Eight Quick Points about HB 3574
Just Say "No" (to Price Fixing)
Regarded by his own office as “the most conservative member of the Massachusetts legislature,” Republican Nicholas Boldyga last week introduced HB 3574, a bill to impose a price cap on an “MDMA treatment service unit” in the event MDMA is approved by FDA.
For convenience’s sake, here is the text:
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
SECTION 1. Section 7 of chapter 94C of the General Laws, as appearing in the 2020 Official Edition, is hereby amended by adding the following subsection:
(j) Any person or entity registered to prescribe, manufacture, distribute, dispense or provide services related to 3,4-methylenedioxymethamphetamine (MDMA) shall not charge more than $5,000 per MDMA treatment service unit. For the purposes of this subsection, “MDMA treatment service unit” shall mean any prescribed and controlled administration of MDMA in any 7-day consecutive period including therapy and related counseling.
SECTION 2. Paragraph (a) of Class B of section 31 of chapter 94C of the General Laws, as so appearing, is hereby amended by striking out clause (8).
SECTION 3. Section 2 of this act shall take effect upon the approval of 3,4 methylenedioxymethamphetamine (MDMA) as a prescription drug by the United States Food and Drug Administration and the secretary of the commonwealth shall publish notice of the effective date of this act in the Massachusetts Register.
Relaxing barriers to access is generally good. But whatever one thinks about access/equity problems, price caps aren’t a true solution.
State price controls are unlikely to achieve their intended purpose. Indeed, it isn’t hard to see how they backfire. If I’m a for-profit company and forced to take low-margins or a loss in Massachusetts, I don’t offer the product there at all. Rather, I charge what I want in neighboring states. If I’m a provider and price controls make it so I cannot earn a profit near other types of therapy, I don’t do MDMA assisted therapy. And in a semi-efficient free market where more qualified, credentialed, or experienced therapists charge more, market dynamics could force superior therapists out of the MDMA-assisted therapy market. This isn’t what anyone should want.
Most end-consumers don’t pay sticker price for FDA approved drugs or treatments. Psychotherapy is a bit different and depends. Suffice to say, insurance should cover at least some of this bill. Indeed, that’s part of the grand “net zero” trauma jiu-jitsu, right? Bring psychedelics through the FDA process, insurance pays for trips.
Insurance companies routinely cover interventional/pharmaceutical treatments that exceed $15,000. So, capping the price of MDMA “including therapy and related counseling” at $5,000 saves insurance companies a lot of money; not necessarily as much for end-consumers as those with insurance probably will not pay $5,000 a pop.
The $5,000 cap for an MDMA treatment service unit is somewhat arbitrary, but not completely so. It does track the cost/benefit breakeven point of this study to some extent based on 2 to 3 administrations. But the underlying assumptions of that study and the earlier study are open to question.1
In any event, that a full course of MDMA therapy may cost $15,000 in some localities should surprise no one. As well-noted by Psychedelic Alpha, a single 10+ hour course of therapy incorporates more than $4,000 in cost when one accounts for two therapists and other significant costs such as physical space, malpractice insurance, and the price of the drug itself. And, $15,000 for a course of treatment for a severe condition isn’t that much if one spreads out cost over the course of a year, provided insurance foots some of the bill.
While I believe psychedelic assisted therapy (PAT) can be both a life-saving and money-making enterprise, there is no indication whatsoever that PAT will be a lucrative bonanza that justifies price capping, let alone in its infancy. It might never be. Otherwise, Big Pharma would have been in this game (and running it) yesterday.
As it stands today, all of psychedelic pharma2 fits into JNJ’s $460 billion market cap’s hangnail. You merge all of psychedelic pharma into one company; it wouldn’t crack pharma’s top-100. One pre-capital crunch paper predicts psychedelic pharma will grow to $6.8 billion by 2027. Even at that number—which is doubtful—psychedelic pharma is an afterthought.
It is important to emphasize that the bill’s cap applies to an “MDMA treatment service unit,” which means “any prescribed and controlled administration of MDMA in any 7-day consecutive period including therapy and related counseling.” By my reading, a current MDMA protocol has multiple administrations over a period of months; and the bill’s price cap applies only to a single administration and the 7-days before/after. So, it wouldn’t be correct to say that this bill limits the price of a full course of MDMA-therapy to $5,000. Rather, it limits an individual MDMA session and the 7-day before/after sessions to $5,000.
