What Evidence Is Needed To Transform Health And Health Care?

While there is consensus that more reform is needed to improve value in the US health care system, there is less agreement on the mechanisms for achieving that broad aim. Put simply, while many agree on the what, they do not agree on the how.

Efforts to repeal and replace the Affordable Care Act (ACA) remain on Congress' legislative agenda, with a bill called the American Health Care Act (AHCA) recently passing in the House of Representatives, yet it is unclear whether, or in what form, this bill will pass in the Senate. There is an extensive evidence base evaluating the implementation of the ACA, but more research is needed on the potential effects of the provisions of the AHCA as well as research to see which payment and delivery system reforms could drive improvements in value.

Research intended to inform policy development and to understand and address challenges related to the ACA's implementation is broad ranging. Programs like State Health Access Reform Evaluation (SHARE) and Policy-Relevant Insurance Studies, both funded by the Robert Wood Johnson Foundation (RWJF), generated important, investigator-initiated research evidence to evaluate the implementation of the ACA at the state level and to address highly policy-relevant questions related to health insurance markets. Projects have examined consumer choice in the ACA marketplaces, pent-up demand for health care, premium assistance in Medicaid, and the impact of the ACA's smoking penalties, to name just a few.

Other RWJF-funded projects like the Urban Institute's Quick Strike Health Policy Analysis or Georgetown University's Rapid Response Project, enabled timely policy analysis to address emerging issues related to health reform. For example, the Urban Institute's Quick Strike series on the King v. Burwell Supreme Court case was ultimately cited in the court's decision that upheld tax credits and cost-sharing reductions for millions of Americans.

Georgetown University's Rapid Response series on the ACA's small group market definition raised the visibility of the issue for policy makers and helped to inform the deliberations that led to bipartisan policy change. These and many other projects have generated a robust evidence base for evaluating health reform implementation and informing the next steps to improve health and health care in the United States.

In a recent Health Affairs Blog post, AcademyHealth's President and CEO Lisa Simpson wrote, "Great evidence can serve as an anchor in uncertain times and should be the North Star for policymakers charged with designing a health system that can achieve better care, smarter spending, and healthier people."

There are many areas where rigorous research results can help to move health policy making forward. The federal cost-sharing reduction payments and whether the new administration will continue to make these payments to insurers have grabbed headlines in recent weeks, as these payments have significant implications for insurer participation and for the affordability of premiums in marketplace plans.

In March 2017, Health and Human Services Secretary Thomas ("Tom") Price and Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma released a letter to state governors that signaled an interest in promoting greater design freedom and flexibility in the Medicaid program through Section 1115 waivers.

Policy makers need evidence that addresses questions such as: how can we promote greater affordability and stability in the individual insurance market? What would be the impact of provisions to increase flexibility in the Medicaid program? What does the evidence suggest about the effectiveness of health insurance benefit design and cost sharing on consumers' engagement in health care decision-making?

We know that policy makers and practitioners alike need evidence that is responsive, timely, and credible. We also know that most people in this audience don't have time to wait the average of seventeen years that it takes for scientific discoveries to be incorporated into practice. Given the fluid nature of the current policy environment, it is critical that research be timely so that it can directly inform the policy process.

A new Call for Proposals (CFP) from the RWJF seeks to fund timely studies aimed at these and other policy-relevant questions. The CFP, managed by AcademyHealth, is open through June 23, 3 p.m. (EDT) and seeks to fund rigorous empirical studies that evaluate policies or predict the potential effects of policies or policy changes intended to transform health and health care systems. The CFP builds on the RWJF's decades of investment in trying to increase health insurance coverage and improve the value of health care, and the growing multidisciplinary evidence base required to help build a Culture of Health.

Essential components of this Research in Transforming Health and Health Care Systems CFP are that applicants propose studies that are timely and will directly inform the policy process.

What evidence is needed to transform health and health care in the United States? Apply with your ideas.

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Cast Iron S’Mores

Cast Iron S’Mores.  For when you don’t have an open fire and the great outdoors but still crave a classic.  Ooey-gooey goodness in a pan.  This recipe broils the marshmallows to give them that light brown (or dark, if you prefer) “just-out-of-the-fire” look and taste.

