Senate Committee on Finance Questions for the Record
`
`Drug Pricing in America: A Prescription for Change, Part II
`February 26, 2019
`
`Questions for:
`Olivier Brandicourt, M.D.
`Chief Executive Officer
`Sanofi
`
`Senator Grassley:
`For all witnesses:
`
`The Department of Health and Human Services’ proposed rule, “Fraud and Abuse;
`Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals
`and Creation of New Safe Harbor Protection for Certain Point-of-Sale Reductions in Price
`on Prescription Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees”,
`envisions that drug manufacturers will offer upfront discounts rather than the back-end
`rebates that are now commonly provided. Some observers argue that a 1996 court case
`called into question whether manufacturers could offer upfront discounts, resulting in
`today’s rebate-based system. I’ve heard differing opinions as to whether the issues related
`to the initial court case are still relevant. If the HHS proposed rule is finalized, can you
`assure the Committee that your company will offer upfront discounts? If not, why?
`
`
`As the question notes, one of the practical implications of the Proposed Rule is to
`incentivize a shift from back-end rebate payments to upfront discounts that are passed through at
`the point-of-service to the patient (at least in part). We understand that some in the health care
`industry have raised concerns that the nation’s antitrust laws, specifically the Robinson-Patman
`Act, and long-running antitrust litigation involving drug manufacturers, wholesalers, and
`pharmacies could prevent or reduce discounting under a pricing structure without rebates. But,
`the Robinson-Patman Act focuses on price discrimination -- involving any dimension of price --
`and it does not distinguish between upfront discounts and rebates. In addition, the referenced
`litigation, In re Brand Name Prescription Drugs Antitrust Litigation, did not result in any change
`in the ability of a prescription drug manufacturer to offer an upfront discount. Consequently,
`because Sanofi’s view is that the antitrust laws apply equally to upfront discounts and back-end
`rebates, we do not believe that they present any impediment to offering upfront discounts to
`patients at the point of sale. Sanofi is committed to working with other stakeholders to lower
`patient out-of-pocket costs, and the company will carefully review any final rule issued by HHS
`regarding the Anti-Kickback Statute and its safe harbor regulations -- with the goal of providing
`point-of-sale discounts to patients in a compliant manner to help lower patient out-of-pocket
`costs.
`
`
`
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`Please describe how you expect your company to respond to the HHS proposed rule to
`eliminate safe harbor protection for back-end rebates in Medicare Part D that is
`referenced above if it is finalized. Assuming you are confident that antitrust laws do not
`prevent your company from offering upfront discounts, specifically, do you envision that
`your company lowers the list price of a drug to the current after-rebate net price, offer
`discounts equal to the current rebate amount, or a combination of both?
`
`Sanofi is committed to working with other stakeholders to lower patient out-of-pocket costs, and
`the company will carefully review any final rule issued by HHS regarding the Anti-Kickback
`Statute and its safe harbor regulations -- with the goal of providing point-of-sale discounts to
`patients in a compliant manner to help lower patient out-of-pocket costs.
`
`With respect to list price, if (1) the proposed changes to the anti-kickback statute safe harbors
`were codified, and (2) Congress implemented similar changes to the commercial insurance
`market, Sanofi would lower the list prices of its prescription medications for products in
`competitive categories for which there is currently a material difference between list price and
`net price on the assumption that patient access and affordability would be improved. Sanofi also
`supports policy changes that would de-link other payments in the pharmaceutical supply chain
`from list price.
`We support extending the intent behind the anti-kickback statute safe harbor proposed rule to the
`commercial market so that incentives are aligned across the marketplace. Together, we believe
`these changes would facilitate Sanofi’s ability to lower our list prices. However, we recommend
`a step-wise approach, implementing changes to the commercial market after the safe harbor rule
`is implemented on January 1, 2020. Such an approach would provide an opportunity for
`stakeholders and the government to identify unintended consequences, and address them, prior to
`extending these policies to the commercial market.
`We want to ensure that the new system achieves its goal of improving affordability for patients.