Thus, the limit as drawn up makes it easy to circumvent. Place some therapy outside the 7-day windows and spread out the cost. Problem solved. Charge $2,500 for the pre-session, $2,500 for the session, and $2,500 for a post-session. Get creative with a few workarounds and the cap fails to achieve its purpose—but it might enrich loophole finding lawyers like me.
With a few exceptions, unless a government itself is purchasing a drug or product, I generally don’t believe in government tampering with market prices. Let market prices be set by supply and demand. When governments try to fix prices, it often results in price distortion and supply/demand issues down the line.3
Boldyga states that he “share similar concerns among grassroots advocates about access, affordability, and the over-corporatization of psychedelic compounds and plant medicines.” Cool. I do too.
But why single out MDMA or stop at (prospective) psychedelic medicine? What about other unaffordable medicines or healthcare issues. I wrote previously about Auvelity, the FDA-approved DXM/Wellbutrin smush that costs $561 per 30 tablets—i.e., more than $ 5,000 annually for a combination of two drugs that can separately be had for a fraction of the price. Or, take Danyelza, a drug that costs $977,664 for a course of treatment ($20,368 per vial) to treat pediatric and adult patients with neuroblastoma in the bone or bone marrow?
That FDA approval of MDMA will give MAPS PBC an exclusive right to sell MDMA for years after via data exclusivity isn’t some bizarre regulatory anomaly. It is unremarkable and what most NDA drug sponsors get upon approval. That is the reward for companies get for doing the research and running the regulatory gauntlet.
[Note: the above paragraph has been corrected in an important way4]
If we’re going to be people of principle about making healthcare accessible and affordable, let’s be consistent about it. Enacting price caps on all life-saving or breakthrough medicines during exclusivity periods should be laid on the table. Working-class parents of children dying from pediatric cancer are every bit as deserving of having life-saving medicine made affordable as vets suffering from treatment-resistant PTSD. Access to lifesaving or lifechanging medicine is not a problem unique to psychedelic medicine.
But once again, the principle advanced here appears to be that psychedelic medicines are “exceptional.” That ball of wax is best saved for another day. Certainly, for the purpose of price capping, they are not.
It is worth noting that Boldyga introduced two other bills concurrently, including one that would decriminalize “possession, use, ingestion, cultivation, transportation or transferring” of psychedelics found in plants—up to 2 grams of psilocybin, ibogaine, DMT and mescaline.
Of course, I support decriminalizing drug use/possession. That includes partial measures. These companion bills support an inference that Boldyga’s proposals may be misguided but also generally proposed in good faith.
But again, I must ask, what’s our principle behind removing criminal penalties on activities related to psychedelics found in plants? “Plant psychedelic” exceptionalism? Another ball of nonsense, if you ask me.
Which in turn, may affect the bottom line conclusion about how much MDMA assisted therapy results in cost-savings. But even conservative assumptions show cost-savings on time-horizons of 15+ years or greater.
Psychedelic pharma consists of more than PAT. I believe the money-making opportunities in psychedelic pharma past first-gen psychedelic assisted therapy will be better, such as take-home psychotropics and shorter acting in-clinic psychoplastogens. I likewise believe that indications like addiction and alcohol dependence may be more lucrative, more promising, and even more impactful than treatment-resistant PTSD/depression treatments. The results are good and cleaner to measure. 40+ million people struggle with substance use disorders in the United States, and the costs of substance use disorders are enormous.
To be sure, regulatory exclusivity/patents tamper with the free market. They create artificial monopolies that allow companies to charge supra-competitive prices. But this tampering is part of a bargain to insure that companies have incentives to pour money into R&D.
The original post asserted that all NDA drug sponsors gain exclusivity rights, and suggested that this would be market exclusivity. An astute reader pointed out that my language here was hardly precise. Indeed, one statement was not true.
Whether and the extent to which an NDA sponsor gets regulatory exclusivity depends on whether the subject drug meets one of the regulatory exclusivity categories. Generally, a drug sponsor will do the research with the expectation of some type of exclusivity, but it is of course possible for an NDA to fall outside the categories. In addition, data exclusivity—the type of exclusivity that comes with a New Chemical Entity approval—is not market exclusivity. It merely blocks generics from entering the market.
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