Qualifying Single-Source Drug Policy, Medicare Price Negotiation, and the Incentives for Meaningful Post-Approval Innovation
Peter J. Pitts
Former FDA Associate Commissioner
President, Center for Medicine in the Public Interest
Executive Summary
Medicare has an obligation to get a fair price for medicines. It also has patients who are still waiting for a treatment. Those obligations meet when a company decides whether to finance another clinical trial of an approved drug. CMS’s qualifying single-source drug (QSSD) rules help determine the economics of that decision. Grouping an extended-release formulation with the original medicine may make sense. Applying the same rule to a treatment developed for another disease raises a harder question: what happens to the incentive to do the new research?
Manufacturers should not be able to divide Medicare spending among applications to escape negotiation. But preventing that maneuver does not settle how Medicare should recognize a substantial new therapeutic program. CMS needs to explain the distinction, and HHS needs to establish how far the statute allows the agency to act. Where legislation is required, Congress should authorize a narrowly drawn separate eligibility clock for qualifying later products. The case for that treatment must rest on clinical evidence and meaningful development work, rather than the number printed on an FDA application.
The same investment problem arises when a new indication is approved through a supplemental application. Those programs belong in this review. A clinically distinct later product may warrant a separate clock, where the law permits one; a new indication within an existing product requires a different approach. CMS should explain how its negotiation process recognizes the additional evidence and investment. Congress should consider a targeted development incentive if that recognition falls short. Established uses would keep their existing timetable. The purpose is to make worthwhile research financeable while preserving Medicare’s ability to negotiate.
The Decision Before CMS
An established molecule can still pose an unanswered clinical question. Will it work in another disease? Can it reach the relevant tissue safely? What dose will help the patient, and what risks come with it? An earlier approval may supply useful knowledge, but it cannot supply those answers. CMS’s grouping rules need to account for the work required to obtain them, even where the statute places the resulting products in the same negotiation category.
CMS can begin by making its clinical assessment and reasoning more explicit. HHS should examine the legal basis for a narrowly defined exception and identify any changes Congress would have to make. A separate clock requires lawful authority. Meanwhile, the agency can examine the development decisions its existing rules may discourage. Waiting for legislation need not mean waiting to understand the problem.
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