`For instance, CMS should monitor and evaluate how the new system affects formulary access,
`utilization management, and patient cost-sharing, particularly with respect to medicines with a
`lower list price. We also have concerns that changes to the rebate system may lead to new fees,
`which simply require manufacturers to pay previous rebate values in new ways, rather than
`creating savings for patients.
`Without a better understanding of how these policy changes ultimately would affect the
`competitive marketplace, patient access, and affordability, we are unable to quantify the amount
`of upfront discounts or any potential list price reduction.
`
`To what extent are the back-end rebates your company currently offers contingent on the
`amount of market share realized for your drugs as a result of Part D plan formulary
`placement and other techniques?
`
`Sanofi negotiates rebates with PBMs and Part D plans to secure better formulary position for our
`products, which in turn provides the best possible access and cost sharing for the majority of
`
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`Medicare Part D beneficiaries. When evaluating what level of rebates to offer, Sanofi considers
`the potential business impact of such arrangements.
`
`Please provide a breakdown of percentage of sales that go to each payer (including
`Medicare, Medicaid, private pay, other) and a similar percentage by volume of the total
`number of each drug compared to total volume. Please provide this data for the most
`recent year available.
`
`
`Primary Care Products
`
`
`
`Channel
`
`Product Commercial Medicare Medicaid Tricare
`
`Percentage of Sales by Payer Channel1
`
`
`36%
`39%
`15%
`
`10%
`7%
`3%
`
`0%
`0%
`0%
`
`340B
`
`5%
`4%
`3%
`
`FSS
`Others2
`19%
`2%
`1%
`
`Institutional3
`
`4%
`0%
`0%
`
`2%
`0%
`2%
`38%
`
`Institutional
`
`4%
`0%
`0%
`
`2%
`0%
`2%
`38%
`
`7%
`0%
`12%
`5%
`
`FSS
`Others
`19%
`2%
`1%
`
`7%
`0%
`12%
`5%
`
`25%
`47%
`77%
`
`Lantus
`Toujeo
`Soliqua
`100/33
`16%
`Apidra
`Admelog 0%
`Multaq
`24%
`Praluent
`22%
`
`1%
`0%
`57%
`32%
`
`66%
`91%
`2%
`1%
`
`0%
`0%
`0%
`0%
`
`8%
`9%
`3%
`2%
`
`
`
`Percentage by Volume by Payer Channel
`Channel
`
`Product Commercial Medicare Medicaid Tricare
`
`340B
`
`25%
`47%
`77%
`
`Lantus
`Toujeo
`Soliqua
`100/33
`16%
`Apidra
`Admelog 0%
`Multaq
`24%
`Praluent
`22%
`
`
`
`
`36%
`39%
`15%
`
`1%
`0%
`57%
`32%
`
`10%
`7%
`3%
`
`67%
`91%
`2%
`1%
`
`5%
`4%
`3%
`
`7%
`9%
`3%
`2%
`
`0%
`0%
`0%
`
`0%
`0%
`0%
`0%
`
`
`
`
`1 Based on gross sales.
`2 This category includes the VA, DOD, and other purchases through Sanofi US’s Federal Supply Schedule (FSS).
`3 This category includes Hospital/GPO, Long Term Care, Outpatient, and Staff Model.
`3
`
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`Specialty Care Products
`
`Percentage of Sales by Payer Channel4
`
`
`Commercial/
`Managed
`Care
`
`
`
`Product
`
`0%
`Cerdelga
`0%
`Cerezyme
`0%
`Aldurazyme
`0%
`Fabrazyme
`0%
`Myozyme
`0%
`Thyrogen
`0%
`Caprelsa
`47%
`Aubagio
`0%
`Lemtrada
`69%
`Kevzara
`75%
`Dupixent
`0%
`Eloctate
`0%
`Alprolix
`0%
`Jevtana
`0%
`Zaltrap
`0%
`Elitek
`0%
`Mozobil
`Thymoglobulin 0%
`
`Channel
`Medicare Medicaid/VA
`/
`DOD/Tricare
`6%
`15%
`29%
`10%
`15%
`5%
`10%
`11%
`10%
`4%
`6%
`33%
`27%
`1%
`0%
`1%
`6%
`0%
`
`
`Do your companies hire consultants or lobbyists to promote products at state Medicaid
`Pharmacy & Therapeutics Committees? To whom do you disclose advocacy activities
`surrounding state Medicaid programs, if at all?
