an allergic
reaction may occur. Anaphylaxis happens quickly after the
exposure, is severe, and involves the whole body. Tissues
in different parts of the body release histamine and other
substances. This causes the airways to tighten and leads
to other symptoms. Some drugs (such as morphine, x-ray
dye, and aspirin) may cause an anaphylactic-like reaction
when people are first exposed to them. These reactions are
not the same as the immune system response that occurs with
true anaphylaxis. However, the symptoms, risk for
complications, and treatment are the same for both types of
reactions. Risks include a history of any type of allergic
reaction.
b) Epinephrine auto-injectors (EAI) An EAI is a medical
device used to deliver a measured dose of epinephrine using
auto-injector technology, most frequently for the treatment
of acute allergic reactions to avoid or treat the onset of
anaphylaxis. According to the Food Allergy Research and
Education Website, epinephrine is a highly effective
medication that can reverse severe symptoms of anaphylaxis
but must be administered promptly to be most effective.
EpiPen and EpiPen Jr. (the version for smaller children)
are commonly used EAIs. According to Mylan, which makes
the two products, EpiPen contains 0.3mg of epinephrine and
is intended for those who weigh 66 pounds or more, while
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EpiPen Jr. contains 0.15mg and is intended for patients
weighing between 33 to 66 pounds. Mylan's product
information states that it is not known if EpiPen and
EpiPen Jr. are safe and effective in children who weigh
less than 33 pounds. The devices are intended to be
injected into the middle of the outer thigh, and patients
are directed not to inject the device into a vein, buttock,
fingers, toes, hands, or feet.
c) EpiPens and generic alternatives. Epinephrine on its
own is extremely cheap, just a few cents per dose. The
auto-injecting device is the product that is protected
under patent in this case. Mylan "owns" the EpiPen
auto-injector device design, so competitors must find
work-arounds in their devices to deliver the epinephrine
into the patient's body. This task has proven to be
difficult for EpiPen competitors. In 2015, Sanofi US
issued a voluntary nationwide recall of its Auvi-Q due to
potential inaccurate dosage delivery. In 2016, the FDA
rejected Teva Pharmaceutical's generic epinephrine injector
because it had reliability issues and therefore wasn't
medically equivalent. Another company, Twinject, also
discontinued their injectors in 2012. A generic product
called Adrenaclick is on the market, but is not very
popular and is not always covered by insurers.
d) The rising costs of drugs. According to the Centers for
Medicare and Medicaid Services (CMS), prescription drug
spending increased 12.2% to $297.7 billion in 2014, faster
than the 2.4% growth in 2013. A study published in Health
Affairs in December 2015 found that drug spending is
growing faster than other health care spending in the U.S.
- increasing 12.2% between 2013 and 2014. A Kaiser Family
Foundation (KFF) analysis of data from the CMS and Truven
Health Analytics shows that while drugs account for 10% of
U.S. health spending, it represents 19% of the cost of
employer insurance benefits. Some speculate that this
disparity exists because the $3 trillion in U.S. health
spending is a broad catchall which includes hospital care,
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physician services, drugs, research, administrative costs,
public health activities, and long-term care.
Additionally, some of the people served by Medicare and
Medicaid (whose spending is counted in the national totals)
require many services not typically used by those covered
by employer health plans. According to an analysis by the
CEO of the KFF, even that 19% figure is understated because
while it includes prescriptions that patients fill at
pharmacies, it does not include many of the expensive drugs
administered in physicians' offices or hospitals. In
Medicare, for example, retail prescription drugs represent
13% of overall spending while drugs administered mainly by
physicians add an additional 6%.
According to the June 2016 California HealthCare
Foundation's (CHCF) Issue Brief, in 2015, the total U.S.
expenditure on prescription medicines was $425 billion, a
12.2% increase over 2014 total expenditure or an 8.5%
increase when adjusted for net expenditures. CHCF states
that U.S. pharmaceutical prices are among the highest
worldwide, and escalating costs have been a concern for
many years, presenting challenges for federal, state, and
private purchasers.
e) Drug pricing. Federal regulations prohibit the U.S.
government from setting the price of pharmaceuticals, and
patents on drugs, in effect, prohibiting competition, at
least initially. Countries without these restrictions
generally buy drugs for a fraction of the U.S. price.
Pharmaceutical companies argue that high drug prices are
justified because of the enormous cost and risk associated
with bringing a drug to market and that payment for current
drugs fund future innovation. Developing a new drug costs
an average of $1.2 billion and takes 10 to 15 years. When
a new drug provides a cure for a disease, as opposed to
only treating symptoms, drug companies claim that a high
upfront cost is mitigated by not having to treat symptoms
indefinitely. However, critics point to numerous examples
of drug companies charging high prices for drugs with only
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marginal improvements over cheaper alternatives, or
astounding increases in pricing for drugs that have been on
the market for years.
f) Recent press. Over the last several days there have
been numerous articles reporting on the rapidly rising
costs of EpiPen. According to the Los Angeles Times the
price has risen more than 500% from $94 when EpiPen was
acquired by Mylan in 2007 to its current price of $608. On
Thursday, August 25, 2016, Mylan began offering more
financial aid to patients getting EpiPens, such as coupons
to cover up to $300 off patient copayments, and on Monday,
August 29, 2016, the company announced it will begin
selling a generic version for $300 in the next several
weeks.