Ingredients for Cast Iron S’Mores

• 2 cups of chocolate chips (I use dark chocolate)
• 2 Tbsp of butter
• 12 graham crackers
• 15-25 large marshmellows

Directions for Cast Iron S’Mores

1. Turn broil setting on for oven (at least five minutes prior to adding pan)
2. Add butter and chocolate to pan and turn heat to lowest possible setting.  Stir with wooden spoon until all chips and butter are melted.  Too much heat will scorch the chocolate.
3. Remove pan from heat and let cool for five minutes.
4. Place graham cracker pieces over the chocolate.
5. Top graham crackers with single layer of marshmallows.
6. Put pan into the oven to broil and take them out when they are browned to your liking.
7. Enjoy!

Time:

Prep time: 5 minutes
Cook time: 15 minutes
Yield: 4-6 servings

The post Cast Iron S’Mores appeared first on Kids Activities Blog.

from Kids Activities Blog http://ift.tt/2ssNrA5

Cast Iron S’Mores

Cast Iron S'Mores.  For when you don't have an open fire and the great outdoors but still crave a classic.  Ooey-gooey goodness in a pan.  This recipe broils the marshmallows to give them that light brown (or dark, if you prefer) "just-out-of-the-fire" look and taste.

Ingredients for Cast Iron S'Mores

• 2 cups of chocolate chips (I use dark chocolate)
• 2 Tbsp of butter
• 12 graham crackers
• 15-25 large marshmellows

Directions for Cast Iron S'Mores

1. Turn broil setting on for oven (at least five minutes prior to adding pan)
2. Add butter and chocolate to pan and turn heat to lowest possible setting.  Stir with wooden spoon until all chips and butter are melted.  Too much heat will scorch the chocolate.
3. Remove pan from heat and let cool for five minutes.
4. Place graham cracker pieces over the chocolate.
5. Top graham crackers with single layer of marshmallows.
6. Put pan into the oven to broil and take them out when they are browned to your liking.
7. Enjoy!

Time:

Prep time: 5 minutes
Cook time: 15 minutes
Yield: 4-6 servings

The post Cast Iron S'Mores appeared first on Kids Activities Blog.

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For Patients With Multiple Chronic Conditions, Improving Care Will Be A Bipartisan Effort

Editor’s Note: This is the third in a five-part Health Affairs Blog series, produced in conjunction with the Bipartisan Policy Center, examining current issues and care models in the delivery system reform effort. Each post will be jointly authored by Democratic and Republican leaders in health policy. Check back for more posts in the series.

While federal policy makers are undertaking controversial and divisive debates over the future of the Affordable Care Act, Republicans and Democrats have had a good track record of working together to improve health care delivery and payment frameworks. Most recently, the bipartisan Medicare Access and CHIP Reauthorization Act of 2015 reformed Medicare’s physician payment system to better link payment to quality, as well as incentivize participation in models of care outside of the traditional fee-for-service system. These alternative payment models continue a history of bipartisan work in delivery system reform by shifting away from fee-for-service (FFS) and toward a more coordinated, efficient system of care. The shared goal of ensuring high-quality, high-performance, and affordable health care presents a unique opportunity for further bipartisan agreement. Building upon this goal, we should also work to advance a more patient- and family-centered approach to delivering care, especially to those with complex, high-cost health care needs.

A good place to start, and an area where policy makers have already placed an increased focus, is on developing solutions within federal health programs to improve outcomes for individuals with multiple chronic conditions and functional limitations. People with multiple chronic conditions typically use more services, such as emergency department visits, hospitalizations, and eventual need for long-term services and support, compared to those without multiple chronic conditions. For those with complex health needs and functional impairment, health care expenditures averaged $21,000 annually, more than four times the average for all US adults. This spending trajectory is unsustainable for both patients’ pocketbooks and the health care system as a whole, and the care they receive is often fragmented and confusing.

An Emerging Consensus For Individuals With Complex Needs

In recent years, public health researchers have joined with health plans and provider organizations to better understand how to care for individuals with complex health care needs. There is an emerging consensus around common elements of successful care models, strategies for stratifying risk to target services for improved outcomes, and the importance of coordinating care and addressing social determinants of health, particularly for low-income patients.

Academic and clinical research suggests that for high-need, high-cost patients, nonclinical interventions and other social services can improve health outcomes and reduce the need for expensive acute care or institutional services. Such interventions can include in-home meal delivery, supportive housing and home modifications, non-emergent medical transportation to medical appointments, targeted care management, and other home- or community-based assistive services to address functional impairment or an individual’s ability to perform activities of daily living such as bathing and dressing. Simply receiving balanced meals, for example, can make a significant difference in an ailing individual’s ability to heal.