`
`Sanofi does not hire external consultants or lobbyists to advocate for coverage of our products at
`state Medicaid Pharmacy & Therapeutics Committees. Sanofi employees do attend state
`Medicaid Pharmacy & Therapeutics Committees meetings. Relevant advocacy activities to
`support Medicaid access and coverage of our medicines, if any, are disclosed to states in
`accordance with individual state laws.
`
`
`12%
`15%
`6%
`13%
`18%
`4%
`6%
`33%
`35%
`15%
`9%
`5%
`5%
`70%
`0%
`15%
`25%
`0%
`
`PHS/
`340B
`
`Non-Contracted
`Sales
`
`4%
`22%
`23%
`26%
`31%
`25%
`0%
`2%
`41%
`3%
`3%
`37%
`39%
`30%
`0%
`7%
`45%
`4%
`
`78%
`48%
`42%
`51%
`36%
`66%
`84%
`7%
`14%
`9%
`7%
`25%
`29%
`0%
`100%
`77%
`24%
`96%
`
`1. Please describe how the costs of patient assistance programs are accounted for
`within your company’s financial statements. Please also describe the types of
`
`
`4 The data used to derive this information is contracted sales data. Because many of these products are purchased
`through non-contracted sales, Sanofi has a limited view regarding through which channels these products are
`purchased. Percentage by volume by channel results in similar percentages to percentage by sales so a separate
`chart is not provided.
`
`
`
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`market information, such as prescribing and use patterns, that your company
`collects from different types of patient assistance programs and patient hub services.
`
`
`
`Within Sanofi’s financial statements, Sanofi includes the administrative costs of the
`company’s co-pay assistance programs, other point-of-sale programs, and free drug patient
`assistance program (Sanofi Patient Connection) in the “Selling and general expenses” line
`item. For co-pay assistance and other point-of-sale programs, Sanofi records the pharmacy
`reimbursement amount paid by the company as a reduction in sales. Sanofi records free product
`provided through Sanofi Patient Connection within “Cost of Sales.” Sanofi Care North America,
`the 501(c)(3) operating foundation that donates free product to Sanofi Patient Connect, records
`the free goods as a “Contribution” when received from Sanofi and as a “Donation” when donated
`to Sanofi Patient Connection.
`With regard to market information associated with its patient assistance programs and
`hub services, Sanofi generally collects data that aids in the efficient administration and operation
`of these programs. For example, the vendors operating Sanofi Patient Connection and the hubs
`collect information provided by patients on enrollment forms, including patient and provider
`demographic information, patient insurance information, patient diagnosis, and prescription
`information necessary to evaluate patient program eligibility and/or administer the program.
`(Sanofi does not itself receive patient protected health information except in very limited
`circumstances, such as when a patient reaches out to Sanofi directly when they do not agree with
`their patient assistance eligibility determination or when Sanofi monitors vendor calls for
`compliance with company policies and procedures.) With respect to Sanofi Patient Connection,
`Sanofi does not use this information for purposes other than administering the patient assistance
`program. With respect to hub services, in addition to using this information to administer hub
`programs, Sanofi may use this data to develop market and business insights.
`
`With respect to Sanofi’s point-of-sale patient assistance programs, Sanofi also receives
`anonymized program utilization data, including information about patient out-of-pocket costs,
`the average amounts that Sanofi reimburses pharmacies through the program, abandonment
`rates, dispensing pharmacies, and the prescribers writing the prescriptions associated with
`program utilization. This information is used to administer the program. Sanofi may also use
`this data to develop market and business insights.
