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Orphan Drug Act
Under the U.S. Orphan Drug Act, the FDA may
grant orphan drug designation to drugs or biologics
intended to treat a “rare disease or condition,” which
generally is a disease or condition that affects fewer
than 200,000 individuals in the U.S. If a product
which has an orphan drug designation subsequently
receives the first FDA approval for the indication for
which it has such designation, the product is entitled
to orphan exclusivity, i.e., the FDA may not approve
any other applications to market the same drug for
the same indication for a period of seven years
following marketing approval, except in certain very
limited circumstances, such as if the later product is
shown to be clinically superior to the orphan product.
Legislation similar to the U.S. Orphan Drug Act has
been enacted in other countries to encourage the
research, development and
marketing of medicines to
treat, prevent or diagnose rare diseases. In the E.U.,
medicinal products that receive an orphan designation
are entitled to 10 years of market exclusivity following
approval, protocol assistance and access to the
centralized procedure for marketing authorization.
SPINRAZA has been granted orphan drug designation
in the U.S., E.U. and Japan.
Regulation Pertaining to Pricing and
Reimbursement
In both domestic and foreign markets, sales of
our products depend, in part, on the availability and
amount of reimbursement by third-party payors,
including governments, private health plans and other
organizations. Substantial uncertainty exists regarding
the pricing and reimbursement of our products, and
drug prices continue to receive significant scrutiny.
Governments may regulate coverage, reimbursement
and pricing of our products to control cost or affect
utilization of our products. Challenges to our pricing
strategies, by either government or private
stakeholders, could harm our business. The U.S. and
foreign governments have enacted and regularly
consider additional reform measures that affect
health care coverage and costs. Private health plans
may also seek to manage cost and utilization by
implementing
coverage and reimbursement
limitations. Other payors, including managed care
organizations, health insurers, pharmacy benefit
managers, government health administration
authorities and private health insurers, seek price
discounts or rebates in connection with the placement
of our products on their formularies and, in some
cases, may impose restrictions on access, coverage
or pricing of particular drugs based on perceived
value.
Within the U.S.
• Medicaid: Medicaid is a joint federal and state
program that is administered by the states for
low income and disabled beneficiaries. Under
the Medicaid Drug Rebate Program, we are
required to pay a rebate for each unit of product
reimbursed by the state Medicaid programs. The
amount of the rebate is established by law and
is adjusted upward if average manufacture price
(AMP) increases more than inflation (measured
by the Consumer Price Index - Urban). The rebate
amount is calculated each quarter based on our
report of current AMP and best price for each of
our products to the Centers for Medicare &
Medicaid Services (CMS). The requirements for
calculating AMP and best price are complex. We
are required to report any revisions to AMP or
best price previously
reported within a certain
period, which revisions could affect our rebate
liability for prior quarters.
In addition, if we fail to
provide information timely or we are found to
have knowingly submitted false information to
the government, the statute governing the
Medicaid Drug Rebate Program provides for civil
monetary penalties.
• Medicare: Medicare is a federal program that is
administered by the federal government. The
program covers individuals age 65 and over as
well as those with certain disabilities. Medicare
Part B generally covers drugs that must be
administered by physicians or other health care
practitioners; are provided in connection with
certain durable medical equipment; or are
certain oral anti-cancer drugs and certain oral
immunosuppressive drugs. Medicare Part B pays
for such drugs under a payment methodology
based on the average sales price (ASP) of the
drugs. Manufacturers, including us, are
required
to provide ASP information to the CMS on a
quarterly basis. The manufacturer-submitted
information is used to calculate Medicare
payment rates. If a manufacturer is found to
have made a misrepresentation in the reporting
of ASP, the governing statute provides for civil
monetary penalties.
• Medicare Part D provides coverage to enrolled
Medicare patients for self-administered drugs
(i.e., drugs that are not administered by a
physician). Medicare Part D is administered by
private prescription drug plans approved by the
U.S. government. Each drug plan establishes its
own Medicare Part D formulary for prescription
drug coverage and pricing, which the drug plan
may modify from time-to-time. The prescription
drug plans negotiate pricing with manufacturers
and pharmacies, and may condition formulary
placement on the availability of manufacturer
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discounts. In addition, manufacturers, including
us, are required to provide to the CMS a 50%
discount on brand name prescription drugs
utilized by Medicare Part D beneficiaries when
those beneficiaries reach the coverage gap in
their drug benefits.
