Pharmaceutical & Life Sciences News

Capsule: Fetal Cells, Lame Duck Efforts, Clinical Trial Costs

Nov. 16, 2018, 11:16 AM

Welcome to Capsule—your weekly dose of health-care news, where we give you a recap of this week’s highs and lows for key players in the health-care industry. You can expect us every Friday morning as a bookend for your week.

Many of you are likely glued to your screen keeping up with the Florida ballot recount rat race. Or maybe you’ve been mesmerized by Nancy Pelosi’s very vocal confidence on being elected the next speaker of the House. Let’s cut through the election noise and take a look at what’s driving health-care policy this week.

Here’s who ended the week on a high note:

State Facilities

  • States will soon be able to apply for long-restricted Medicaid funding to cover inpatient mental health treatment, Victoria Pelham reports. New funding pathways could open up millions of dollars for behavioral health treatment centers and bolster the government’s response to rising rates of suicide and fatal drug overdoses.
  • Medicaid paid for 21 percent of substance use disorder treatment and a quarter of mental health services in 2014, according to the Kaiser Family Foundation.
  • Under current law, states are banned from using Medicaid funds to pay for most inpatient treatment of adults in facilities with more than 16 beds. The provision has increasingly come under fire as the opioid crisis has worsened.
  • The Trump administration is also preparing a new payment and service delivery model to address social needs, such as insufficient food or housing, that harm Americans’ health, Shira Stein reports. It would also authorize organizations to use more unconventional solutions, such as paying for a beneficiary’s rent if housing is unstable or making sure a diabetic had access to and could afford nutritious food.

Clinical Research Financiers

  • Bookkeepers for companies financing clinical trial research can breath a sigh of relief—Scott Gottlieb has heard them and wants to help. The nation’s chief drug regulator wants to scale back the work of a $40 billion clinical trial outsourcing industry that he said is bloating costs without enough additional benefit, Jeannie Baumann reports.
  • Part of the plan would target contract research organizations like IQVIA, Syneos Health, Parexel International, and PRA Health Sciences. These are companies drugmakers hire to run their clinical trials. They’re expensive, but the industry is growing. Gottlieb hopes to tackle that, but it’s not clear exactly how the plan will work. Keep an eye out for Jeannie’s story when he releases the plan.
  • In a similar vein, drug and device companies will save time and money setting up low-risk clinical studies under a proposal by the FDA to relax consent requirements, Baumann writes. It’s part of a larger effort by both the FDA and the HHS to decrease red tape around research administration.


  • Michigan came out on top this week when the federal Medicare and Medicaid agency approved its request to use outcomes-based drug contracts to lower costs in its Medicaid program.
  • Value-based models are intended to lower costs by requiring patients to pay only for drugs that work. Michigan’s proposal is modeled after a similar initiative pioneered by Oklahoma earlier this summer.
  • State officials still haven’t worked out exactly how they’ll measure a drug’s outcome and what they’ll deem as “effective” but are likely to take the same route as Oklahoma. That involves bargaining with each drug manufacture to jointly agree on what health benchmarks to measure a drug’s effectiveness.
  • “Value-based payment is not a panacea, but it is an important part of our strategy to lower drug prices,” Seema Verma, head of the Centers for Medicare & Medicaid Services, said. The Trump administration has been a big supporter of value-based health care, but the exact definition of value or how to measure it is still a nebulous concept.

It was a bleak week for others. Here’s whose Thursday closed on a downswing:

Generic Drug Attempts

  • It was a low week for drug companies trying to break into the billion-dollar market of patented drug formulas, Dana Elfin writes. Hetero USA Inc. was dinged with a lawsuit filed by Janssen and AbbVie’s Pharmacylcics over Hetero USA’s attempts to create a generic copy of the blockbuster oncology drug, Imbruvica.
  • Similarly, Dr. Reddy’s Laboratories is trying to break into Indivior’s profits for its top-selling opioid treatment, Suboxone. That effort was first blocked by a judge in July. Dr. Reddy’s appealed to the federal patent office this week and asked it to review the Indivior patent that’s blocking Dr. Reddy’s generic, Dana reports.
  • Sanofi—along with other co-owners of patents for the Gaucher-treatment drug, Cerdelga— also sued Teva this week because the company is allegedly proposing a generic version that would infringe on Sanofi’s patent rights, Bloomberg News’ Christopher Yasiejko writes.
  • Patent disputes are common within the pharmaceutical industry, and just because a company sues to block a generic version of a drug doesn’t mean they’ll win; however, companies with the patents typically have the upper hand. Either way both parties will likely spend a boatload of money and time on a long and arduous legal process.

Fetal Tissue Research

  • The Trump administration is moving forward on an audit that could threaten funding for biomedical researchers who are working with cells derived from human fetal tissue, Jeannie Baumann reports.
  • The Department of Health and Human Services is getting feedback from scientists and bioethicists on the use of fetal tissue research, which is used in stem cell research and helps develop treatments for conditions like Parkinson’s disease and spinal cord injury. There’s a catch, though: Abortion opponents are also set to weigh in, and they’re traditionally opposed to any type of fetal cell research.
  • The last time HHS conducted an audit like this it led to the termination of a fetal tissue supplier contract with the Food and Drug Administration. The HHS says this audit is coming “in light of the serious regulatory, moral, and ethical considerations involved,” Baumann writes.

Lame Duck Efforts

  • Medical device makers are feeling the pressure to repeal the medical device tax that will be effective beginning in January 2020, Ayanna Alexander reports. The leading medical device trade group thinks repeal efforts have some momentum going into the lame-duck session of Congress, but if it’s not repealed this year it’s likely to be left behind.
  • House Democratic leaders oppose the tax repeal because it lacks cost offsets, so Congress would need to find a way to make up for the revenue lost in ending the tax to gain their support.
  • The Affordable Care Act required a 2.3 percent excise tax on medical device sales that was intended to counterbalance the cost of providing nationwide coverage. It was supposed to take effect this year, but lobbying efforts pushed the start date back. The Joint Committee on Taxation said in 2014 the tax would rake in $29 billion over a decade, but device makers say it would cost them jobs and research funds.

Thanks for joining us this week and have a great weekend. I’m all ears when it comes to your two cents, tips, critiques, or coordinating exclusive interviews. Send them my way at jlee1@bloomberglaw.com.

To contact the reporter on this story: Jacquie Lee in Washington at jlee1@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Allison Gatrone at agatrone@bloomberglaw.com

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