`
`2. Please provide a list of all contributions since January 1, 2014, that your company
`has made to any tax exempt organizations working on issues related to drugs within
`your product lines, including but not limited to patient groups, disease awareness
`groups, medical or professional societies, universities or hospitals, industry
`associations or leagues. For each contribution, please provide the name of the
`organization that received the donation, the date the donation was made, the
`amount of the donation, and a description of the purpose of the contribution (i.e.,
`was the contribution for the general fund, a specific purpose to a specific program,
`or continuing medical education). Please also note whether the contribution was
`unrestricted or restricted; if it was restricted, please explain all restrictions. Finally,
`
`
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`if your company maintains a foundation or other separate charitable arm, please
`provide the name of all such entities, and list all donations made from that entity or
`entities.
`
`
`
`In the attached documents, we have provided information for the period January 1, 2015
`through December 31, 2018 regarding payments made by Sanofi US to tax exempt
`organizations.5 The information is provided in a number of documents consistent with how
`Sanofi maintains this information. In some cases, this information may be over-inclusive and
`include non-tax exempt organizations (e.g., contributions for independent medical education into
`both non-profit and other entities). The information includes contributions and sponsorships to
`various tax-exempt healthcare-oriented organizations, including patient groups. The information
`also includes contributions made for independent medical education grants, and to teaching
`hospitals for investigator-sponsored trials and for physician fellowship payments. On March 8,
`2018, Sanofi acquired Bioverativ, Inc., a biopharmaceutical company focused on therapies for
`hemophilia and other rare blood disorders. The attached documents also describe the monetary
`contributions to tax exempt organizations made by Bioverativ since March 8, 2018.
`
`
`With respect to any foundations or charitable arms of Sanofi, from January 1, 2014
`through the end of 2017, Sanofi maintained an entity called Sanofi Foundation of North
`America, a 501(c)(3) nonprofit operating foundation that was closed at the end of 2017.
`Donations made from that entity are included in the attachments described above. Currently,
`Sanofi maintains an entity called Sanofi Cares North America, which is a 501(c)(3) nonprofit
`operating foundation that makes donations of Sanofi products free of charge to eligible
`financially-needy uninsured and underinsured patients through a program known as the Sanofi
`Patient Connection. Sanofi Cares North America also donates product to five non-governmental
`organization partners for the purpose of emergency disaster relief – Americares, DirectRelief,
`Heart to Heart International, MAP International, and Project Hope, and to approximately one
`hundred summer camps with 501(c)(3) status for children with diabetes.
`
`Pay for delay agreements cost consumers and taxpayers billions in higher drug costs every
`year. The FTC has gone after drug companies that enter into these settlements where the
`brand pays the generic company to keep its lower cost alternative off the market. I’m the
`lead republican sponsor of S. 64, the “Preserve Access to Affordable Generics and
`Biosimilars Act,” which would help put an end to these deals.
`• Do you agree that these pay-off agreements keep drug costs high for patients
`because they delay competition?
`
`
`
`5 These contributions may not relate to particular drug products. Sanofi US supports programs and initiatives of
`external, independent, not-for-profit organizations that align with Sanofi US’s corporate vision and values. These
`organizations are generally healthcare-oriented and focus on one or more therapeutic areas in which Sanofi US is
`actively involved. The attached information focuses on Sanofi US entities that manufacture and sell drug products
`and does not include entities that manufacturer and sell consumer health products or vaccines. Contribution
`information prior to 2015 is archived in databases and systems that Sanofi does not currently maintain and which are
`not easily accessible. The information available does not distinguish between restricted and unrestricted grants.
`6
`
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`With respect to patent litigation, Sanofi believes it is inappropriate to presume that any
`settlement of patent litigations related to pharmaceutical products is anticompetitive. Patent
`settlements are often the most efficient and effective way to resolve disputes regarding patented
`drugs, and they often lead to the earliest appropriate entry of generic products into the market,
`which benefits patients. In fact, settlements permit entry of a generic alternative into the market
`earlier than expiration of the relevant branded product’s patent. Each patent litigation and
`potential settlement presents unique factors and must be considered individually and in light of
`the relevant circumstances.
`
`
`• Has your company ever entered into these kinds of settlements with a generic
`company?