However, these services are not reimbursed under Medicare’s fee-for-service payment structure, and other reimbursement structures that work under a capitated arrangement may lack the necessary flexibility to support these types of interventions. Failing to adequately reimburse health care providers for the necessary services to provide person- and family-centered care, including social supports, will only result in a delivery system biased toward more expensive medical care episodes. Fortunately, policy makers are exploring ways to address these challenges and improve health status by integrating traditional medical care with social supports that are not typically covered in Medicare, without adding new costs to the Medicare program. In Medicare, accountable care organizations (ACOs) have allocated independent, non-Medicare-reimbursed resources toward providing short-term housing or home-delivered nutritious meals following hospital discharge for vulnerable patients, in an effort to reduce hospital readmissions. However, 70 percent of Medicare beneficiaries remain in Medicare fee-for-service payment plans, and a relatively small portion of those beneficiaries receive care through risk-bearing ACOs that have the financial incentives to furnish noncovered social supports as a method of controlling medical care costs. More effort is needed to advance modernized care models amongst the Medicare fee-for-service population.

The Centers for Medicare and Medicaid Services has also granted waivers under Medicaid for those states pursuing greater flexibility to cover community-based services as a means to lowering health care costs. However, state variation in Medicaid programs limits the scope of providing health-related social supports to all Medicaid beneficiaries. Additionally, the separation of Medicare and Medicaid benefits, and the “carving out” of certain Medicaid benefits from managed care contracts, can lead to a fragmented care model, in which dual-eligible individuals must navigate multiple plans or payers depending on the type of service being furnished. There remains opportunity within integrated models of care to allow for more extensive social support services to be offered as benefits, which can be upstream solutions that will pay dividends with better health and reduced costs.

In September 2016, the Bipartisan Policy Center (BPC) released recommendations to address challenges in the integration of payment systems and delivery of services to vulnerable populations with complex care needs. The BPC’s new report on Improving Care for High-Need, High-Cost Medicare Patients, released in April 2017, dives deeper, by recommending pathways for Medicare Advantage plans, ACOs, and other providers to better tailor care plans for frail and chronically ill Medicare patients, in a manner that integrates traditional medical care with non-Medicare-covered social supports. These interventions can be particularly valuable for Medicare beneficiaries who are not dually eligible for full Medicaid benefits, reside in the community setting, have three or more chronic conditions, and have functional or cognitive impairment. A data analysis performed on behalf of the BPC found that more than 3.5 million Medicare beneficiaries meet these criteria. The analysis also projects that these beneficiaries incur roughly $30,000 in annual Medicare costs per beneficiary. This is more than twice the national average annual Medicare fee-for-service spending amount per beneficiary.

Progress in Washington—Where We May See Bipartisanship

Fortunately, policy makers have already expressed interest in working together to address challenges related to this complex population. In the 114th Congress, the Senate Finance Committee launched a bipartisan Senate Chronic Care Working Group, which undertook a thorough, deliberative process—including gathering input from the BPC and other stakeholders and policy experts—to introduce the Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act (S. 870 in the 115th Congress). The CHRONIC Care Act aims to improve care coordination and health outcomes for chronically ill Medicare beneficiaries with complex needs. Despite the poisonous environment surrounding broader health care reform, the Senate Finance Committee passed the Chronic Care Act in May by a unanimous vote of 26-0. Both the Committee Chairman and Ranking Member have expressed hopes for moving the bill through the Senate this year.

As this legislation and other health care delivery and payment reforms are considered, policy makers must recognize system shortcomings and consider how to better integrate care and improve health outcomes for our sickest and most vulnerable Americans. We hope the actionable recommendations provided by the recent analysis by the BPC, the CHRONIC Care Act, and identified in existing successful care models will form the basis for improved care and outcomes for this population through delivery system reform.

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For Patients With Multiple Chronic Conditions, Improving Care Will Be A Bipartisan Effort

Editor's Note: This is the third in a five-part Health Affairs Blog series, produced in conjunction with the Bipartisan Policy Center, examining current issues and care models in the delivery system reform effort. Each post will be jointly authored by Democratic and Republican leaders in health policy. Check back for more posts in the series.

