Seven drug pricing proposals that will happen and a couple that won’t
US President Donald Trump’s blueprint offers various proposals to reduce drug prices, some more ambitious than others.
US President Donald Trump’s evolution from “competitive bidding” in drug pricing to Friday’s blueprint has taken biopharma through 18 months of stock market gyrations, but the issue looks like it has settled itself. The administration has offered a list of proposals, the most ambitious of which would see the sector move to value-based pricing and the most achievable of which would lead to reduced patient out-of-pocket costs (see list below).
Demonstrating that the proposals will have little immediate effect on big biopharma’s bottom line, the S&P pharmaceuticals and Nasdaq biotechnology indices both finished Friday up 3%, suggesting that investors now see little threat to the sector’s outlook from government action. The threat of price controls has largely evaporated, but before the speech there had to have been at least a little worry that this most inconsistent of presidents might change his mind once again.
For the average patient with insurance, the full cost of drugs is at best a theoretical consideration, with patients’ main concern what they pay their pharmacist. Therefore, some consensus concepts have emerged, such as when Lilly's chief executive, David Ricks, came out in favour of sharing the savings from rebates at the point of sale, which has now started to be implemented in many plans.
This idea has found its way into the administration’s blueprint, with two new very specific ideas that are likely to happen and that will probably not even require congressional intervention:
Value-based pricing is a popular idea – even among some in big pharma’s C suites – so the blueprint lays out specific ideas that again could happen without needing to enlist Congress’s help (Vantage point – Value-based payment finds a friend in a high place, April 10, 2017):
Increasing competition has been the watchword of advocates who believe in the power of the private sector, so the blueprint has the following proposals:
On the last point, biosimilar uptake has been slowed in the US by crafty contracting by innovator companies – this has landed Johnson & Johnson in court against Pfizer, with the latter claiming that the Remicade maker had drafted anticompetitive contracts with payers. Promoting biosimilars should not necessarily be the aim of policymakers as much as lowering healthcare costs.
Some ideas, however, will take longer to gestate, and might not happen at all:
A few ideas have so many forces arrayed against them that it is improbable that they would be able to be implemented:
Within months it looks like some patients will see some relief on their out-of-pockets costs, and it is undeniable that Mr Trump’s bully pulpit has helped coalesce support around a few easily achievable objectives.
However, it is also undeniable that the fundamental economic drivers of higher drug prices are for now largely untouched, and likely will remain so unless the US government is willing to do what virtually every other industrialised nation does – negotiate drug prices.