`
`No, Sanofi does not enter into “pay for delay” or “reverse payment” agreements that
`prohibit generic drug or biosimilar development after the expiration of a patent. Sanofi has
`reached settlements in patent infringement cases, and these agreements have allowed the generic
`company to commercialize its product before the expiration of the branded product’s patent(s).
`
`• Do you support the pay for delay bill?
`
`We support the intent behind this legislation to promote competition, including
`prohibitions on “reverse payment” agreements. However, we have significant concerns with the
`way that this bill is drafted, and therefore we do not support this particular legislation.
`
`We believe that it is inappropriate to make settlements of patent litigations presumptively
`illegal or to classify such settlements as anticompetitive. Such settlements can be the most
`efficient and effective way to resolve legitimate disputes regarding patented drugs, and they
`often lead to the earliest appropriate entry of generic products into the market, which in turn
`benefits patients. As stated above, each patent litigation and potential settlement presents unique
`factors and must be considered individually and in light of the relevant circumstances.
`
`Additionally, we have concerns that this bill could apply retroactively to agreements
`entered into after June 17, 2013. For clarity and certainty in the marketplace, any new legislation
`governing the settlement of patent litigation should apply prospectively only.
`
`
`Rebate Traps/Walls
`I’m increasingly concerned about the effect of so-called “rebate traps” or “rebate
`walls” on patients’ access to quality, lower cost medicine. I understand there is
`ongoing litigation challenging these practices as anti-competitive.
`
`1. Does your company engage in the bundling of rebates over multiple products? If so,
`why? And what benefit does the consumer gain from that?
`
`Sanofi offers discounts in bundled sales arrangements only in limited circumstances. For
`example, Sanofi may offer bundled discounts on its products Toujeo® and Lantus® to ensure that
`both products attain a formulary position that benefits patients. This is especially important
`because the products may serve patients with different medical needs.
`
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`2. Does your company view these practices as anticompetitive or harmful to patients’
`access to quality, lower cost medicine?
`
`Sanofi prioritizes patient access to medications at a reasonable cost. Sanofi’s
`arrangements with individual PBMs or insurers promote this goal by maintaining stability of
`supply at affordable prices. In competitive drug markets, Sanofi may enter into arrangements
`with particular PBMs or insurers that permit Sanofi to further reduce its prices on one or more
`medications in exchange for greater certainty regarding the amount of those medications it will
`sell over a specified term. These arrangements promote patient access to quality, affordable
`medications, are procompetitive, and comply with the antitrust laws.
`
`Moreover, in competitive drug markets Sanofi’s ability to ensure patient access to
`affordable medications is affected both by PBMs and insurers (who may have considerable
`negotiating leverage over manufacturers) and by other manufacturers (who may respond to
`competition from Sanofi in a variety of ways). While some manufacturers may respond by
`building “rebate walls” or “rebate traps” around their products, Sanofi shares the Committee’s
`concern about practices that are harmful to patients’ access to quality, affordable medication.
`
`3. If a policy were adopted to eliminate rebates, or to require that rebate savings be
`passed on to the consumer, would that in and of itself solve the issue of rebate
`“traps” and “walls”? And would consumers benefit from such a policy?
`
`The elimination of safe harbor protection for rebates would remove incentives for
`manufacturers to attempt to influence formulary placement through such discounts. It is also
`possible that competitive products would be launched at lower list prices and more readily
`incorporated into formularies on the basis of their clinical benefits in a world without rebates.
`This would benefit the system overall, including consumers.
`
`Drug Pricing
`a) When setting the list price of a drug, does your company consider regulatory costs
`or compliance? If so, how specifically do those factors affect the list price of a drug?
`Please provide at least one specific example, if applicable, from your current
`product portfolio.