While federal policy makers are undertaking controversial and divisive debates over the future of the Affordable Care Act, Republicans and Democrats have had a good track record of working together to improve health care delivery and payment frameworks. Most recently, the bipartisan Medicare Access and CHIP Reauthorization Act of 2015 reformed Medicare's physician payment system to better link payment to quality, as well as incentivize participation in models of care outside of the traditional fee-for-service system. These alternative payment models continue a history of bipartisan work in delivery system reform by shifting away from fee-for-service (FFS) and toward a more coordinated, efficient system of care. The shared goal of ensuring high-quality, high-performance, and affordable health care presents a unique opportunity for further bipartisan agreement. Building upon this goal, we should also work to advance a more patient- and family-centered approach to delivering care, especially to those with complex, high-cost health care needs.

A good place to start, and an area where policy makers have already placed an increased focus, is on developing solutions within federal health programs to improve outcomes for individuals with multiple chronic conditions and functional limitations. People with multiple chronic conditions typically use more services, such as emergency department visits, hospitalizations, and eventual need for long-term services and support, compared to those without multiple chronic conditions. For those with complex health needs and functional impairment, health care expenditures averaged $21,000 annually, more than four times the average for all US adults. This spending trajectory is unsustainable for both patients' pocketbooks and the health care system as a whole, and the care they receive is often fragmented and confusing.

An Emerging Consensus For Individuals With Complex Needs

In recent years, public health researchers have joined with health plans and provider organizations to better understand how to care for individuals with complex health care needs. There is an emerging consensus around common elements of successful care models, strategies for stratifying risk to target services for improved outcomes, and the importance of coordinating care and addressing social determinants of health, particularly for low-income patients.

Academic and clinical research suggests that for high-need, high-cost patients, nonclinical interventions and other social services can improve health outcomes and reduce the need for expensive acute care or institutional services. Such interventions can include in-home meal delivery, supportive housing and home modifications, non-emergent medical transportation to medical appointments, targeted care management, and other home- or community-based assistive services to address functional impairment or an individual's ability to perform activities of daily living such as bathing and dressing. Simply receiving balanced meals, for example, can make a significant difference in an ailing individual's ability to heal.

However, these services are not reimbursed under Medicare's fee-for-service payment structure, and other reimbursement structures that work under a capitated arrangement may lack the necessary flexibility to support these types of interventions. Failing to adequately reimburse health care providers for the necessary services to provide person- and family-centered care, including social supports, will only result in a delivery system biased toward more expensive medical care episodes. Fortunately, policy makers are exploring ways to address these challenges and improve health status by integrating traditional medical care with social supports that are not typically covered in Medicare, without adding new costs to the Medicare program. In Medicare, accountable care organizations (ACOs) have allocated independent, non-Medicare-reimbursed resources toward providing short-term housing or home-delivered nutritious meals following hospital discharge for vulnerable patients, in an effort to reduce hospital readmissions. However, 70 percent of Medicare beneficiaries remain in Medicare fee-for-service payment plans, and a relatively small portion of those beneficiaries receive care through risk-bearing ACOs that have the financial incentives to furnish noncovered social supports as a method of controlling medical care costs. More effort is needed to advance modernized care models amongst the Medicare fee-for-service population.

The Centers for Medicare and Medicaid Services has also granted waivers under Medicaid for those states pursuing greater flexibility to cover community-based services as a means to lowering health care costs. However, state variation in Medicaid programs limits the scope of providing health-related social supports to all Medicaid beneficiaries. Additionally, the separation of Medicare and Medicaid benefits, and the "carving out" of certain Medicaid benefits from managed care contracts, can lead to a fragmented care model, in which dual-eligible individuals must navigate multiple plans or payers depending on the type of service being furnished. There remains opportunity within integrated models of care to allow for more extensive social support services to be offered as benefits, which can be upstream solutions that will pay dividends with better health and reduced costs.

In September 2016, the Bipartisan Policy Center (BPC) released recommendations to address challenges in the integration of payment systems and delivery of services to vulnerable populations with complex care needs. The BPC's new report on Improving Care for High-Need, High-Cost Medicare Patients, released in April 2017, dives deeper, by recommending pathways for Medicare Advantage plans, ACOs, and other providers to better tailor care plans for frail and chronically ill Medicare patients, in a manner that integrates traditional medical care with non-Medicare-covered social supports. These interventions can be particularly valuable for Medicare beneficiaries who are not dually eligible for full Medicaid benefits, reside in the community setting, have three or more chronic conditions, and have functional or cognitive impairment. A data analysis performed on behalf of the BPC found that more than 3.5 million Medicare beneficiaries meet these criteria. The analysis also projects that these beneficiaries incur roughly $30,000 in annual Medicare costs per beneficiary. This is more than twice the national average annual Medicare fee-for-service spending amount per beneficiary.

