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.

Pricing

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.

Out-of-pocket relief

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:

Allowing pharmacists to tell Medicare beneficiaries when they could save money by not using insurance. Some Medicare Part D contracts now bar pharmacists from doing this.Including information in the Part D explanation of benefits about price increases and lower cost alternatives.

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):

Value-based contracts in federal programmes such as Medicare, Medicaid, the Department of Veterans Affairs and the health insurance scheme for federal employees.Removing impediments to pharma and private payers pursuing such contracts, such as restrictions on pre-approval communications and payment coding that prevent indication-based pricing.

Increasing competition has been the watchword of advocates who believe in the power of the private sector, so the blueprint has the following proposals:

Barring innovative pharma companies from using risk evaluation and mitigation strategies to slow generic competition, such as by refusing to share samples.Giving Medicare part D plans more power to negotiate lower prices in the “protected classes” of HIV, oncology, mental health, anticonvulsants and immunosuppressants for organ transplants.Promoting greater use of biosimilars, such as through coding and reimbursement changes that will put them in direct competition with the original biological product.

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.

Gestation time

Some ideas, however, will take longer to gestate, and might not happen at all:

Restricting drug price rebates under federal anti-kickback law. This drew a great deal of attention before Mr Trump’s speech, but it is not clear if it would require congressional intervention; as it is the blueprint just raises it as a possible tool.Giving pharmacy benefit managers “fiduciary status” – forcing them to act in the best interest of their customers, although it is not clear if the duty is to the payer or the patient.Resuming the competitive acquisition programme for physician-administered drugs reimbursed under Medicare part B. A demonstration of this idea fell apart when only 1,100 practices enrolled and it turned out that its design actually raised costs (Vantage point – Price restraint talks hit reality bump, April 12, 2017).

A few ideas have so many forces arrayed against them that it is improbable that they would be able to be implemented:

Forcing disclosure of the list price in drug advertisements. Price transparency is an emotive issue in US politics, as physicians and hospitals have successfully fought such ideas – it seems unlikely that pharma would be any less successful.Forcing foreign governments to raise drug prices to allow the US to lower theirs without hurting pharma revenues. A government currently engaged in aggressive trade tactics will probably not be in a position to negotiate this point.Blocking foreign government actions that could force pharma companies to license drugs to domestic competitors or that could allow companies to use global pharma’s intellectual property without compensation. Again, the trade stance of the US government does little to help it negotiate on the sector’s behalf overseas.

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.

To contact the writer of this story email Jonathan Gardner in Virginia at jonathang-us@epvantage.com or follow @ByJonGardner on Twitter

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