`
`The primary factors that Sanofi considers in setting list price include the value of the
`product, the competitive environment, patient affordability and access, investment in further
`product development or needs to reinvest in R&D more generally. In certain limited cases,
`Sanofi also will consider regulatory costs when setting the list price of a product. These factors
`may be considered, for example, where ongoing clinical trials are needed for a particular therapy
`or when the FDA mandates a Risk Evaluation and Mitigation Strategy (“REMS”) for a product –
`such as with Sanofi’s drug Lemtrada®. Sanofi does not, however, consider our routine and
`ongoing regulatory compliance efforts within the cost of our products. Rather, those efforts are
`considered part of Sanofi’s operating costs.
`
`
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`b) When setting the list price of a drug, does your company consider the risk of
`liability or litigation? If so, how specifically do those factors affect the list price of a
`drug? Please provide at least one specific example, if applicable, from your current
`product portfolio.
`
`When conducting its pricing analysis for a new drug, Sanofi does not specifically
`consider the risk of liability or litigation associated with such product.
`
`Senator Roberts:
`1. What role do you see Value Based Arrangements (VBAs) playing in the effort to reduce
`prescription drug costs? What potential do these arrangements have to find the “sweet
`spot” between controlling costs to patients and encouraging innovation of new drugs?
`
`2. How can VBAs help lower what patients pay out-of-pocket?
`
`3. Can Congress do more to allow for and encourage the use of VBAs?
`
`
`This response covers the three VBA questions above.
`
`Sanofi believes that encouraging an environment that is supportive of value-based
`arrangements would help promote drug affordability, increase patient access to medicines, and
`improve patient adherence and outcomes. Although there are different types of these
`agreements, value-based contracts generally tie prices and payments to the value of a particular
`prescription drug product – while potentially reducing patient out-of-pocket costs and providing
`patients with better access to the most innovative drug products. A manufacturer could, for
`example, condition payment for a product on its success in meeting a predefined clinical
`outcome, and this type of arrangement could make drugs more affordable and lower healthcare
`costs throughout the system.
`
`
`Facilitating value-based arrangements also could encourage new drug innovation, control
`costs for such new products, and recognize the full value of complex and personalized
`treatments. Nevertheless, despite the promise of these arrangements, industry stakeholders –
`including manufacturers and payers – need better legal and regulatory clarity. For example, we
`support the creation of a safe harbor from Anti-Kickback Statute liability to protect value-based
`agreements. We also are supportive of any legislation that would facilitate value-based
`arrangements and protect them from legal enforcement, such as the Patient Affordability, Value,
`and Efficiency Act (PAVE Act).
`
`Senator Cornyn:
`For all witnesses:
`
`We continue to hear that rebates negotiated off of the list price of a drug are both good and
`bad.
`
`
`
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`Pharmacy benefit managers and plans have argued that rebates are used to lower
`premiums across the board and that it is the best way to seek a price concession on
`otherwise expensive drugs.
`
`
`Your industry argues that these payers are insisting on higher rebates that can only be
`achieved by raising list prices.
`
`
`But patients often lose under this system, with out of pocket costs being tied to list price.
`Insulin patients appear to be routinely impacted by this perversity in the system.
`
`
`• Please explain to the committee how your company would reduce list prices if
`rebates were no longer a part of the equation?
`
`• What assurance can you provide that you would in fact lower your prices?
`
`• What actions should be taken to ensure that patients are actually seeing the benefits
`of lower out of pocket costs?
`
`
`
`If (1) the proposed changes to the anti-kickback statute safe harbors were codified, and
`(2) Congress implemented similar changes to the commercial insurance market, Sanofi would
`lower the list prices of its prescription medications for products in competitive categories for
`which there is currently a material difference between list price and net price on the assumption
`that patient access and affordability would be improved. Sanofi also supports policy changes
`that would de-link other payments in the pharmaceutical supply chain from list price.
`
`
`We support extending the intent behind the anti-kickback statute safe harbor proposed
`rule to the commercial market so that incentives are aligned across the marketplace. Together,
`we believe these changes would facilitate Sanofi’s ability to lower its list prices. However, we
`recommend a step-wise approach, implementing changes to the commercial market after the safe
`harbor rule is implemented on January 1, 2020. Such an approach would provide an opportunity
`for stakeholders and the government to identify unintended consequences, and address them,
`prior to extending these policies to the commercial market.