Progress in Washington—Where We May See Bipartisanship

Fortunately, policy makers have already expressed interest in working together to address challenges related to this complex population. In the 114th Congress, the Senate Finance Committee launched a bipartisan Senate Chronic Care Working Group, which undertook a thorough, deliberative process—including gathering input from the BPC and other stakeholders and policy experts—to introduce the Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act (S. 870 in the 115th Congress). The CHRONIC Care Act aims to improve care coordination and health outcomes for chronically ill Medicare beneficiaries with complex needs. Despite the poisonous environment surrounding broader health care reform, the Senate Finance Committee passed the Chronic Care Act in May by a unanimous vote of 26-0. Both the Committee Chairman and Ranking Member have expressed hopes for moving the bill through the Senate this year.

As this legislation and other health care delivery and payment reforms are considered, policy makers must recognize system shortcomings and consider how to better integrate care and improve health outcomes for our sickest and most vulnerable Americans. We hope the actionable recommendations provided by the recent analysis by the BPC, the CHRONIC Care Act, and identified in existing successful care models will form the basis for improved care and outcomes for this population through delivery system reform.

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Pharmaceutical Product Hopping: A Proposed Framework For Antitrust Analysis

Skyrocketing drug prices are in the news. Overnight price increases have riveted the attention of the public, media, and politicians of all stripes. But one reason for high prices has flown under the radar. When drug companies reformulate their product, switching from one version of a drug to another, the price doesn't dramatically increase. Instead, it stays at a high level for longer than it otherwise would have without the switch. Although more difficult to discern than a price spike, this practice, when undertaken to prevent generic market entry, can result in the unjustified continuation of monopoly pricing, burdening patients, the government, and the health care system as a whole.

Not all reformulations pose competitive concerns. Empirical studies have shown that more than 80 percent can be explained by improvements that are not temporally connected to impending generic entry. But a dangerous subset of such reformulations is undertaken for one, and only one, reason: to delay generic entry. In such cases, reformulation is called "product hopping."

When generics enter the market, the price can fall dramatically overnight, by as much as 85 percent. For that reason, brand firms have every incentive to delay this moment of reckoning as long as possible. Sure enough, making trivial changes to their drugs has that effect. Every state has a substitution law that requires or allows pharmacists to offer a generic drug when the patient presents a prescription for a brand drug. But such substitution is thwarted if the drug is not the same—in particular, if it is not bioequivalent (able to be absorbed into the body at the same rate) and therapeutically equivalent (having the same active ingredient, form, dosage, strength, and safety and efficacy profile). A minor change to a drug's formulation can prevent the pharmacist from substituting the generic.

Product hopping raises nuanced issues arising at the intersection of patent law, antitrust law, the federal Hatch-Waxman Act, and state drug product substitution laws. It is even more complex given the uniquely complicated pharmaceutical market, in which the buyer (patient, insurance company) is different from the decision maker (doctor).

Courts applying US antitrust law have struggled to create a robust and defensible legal framework for separating anticompetitive product hops from competitively benign, legitimate product development. In this post, we propose a framework that would help courts defer to legitimate reformulations while targeting anticompetitive switches.

Different Courts, Different Decisions

One example of a minor formulation change that prevented generic entry involves the Alzheimer's drug Namenda. Facing the end of its patent term, brand firm Forest switched from Namenda IR (taken twice a day) to Namenda XR (taken once a day), allowing it to enjoy 14 additional years of patent protection. The original version was wildly profitable, earning $1.5 billion per year. Forest's decision to pull that blockbuster drug off the market would have made no economic sense for Forest—if the reformulation hadn't had the effect of thwarting generic competition. Put differently, the economics show that Forest's sole motive in making the switch was to impair generics. The US Court of Appeals for the Second Circuit upheld an injunction that prevented Forest from removing this drug from the market.

