The Blueprint One Year Later: Progress in Drug Pricing Reform

In a session at AMCP Managed Care & Specialty Pharmacy Annual Meeting 2019, Melissa Andel, MPP, vice president of health policy at Applied Policy and First Report Managed Care advisory board member, provided insight on progress made in relation to the Trump administration’s May 2018 blueprint to lower drug prices and discussed what we could expect to see in the near future.

The goal of the blueprint is to solve problems in four major areas: high list prices, rising out-of-pocket costs for consumers, address foreign “free-riding”, and resolve overpaying for drugs due to a lack of negotiation tools.

Understanding Drug Pricing to Battle List Pricing and Out-of-Pocket costs

“The most important thing to understand when we’re discussing drug prices is what prices we’re actually talking about,” Ms Andel emphasized. We are often referring to one of the following: list prices, net costs to plans or pharmacy benefit managers (PBMs) after rebates and discounts, costs to employers/plan sponsors/government, or out-of-pocket patient costs. 

“Premium costs are often overlooked but I think just as important. According to a consumer reports survey, ultimately about half of Americans take prescription drugs on a regular basis. So for those people, what they have to pay every month for their premium may actually be more important than what they pay when they go to the pharmacy,” said Ms Andel.

Ms Andel referred to a controversial comment President Trump made during his 2019 State of the Union, “Already as a result of my administration’s efforts, in 2018, drug prices experienced their single largest decline in 46 years.”  

“This is actually a true statement,” said Ms Andel. “The [Consumer Price Index for Prescription Drugs] CPI-PD index dropped 0.6% in 2018, which is actually the most significant decrease in 46 years.” However, Ms Andel pointed out, “Using the CPI-PD is problematic because it is calculated via a phone survey of retail pharmacies and asking how much they received for the 20 most recent prescriptions filled.” This method is not a true measure of increases and could even be swayed by rises during flu season. It does not account for any physician or hospital-administered drugs. 

Ms Andel said that in the last year, no proposals to lower high list prices have been finalized and it is unclear whether the proposals in progress will both lower list prices and have a material effect on drug costs and spending.

Progress has been made, however, in reducing out-of-pocket spending. “CMS has implemented several modifications to give Part D plans more flexibility to encourage utilization of lower-cost drugs, which should result in lower cost sharing.” she continued, “If finalized, the rebate rule has potential to reduce out-of-pocket spending but possibly at the expense of premiums.”

Foreign Free-Riding

Ms Andel addressed the third goal of the blueprint which is foreign free-riding, which refers to the international pricing index. 

“What they are really talking about is the discrepancy in the prices paid by other countries and the US for the same drugs,” she explained. “There is not an actual proposal related to this  for now but what is known in government-speak as advanced notice of proposed rule-making” which provides the opportunity to get feedback from stakeholders before a rule is created. “So if you take anything away from this portion, know that the international pricing index is not formally proposed yet. 

Ms Andel went on to explain that “CMS has announced their intent to propose a model that would shift acquisition of physician-administered drugs from physicians to national vendors. Physicians would order drugs from a vendor for an administrative fee, the vendor would bill Medicare for the drug, and Medicare would pay the physician an ‘add-on fee.’”

Ms Andel explained that the notice was actually one of the shorter ones she has read but it  is complicated and often confusing. 

Ms Andel’s interpretation of the potential proposal continued, “The model would be limited to specific geographic areas, but participation would be mandatory. The Medicare payment to the vendor would be based on a price calculated using an International Price Index (IPI) Beneficiaries in Medicare Advantage (~40% of all beneficiaries) would not be impacted.”

“I requested comment from CMS and the response was a very kind, ‘Thank you for pointing out that the IPI requires more clarification.’ so there is still a lot of work to be done.”

Overpaying Due to Lack of
competition 

A prominent theme in the battle to fight drug pricing is the drive to increase and encourage competition. There are a number initiatives related to this incentive including giving plans more negotiating leverage.

The final goal of the blueprint in Ms Andel’s opinion, is one with some of the most progress.  Starting in 2020, part D plans will be able to use “indication-based” formulary designs. 

“CMS has been relatively assertive with introducing reforms with their existing authority aimed
at making Medicare Advantage and Part D run more
like a commercial benefit,” explained Ms Andel.

Looking to the Future

Ms Andel reflected on the divided Congress that the 2018 elections brought and with it, a number of conflicts related to health care reform progress. As the presidential election season approaches, politicians are declaring stances right and left.

“I am from DC and it is always election season in DC,” said Ms Andel. There are many opportunities for republicans and democrats to agree and disagree on topics related to managed care. Some areas they might align, according to Ms Andel, is the importation of medication from other countries. 

“There seems to be general agreement on importation, generic drug access like pay-for-delay and access to samples, and scrutiny of PBMs,” however the areas where she did not see Congress connecting was the federal negotiation of prescription drug prices and international reference pricing.

Looking to the future and what is resonating in the current political climate in relation to the next presidential election, Ms Andel shared why she believes “Medicare for All”—one of the most buzzworthy terms right now—is not likely to happen anytime soon.

“Looking at data from a health tracking poll in 2018, 70% of Americans see health insurance as a right but only 56% support a ‘national health plan.’ Of that 56%, only 37% would support a plan that raises their taxes. There is a lot to be desired in communicating what Medicare for All actually entails.” Instead, Ms Andel suggests that we might see further Medicaid expansion. Medicare buy-in, and Affordable Care Act premium subsidy fixes.—Edan Stanley