• Federal Agency Discounted Pricing: Our products
are subject to discounted pricing when
purchased by federal agencies via the Federal
Supply Schedule (FSS). FSS participation is
required for our products to be covered and
reimbursed by the Veterans Administration (VA),
Department of Defense, Coast Guard and Public
Health Service (PHS). Coverage under Medicaid,
Medicare and the PHS pharmaceutical pricing
program is also conditioned upon FSS
participation. FSS pricing is intended not to
exceed the price that we charge our most-favored
non-federal customer for a product. In addition,
prices for drugs purchased by the VA,
Department of Defense (including drugs
purchased by military personnel and dependents
through the TriCare retail pharmacy program),
Coast Guard and PHS are subject to a cap on
pricing equal to 76% of the non-federal average
manufacturer price (non-FAMP). An additional
discount applies
if non-FAMP increases more
than inflation (measured by the Consumer Price
Index - Urban). In addition, if we fail to provide
information timely or we are found to have
knowingly submitted false information to the
government, the governing statute provides for
civil monetary penalties.
• 340B Discounted Pricing: To maintain coverage
of our products under the Medicaid Drug Rebate
Program and Medicare Part B, we are required to
extend significant discounts to certain covered
entities that purchase products under Section
340B of the PHS pharmaceutical pricing
program. Purchasers eligible for discounts
include hospitals that serve a disproportionate
share of financially needy patients, community
health clinics and other entities that receive
certain types of grants under the PHSA. For all of
our products, we must agree to charge a price
that will not exceed the amount determined
under statute (the “ceiling price”)
when we sell
outpatient drugs to these covered entities. In
addition, we may, but are not required to, offer
these covered entities a price lower than the
340B ceiling price. The 340B discount formula is
based on AMP and is generally similar to the
level of rebates calculated under the Medicaid
Drug Rebate Program.
Outside the U.S.
Outside the U.S., our products are paid for by a
variety of payors, with governments being the primary
source of payment. Governments may determine or
influence reimbursement of products and may also
set prices or otherwise regulate pricing. Negotiating
prices with governmental authorities can delay
commercialization of our products. Governments may
use a variety of cost-containment measures to control
the cost of products, including price cuts, mandatory
rebates, value-based pricing and reference pricing
(i.e., referencing prices in other countries and using
those reference prices to set a price). Budgetary
pressures in many countries are continuing to cause
governments to consider or implement various cost-
containment
measures, such as price freezes,
increased price cuts and rebates and expanded
generic substitution and patient cost-sharing.
Regulation Pertaining to Sales and Marketing
We are subject to various federal and state laws
pertaining to health care “fraud and abuse,” including
anti-kickback laws and false claims laws. Anti-
kickback laws generally prohibit a prescription drug
manufacturer from soliciting, offering, receiving or
paying any remuneration to generate business,
including the purchase or prescription of a particular
drug. Although the specific provisions of these laws
vary, their scope is generally broad and there may be
no regulations, guidance or court decisions that clarify
how the laws apply to particular industry practices.
There is therefore a possibility that our practices
might be challenged under anti-kickback or similar
laws. False claims laws prohibit anyone from
knowingly and willingly presenting, or causing to be
presented for payment to third-party payors (including
Medicare and Medicaid), claims for reimbursed drugs
or services that are false or fraudulent, claims for
items or services
not provided as claimed, or claims
for medically unnecessary items or services. Our
activities relating to the sale and marketing of our
products may be subject to scrutiny under these laws.
Violations of fraud and abuse laws may be punishable
by criminal or civil sanctions, including fines and civil
monetary penalties, and exclusion from federal health
care programs (including Medicare and Medicaid). In
the U.S., federal and state authorities are paying
increased attention to enforcement of these laws
within the pharmaceutical industry and private
individuals have been active in alleging violations of
the laws and bringing suits on behalf of the
government under the federal civil False Claims Act. If
we were subject to allegations concerning, or were
convicted of violating, these laws, our business could
be harmed.