Another example, the harms of which the court did not fully appreciate, involves the acne-treating drug Doryx. Brand firm Warner Chilcott stopped selling the original capsule versions of its drug, removed capsules from its website, and bought back and destroyed capsules while introducing a reformulated version in tablet form (in successively different doses and with score marks allowing splitting). The US Court of Appeals for the Third Circuit admitted, for the purpose of its decision, that Warner "had indeed made the Doryx 'hops' primarily to 'delay generic market entry.'" Despite these flashing red lights, the court upheld the conduct, focusing on the effect of the switch on generic competitor Mylan, which was still able to enter the market with a profitable generic of one of the versions of Doryx, instead of focusing on the conduct's effect on consumers, who were forced to continue paying higher prices. It did so even though Warner forecast that its switch away from a product making tens of millions of dollars a year would not result in increased sales or profits—the switch made economic sense for Warner solely because it impaired generic substitutability. The substantial costs that Warner incurred in reformulating the product were not investments in increasing consumer welfare but investments in impairing competition. Nor is that the only concerning court decision. The District of Columbia Court in another case explained that when introducing Nexium, AstraZeneca kept its other heartburn drug Prilosec on the market, which allegedly "added choices" even though such a switch prevented many consumers from choosing a generic version of nearly identical Prilosec.

A Rational Framework For Anticompetitive Product Hopping

Instead of ignoring the regulatory regime or focusing on whether the original drug is removed from the market (hard switch) or remains on the market (soft switch), courts need to start taking account of the realities of the pharmaceutical industry. In particular, courts should consider whether the brand firm, in reformulating its drug, "cannibalizes" the sales of the original product; that is, encourages doctors to write prescriptions for the reformulated instead of the original product. Merely reformulating and selling a product, without cannibalizing its sales, does not present anticompetitive concern. Courts also should consider the timing of the switch, as timing that is unrelated to generic entry does not call for scrutiny.

For switches in which the brand firm cannibalizes the original product at a time when generic entry is expected, we suggest the application of a conservative, respected test that asks if the conduct would make economic sense for the brand firm if it did not impair generic competition. In other words, would the brand have switched the product if it did not have the effect of harming generics?

Such a test offers significant leeway to the brand firm, which would avoid liability unless the switch was a money-losing proposition for it (absent the effect of impairing competition), even if the switch in fact resulted in a net loss of consumer welfare (the standard under antitrust's traditional "Rule-of-Reason"). It also recognizes that both hard and soft switches can result in anticompetitive harm: The hard switch in Abbott Laboratories v. Teva Pharmaceuticals (TriCor) resulted in generics obtaining 2 percent of the market, and the soft switch in Walgreen led to 25 percent generic penetration, each far less than the 85 percent that would have been expected absent product hopping.

Applying a no-economic-sense test to product hopping would defer to legitimate reformulations while targeting anticompetitive switches—those in which the brand manufacturer has invested in impairing generic competition instead of in making economically rational improvements in its product. In either case, it would allow courts to apply an analysis more connected to the economics of the pharmaceutical industry.

Authors' Note

Counsel for direct-purchaser plaintiffs in Nexium and Doryx cases.

from Health Affairs BlogHealth Affairs Blog http://ift.tt/2simYFN

Pharmaceutical Product Hopping: A Proposed Framework For Antitrust Analysis

Skyrocketing drug prices are in the news. Overnight price increases have riveted the attention of the public, media, and politicians of all stripes. But one reason for high prices has flown under the radar. When drug companies reformulate their product, switching from one version of a drug to another, the price doesn’t dramatically increase. Instead, it stays at a high level for longer than it otherwise would have without the switch. Although more difficult to discern than a price spike, this practice, when undertaken to prevent generic market entry, can result in the unjustified continuation of monopoly pricing, burdening patients, the government, and the health care system as a whole.

Not all reformulations pose competitive concerns. Empirical studies have shown that more than 80 percent can be explained by improvements that are not temporally connected to impending generic entry. But a dangerous subset of such reformulations is undertaken for one, and only one, reason: to delay generic entry. In such cases, reformulation is called “product hopping.”

When generics enter the market, the price can fall dramatically overnight, by as much as 85 percent. For that reason, brand firms have every incentive to delay this moment of reckoning as long as possible. Sure enough, making trivial changes to their drugs has that effect. Every state has a substitution law that requires or allows pharmacists to offer a generic drug when the patient presents a prescription for a brand drug. But such substitution is thwarted if the drug is not the same—in particular, if it is not bioequivalent (able to be absorbed into the body at the same rate) and therapeutically equivalent (having the same active ingredient, form, dosage, strength, and safety and efficacy profile). A minor change to a drug’s formulation can prevent the pharmacist from substituting the generic.

