Featured in Health Business Daily, Sept. 19, 2017

Drug Pricing Sparks Lobbying, But Legislative Action Is Uncertain

Reprinted from DRUG BENEFIT NEWS, biweekly news and proven cost management strategies for health plans, PBMs, pharma companies and employers. Subscribe today!

By Jane Anderson
June 9, 2017Volume 18Issue 11

Prescription drug benefit industry stakeholders are gearing up their lobbying efforts on drug pricing measures that would affect various components of the pharmaceutical supply chain. But despite lots of talk, it’s far from clear whether any drug pricing legislation — major or minor — will clear Congress this year.

“The focus on drug prices is political theater,” Adam Fein, Ph.D., president of Pembroke Consulting, Inc., tells AIS Health. “The average increase in drug spending for 2016 was only 3.3%. Complaining about ‘drug prices’ is politically fashionable. Yet drug spending appears to be growing at a rate comparable to — or slower than — that of other parts of the health care system.”

Regardless of the rhetoric coming from all sides, Fein says the proposals currently on the table — which deal with PBM transparency and the ability to import less expensive drugs from other countries — won’t help.

“Such policy proposals as importation and transparency will do nothing to reduce drug list prices or lower patients’ out-of-pocket costs,” Fein says. “I expect political action to focus on cost sharing and benefit designs. We are also likely to see something happen in Medicare Part B, although that program is a very small part of government spending.”

Fein adds: “Consumers care most about out-of-pocket costs. However, current benefit designs use deductibles and coinsurance to shift prescription costs onto the sickest patients taking the most innovative specialty therapies. Patients are often not benefitting from the rebates being provided by manufacturers.”

In the last month, HHS Secretary Tom Price has convened a series of listening sessions with industry experts and stakeholders to discuss drug pricing issues. Fein attended a session in early May and reported on his Drug Channels blog that he had highlighted ways he believes the 340B Drug Pricing Program, which requires drugmakers to provide outpatient medications to hospitals and other health care entities at discounts that are based on Medicaid pricing, is pushing up drug costs. However, Fein noted, “I have no idea if my suggestions will have any impact.” HHS officials have not indicated what President Donald Trump and Price may be considering.

Drug Benefit News

Several Bills Are Focusing on PBMs

Lawmakers, meanwhile, have introduced several bills that target PBMs. Proposals under consideration would improve transparency of drug pricing by requiring PBMs to disclose rebates and discounts and forcing PBMs to update their Maximum Allowable Cost lists for Medicare Part D, TRICARE and the Federal Employees Health Benefits Program more often.

One bill, introduced by Sen. Ron Wyden (D-Ore.), would require PBMs to disclose “spread pricing,” or the difference in payments made to pharmacies by PBMs compared with payments received by PBMs from health plans (DBN 3/24/17, p. 1). States such as California also are considering PBM transparency measures.

Various stakeholder groups are lobbying hard to have their viewpoints heard.

The Pharmaceutical Research and Manufacturers of America (PhRMA) ramped up the war of words over drug pricing — especially over which parts of the supply chain might be profiting unfairly — with an ad campaign urging insurers to share rebates with members who have high deductibles and copayments (DBN 4/21/17, p. 1).

As that PhRMA ad campaign launched, the Pharmaceutical Care Management Association (PCMA) struck back, saying that the average amount spent out-of-pocket for drugs continues to decline. It’s projected to be 13% of drug spending in 2016, down from 23% in 2006, the group says. And groups representing community pharmacists and generic drugs have mobilized their memberships, visiting Capitol Hill and attending the listening sessions with Trump administration officials.

There’s been plenty of rhetoric indicating that the Trump administration would consider measures to control drug prices: Trump threatened in his first post-election press conference to “create new bidding procedures for the drug industry because they’re getting away with murder,” saying he would save “billions of dollars over a period of time” by doing so (DBN 1/20/17, p. 1).

However, in ensuing months the Trump administration hasn’t pursued new Medicare or Medicaid bidding procedures for pharmaceuticals and instead seemed to be looking at PBMs as a potential target for some sort of legislation or regulation (DBN 3/24/17, p. 1).

In fact, Trump’s budget proposal, released May 22, doesn’t go as far as some of President Obama’s proposals. In 2016, Obama asked Congress to give HHS the authority to force drugmakers to disclose pricing information, including discounts and research and development costs. Obama also asked lawmakers for Medicare price-negotiating power and to establish a Medicaid “negotiating pool” among states.

Trump’s budget, on the other hand, includes “a package of administrative actions that will promote regulatory efficiency and speed the development of safe and effective medical products.” As part of this package, the administration will clarify treatment of value-based purchasing arrangements and foster the exchange of information between drug manufacturers and payers prior to drug approval “to reduce uncertainty and improve payer ability to more accurately set premiums.”

The Council for Affordable Health Coverage (CAHC), an alliance of insurers, PBMs, provider groups, pharmaceutical manufacturers and other health industry stakeholders, applauded the budget proposals. In fact, the council called May 17 for what it called “comprehensive reforms to lower the cost of prescription drugs and health care,” including the reforms included in the Trump administration’s budget proposal.

CAHC’s desired reforms — which it laid out in a report — focus on four principles: increasing competition, rewarding value, improving data infrastructure and use, and preserving what works in the current system. Some of the group’s objectives could be accomplished through new regulatory action, but many would need to be addressed via legislation. Specifically, the group recommends:

  • Establishing clear statutory and regulatory guidelines for drug manufacturers and insurers to communicate prior to drug approval,

  • Making the drug development and FDA approval system more efficient and faster by utilizing new computing and statistical analysis tools,

  • Reforming pricing models that inhibit value-based arrangements,

  • Revising anti-kickback rules so that they don’t prevent value-based and care-coordination arrangements, and

  • Permitting more flexible and better targeted benefit designs for those with chronic conditions.

Enacting the council’s recommended changes could save up to $71 billion in national health expenditures over 10 years, says CAHC President Joel White. “Most important, and unlike other approaches, our solutions won’t undermine innovation and patient access to the drugs they need,” he adds, stressing that competition works better than regulation to lower costs.

Read the White House budget document at http://bit.ly/2qRsDnZ. View the CAHC report at http://bit.ly/2pLvboF.

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