On the same day, the heads of the House Committee on
Oversight and Government Reform wrote to Mylan Chief
Executive Heather Bresch, requesting information regarding
how much Mylan receives from federal healthcare programs,
information about its profits, as well as lobbying
disclosure forms. Last week leaders of the Senate
Judiciary Committee and the Senate Special Committee on
Aging sent similar letters.
3)SUPPORT. The State Employees International Union (SEIU
California) supports this resolution stating that for families
struggling to afford this life-saving medicine, these
outrageous price hikes are nothing short of devastating and
limit access where it is most needed. SEIU California notes
that the federal government is largely responsible for
regulating drugs and devices such as the EpiPen, therefore
this resolution which calls on the federal government to:
reconsider its denial of approval for a generic alternative to
the EpiPen; investigate the impact of Mylan's monopoly on
price hikes; and, take action to limit the "unrestrained
ability" of drug manufacturers to increase prices based only
on what the market will bear rather than on a fair return on
investment.
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The California Labor Federation (CLF) supports this resolution,
noting that the EpiPen is not an innovative new product-it has
been in use since 1977 and research and development costs have
been made back already. In 2007, Mylan bought the EpiPen, and
raised the price steadily since then. CLF also points out
that from 2007-2015, the CEO of Mylan's total compensation
went up 671%, at the same time that they were gouging families
by raising the average wholesale price of the EpiPen 461%.
Mylan is also a tax dodger, having completed a tax inversion
and reincorporating in the Netherlands in 2014 to avoid paying
tax in the United States. CLF concludes that Mylan's
outrageous price increases are not an isolated incident.
Pharmaceutical companies raise the prices of drugs to treat
asthma, diabetes, high-blood pressure, and many other
conditions, multiple times a year, burdening patients,
employers, taxpayers, and our health care system.
Kaiser Permanente (KP) and the California Association of Health
Plans (CAHP) support this resolution, writing that it is
particularly meaningful because it calls attention to the
overall dysfunction of the pharmaceutical marketplace
resulting from decades of federal law and regulatory processes
that have stymied any real competition among drug
manufacturers. KP and CAHP note that while the behavior of
Mylan is front and center this month, sadly they are not an
outlier. Pharmaceutical companies regularly increase the
price of their product, annually or sometimes twice a year.
KP and CAHP state these year-over-year "small" increases of
9-15% lead to dramatic, cumulative cost impacts that threaten
the affordability of health care.
4)RELATED LEGISLATION.
a) AB 1386 (Low) permits a health care provider to issue a
prescription for, and a pharmacy to dispense, an
epinephrine auto-injector to an authorized entity, which is
defined as any entity or organization that employs at least
one person that has completed an approved training course
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on the emergency use of epinephrine auto-injectors; revises
the definition of "epinephrine auto-injector" to eliminate
the reference to a spring-activated needle, and instead
define this term as a "disposable delivery device designed
for automatic injection of a premeasured dose of
epinephrine into the human body to prevent or treat a
life-threatening allergic reaction. AB 1386 has been
passed by the Legislature, and is pending action by the
Governor.
b) SB 1010 (Hernandez) requires health care service plans
(health plans) and health insurers that report rate
information to also include information regarding covered
prescription drugs, as specified. Requires the Department
of Managed Health Care and the California Department of
Insurance to compile and report this data in an aggregated
report to demonstrate the overall impact of drug costs on
health care premiums. Requires any manufacturer of a
prescription drug, who sells to or is reimbursed by a state
purchaser, health plan, health insurer, or pharmacy benefit
manager, to provide notice describing a price increase, as
specified. SB 1010 is on the Assembly Inactive File.
5)PREVIOUS LEGISLATION.
a) AB 463 (Chiu) of 2015 would have established the
Pharmaceutical Cost Transparency Act of 2016, which
requires that a pharmaceutical manufacturer that sells a
prescription drug in California file a report with OSHPD if
the wholesale acquisition cost of the drug is more than
$10,000 annually or per course of treatment. AB 463 died
in the Assembly Health Committee.
b) SB 1266 (Huff), Chapter 321, Statutes of 2014, requires
school districts, county offices of education, and charter
schools to provide emergency epinephrine auto-injectors to
school nurses or trained personnel who have volunteered, as
specified. Authorizes school nurses or trained personnel
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to use the epinephrine auto-injectors to provide emergency
medical aid to persons suffering, or reasonably believed to
be suffering, from an anaphylactic reaction.
REGISTERED SUPPORT / OPPOSITION:
Support
AFSCME
Amalgamated Transit Union
Anthem
Association of California Life and Health Insurance Companies
Blue Shield of California
California Association of Health Plans
California Labor Federation
California Professional Firefighters
California School Employees Association
California Teamsters Public Affairs Council
Cigna
Health Access California
International Association of Machinists and Aerospace Workers
International Longshore and Warehouse Union
Jockeys Guild
Kaiser Permanente
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Professional & Technical Engineers, Local 21, AFL-CIO
SAG-AFTRA
SEIU California
United Nurses Association of California
UNITE HERE
Utility Workers Union of America
Opposition
None on file.
Analysis Prepared by:Lara Flynn / HEALTH / (916)
319-2097