`
`
`We want to ensure that the new system achieves its goal of improving affordability for
`patients. For instance, CMS should monitor and evaluate how the new system affects formulary
`access, utilization management, and patient cost-sharing, particularly with respect to medicines
`with a lower list price. We also have concerns that changes to the rebate system may lead to new
`fees, which simply require manufacturers to pay previous rebate values in new ways, rather than
`creating savings for patients.
`
`
`Without a better understanding of how these policy changes ultimately would affect the
`competitive marketplace, patient access, and affordability, we are unable to quantify the amount
`of any potential list price reduction.
`
`
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`10
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`Mylan Ex.1086
`Mylan v. Sanofi - IPR2018-01676
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`With respect to actions that should be taken to ensure patients are seeing the benefit of
`lower out-of-costs, we support legislation that would incentivize manufacturers to lower list
`prices by connecting better patient access and affordability to such pricing actions.
`If rebates are driving high list prices for drugs as drug manufacturers’ claim, why do you
`think that Part B drugs, which have no PBM rebates, are also seeing significant price
`increases? Whose fault is that?
`
`
`Sanofi considers a variety of factors when setting or raising its list prices. These factors
`include the value of the product, the competitive environment, patient affordability and access,
`investment in further product development or needs to reinvest in R&D more generally. Within
`this framework, any list price increase is made consistent with our pricing principles, including
`our commitment to limit the total annual increase to a level at or below the NHE projected
`growth rate, as estimated by CMS.
`
`Although we agree that one factor in price increases across the industry may be the
`increased demand for rebates at the PBM and health plan level, that is not the only factor. In
`fact, Sanofi believes that reducing incentives for high prices throughout the supply chain by
`delinking payments from list price would have a meaningful impact on price and patient costs.
`This is true, for example, with group purchasing organizations (GPOs) that negotiate pricing for
`Part B providers. As with PBMs, these GPOs negotiate rebates and administrative fees that are
`linked to the list price of the product. These structures thus create the same misalignment of
`interests as in the PBM setting. It is important to note, as well, that the current average sales
`price (ASP)-based system for Medicare Part B works to moderate price growth because
`reimbursement reflects the weighted average of discounts given to providers, payers, and other
`commercial purchasers. This means that the Medicare program and its beneficiaries benefit from
`the discounts health plans and providers negotiate on these drugs. Due to this market-based
`competition, ASP reimbursement rates often are substantially lower than list prices.
`
`
`
`Biosimilar Competition/Insulin
`
`
`Biosimilars have been much anticipated as a solution to the drug pricing crisis. In
`particular, the FDA is moving to make insulin a biologic that would be subject to
`biosimilar competition in the future.
`
`But we are hearing from all of you that the biosimilar market doesn’t work and the benefit
`of these cheaper but equally effective alternatives are really not available to U.S. patients.
`
`
`• Can a biosimilar version of insulin be part of the solution for diabetes patients?
`
`• If so, what changes need to be made to the system so that patients and the taxpayer
`can realize the benefit of biosimilars? (Merck gave up on pursuing a biosimilar to
`Sanofi’s Lantus6)
`
`6 https://www.fiercepharma.com/pharma/merck-ditches-biosimilar-lantus-but-will-ease-path-for-mylan-s-rival-
`insulin-product
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`11
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`Mylan Ex.1086
`Mylan v. Sanofi - IPR2018-01676
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`

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`Sanofi believes that biosimilars currently – and will continue to – result in increased
`competition. In fact, this type of competition has grown among insulin manufacturers in recent
`years, and we expect that it will continue to lower prices for patients with diabetes. For example,
`in 2016, Eli Lilly introduced a follow-on biologic to Sanofi’s drug Lantus. Additionally, in
`2018, Sanofi introduced Admelog, a follow-on biologic of Humalog, at a list price that was 15%
`lower than the reference product. Mylan also is developing a second follow-on insulin glargine
`that references Lantus, and Sanofi is developing a biosimilar insulin aspart, a rapid-acting
`insulin, which we