Product hopping raises nuanced issues arising at the intersection of patent law, antitrust law, the federal Hatch-Waxman Act, and state drug product substitution laws. It is even more complex given the uniquely complicated pharmaceutical market, in which the buyer (patient, insurance company) is different from the decision maker (doctor).

Courts applying US antitrust law have struggled to create a robust and defensible legal framework for separating anticompetitive product hops from competitively benign, legitimate product development. In this post, we propose a framework that would help courts defer to legitimate reformulations while targeting anticompetitive switches.

Different Courts, Different Decisions

One example of a minor formulation change that prevented generic entry involves the Alzheimer’s drug Namenda. Facing the end of its patent term, brand firm Forest switched from Namenda IR (taken twice a day) to Namenda XR (taken once a day), allowing it to enjoy 14 additional years of patent protection. The original version was wildly profitable, earning $1.5 billion per year. Forest’s decision to pull that blockbuster drug off the market would have made no economic sense for Forest—if the reformulation hadn’t had the effect of thwarting generic competition. Put differently, the economics show that Forest’s sole motive in making the switch was to impair generics. The US Court of Appeals for the Second Circuit upheld an injunction that prevented Forest from removing this drug from the market.

Another example, the harms of which the court did not fully appreciate, involves the acne-treating drug Doryx. Brand firm Warner Chilcott stopped selling the original capsule versions of its drug, removed capsules from its website, and bought back and destroyed capsules while introducing a reformulated version in tablet form (in successively different doses and with score marks allowing splitting). The US Court of Appeals for the Third Circuit admitted, for the purpose of its decision, that Warner “had indeed made the Doryx ‘hops’ primarily to ‘delay generic market entry.’” Despite these flashing red lights, the court upheld the conduct, focusing on the effect of the switch on generic competitor Mylan, which was still able to enter the market with a profitable generic of one of the versions of Doryx, instead of focusing on the conduct’s effect on consumers, who were forced to continue paying higher prices. It did so even though Warner forecast that its switch away from a product making tens of millions of dollars a year would not result in increased sales or profits—the switch made economic sense for Warner solely because it impaired generic substitutability. The substantial costs that Warner incurred in reformulating the product were not investments in increasing consumer welfare but investments in impairing competition. Nor is that the only concerning court decision. The District of Columbia Court in another case explained that when introducing Nexium, AstraZeneca kept its other heartburn drug Prilosec on the market, which allegedly “added choices” even though such a switch prevented many consumers from choosing a generic version of nearly identical Prilosec.

A Rational Framework For Anticompetitive Product Hopping

Instead of ignoring the regulatory regime or focusing on whether the original drug is removed from the market (hard switch) or remains on the market (soft switch), courts need to start taking account of the realities of the pharmaceutical industry. In particular, courts should consider whether the brand firm, in reformulating its drug, “cannibalizes” the sales of the original product; that is, encourages doctors to write prescriptions for the reformulated instead of the original product. Merely reformulating and selling a product, without cannibalizing its sales, does not present anticompetitive concern. Courts also should consider the timing of the switch, as timing that is unrelated to generic entry does not call for scrutiny.

For switches in which the brand firm cannibalizes the original product at a time when generic entry is expected, we suggest the application of a conservative, respected test that asks if the conduct would make economic sense for the brand firm if it did not impair generic competition. In other words, would the brand have switched the product if it did not have the effect of harming generics?

Such a test offers significant leeway to the brand firm, which would avoid liability unless the switch was a money-losing proposition for it (absent the effect of impairing competition), even if the switch in fact resulted in a net loss of consumer welfare (the standard under antitrust’s traditional “Rule-of-Reason”). It also recognizes that both hard and soft switches can result in anticompetitive harm: The hard switch in Abbott Laboratories v. Teva Pharmaceuticals (TriCor) resulted in generics obtaining 2 percent of the market, and the soft switch in Walgreen led to 25 percent generic penetration, each far less than the 85 percent that would have been expected absent product hopping.

Applying a no-economic-sense test to product hopping would defer to legitimate reformulations while targeting anticompetitive switches—those in which the brand manufacturer has invested in impairing generic competition instead of in making economically rational improvements in its product. In either case, it would allow courts to apply an analysis more connected to the economics of the pharmaceutical industry.

Authors’ Note

Counsel for direct-purchaser plaintiffs in Nexium and Doryx cases.

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