Who’s Targeting Drug Prices Now?

Now that Democrats control the House of Representatives, a number of state legislatures, and governorships have flipped blue,  it is a certainty that the debate on health care will rise to the forefront. The first month of 2019 has given us much to analyze, including recently introduced federal legislation, additional proposals from the Trump administration, and state initiatives (Table).

Article continues below Table.

First Report Managed Care  turned to its stellar panel of experts to get their take on the latest developments, including which ones are most likely to see the light of day first, and why. Our experts discussed where credibility lies for progress thus far in terms of Trump’s original blueprint.  They also weigh in on where the tipping point might be when it comes to regulating and pressuring the pharma industry. Our panelists include: 

• Melissa Andel, vice president of health policy, Applied Policy, Washington, DC
• Larry Hsu, MD, medical director, Hawaii Medical Service Association, Honolulu, HI
• Charles Karnack, PharmD, BCNSP, assistant professor of clinical pharmacy, Duquesne University, Pittsburgh, PA
• Arthur Shinn, PharmD, president, Managed Pharmacy Consultants, Lake Worth, FL
• Norm Smith, principle payer market research consultant, Philadelphia, PA
• Barney Spivack, MD, national medical director of Medicare case & condition management at OptumHealth, New York, NY
• Daniel Sontupe, executive vice president and director market access & payer marketing, The Bloc Value Builders, New York, NY
•  F. Randy Vogenberg, PhD, RPh, principal, Institute for Integrated Health Care, Greenville, SC

Overall, the average price of pharmaceutical medications is not declining, but the rate at which it is increasing appears to have slowed. How much credit does the Trump administration deserve? 

Ms Andel: Much of the credit should go to the appointees within the Department of Health and Human Services (HHS). Alex Azar, Scott Gottlieb, MD, and Seema Verma are experienced and knowledgeable. The president has delegated responsibility to them and let them work. 

Dr Spivack: This issue mobilized consumers, insurers, and health care professionals long before President Trump took office. [Political leaders] have not been critical enough of the price-value tradeoff. But there is now increasing recognition that drug prices—and price increases—must be justifiable.

Dr Shinn: I think both perspectives are true. President Trump and his team deserve credit for bringing more attention to an issue that’s been of concern for awhile now. Pharmaceutical companies and pharmacy benefit managers (PBMs) appear to have had somewhat of an awakening. If they don’t change their ways, they will face increased regulation. 

Ms Andel: Public opinion has definitely had an impact, but in my opinion, the Trump administration has been more aggressive in trying to control costs than the Obama administration was. It takes more than public opinion. 

Dr Vogenberg: The administration’s moves are timed with consumer activism to address this issue. How it all shakes out remains elusive. 

Mr Smith: I am more of the mind that market forces deserve most of the credit. What drives the ability to price medications? If the products are high value, such as those for hepatitis C, lung cancer, and high cholesterol, the delta between list and net is small. Prices in classes with minimal differentiation and potential for reference pricing, [for example,] think HIV drugs over the last 5 years, suffer. Classes with multi-source manufacturers of similar drugs without strong, differentiating clinical data see net price spiral down. 

Let’s turn to the legislative branch. Which bill or bills are most likely to advance through both chambers of Congress and arrive on the president’s desk? 

Dr Karnack: Legislation that enables generic drugs to get to market sooner has the best shot. The concepts are easily understood by the public, including the so-called “shenanigans” by brand manufacturers. 

Ms Andel: I agree. Issues such as pay-for-delay and access to samples appeal to Democrats and fit within a Republican worldview of encouraging a competitive market, [while] making sure the playing field is even.

Mr Sontupe: I would argue that what some might see as questionable practice is just good, solid business. A brand maker paying a generic company to slow the launch of a generic wins for both companies and in reality, does not impact cost to patients or payers. In most cases, this first generic is an exclusive one and is priced at nearly the same level as the brand. So, a generic company that spends nothing to develop a product has 6 months to charge as much as the market will bear for the product, without any repercussions. If anything, legislation should disallow the time period allowed for an exclusive generic. Once the brand’s patent expires, open the generic path up to all comers.

Dr Vogenberg: Still, because the generics legislation has bipartisan support, I am guessing it will reach the president’s desk. 

Dr Hsu: I am not so sure. Even when the Republicans held the majority in both chambers, they were unable or unwilling to pass any significant legislation to control drug costs. Bipartisan support in Washington is elusive. 

Speaking of elusiveness, what about the bills that will allow Medicare to negotiate drug prices? 

Ms Andel: These aren’t going anywhere, mainly because the Congressional Budget Office finds that it doesn’t save money. Federal negotiation of Part D prices is the Democrats’ version of the border wall: If they really thought it would be effective at lowering prices, they would have enacted it when they had a Democratic Congress and president.

Dr Karnack: I don’t see it getting anywhere either, mainly because the drug lobby is too strong. Yet the [Office for Veteran Affairs] (VA) is able to negotiate pricing. 

Dr Hsu: [The Centers for Medicare & Medicaid Services] (CMS) and the VA are the largest payers of health care. Combining them into one negotiating force would be powerful. 

Mr Sontupe: But it’s an issue of alignment. Medicare Part D only concerns itself with drug costs, not outcomes. This creates a misaligned objective. If Medicare is ever given the power to negotiate price, it must become accountable for patient outcomes, adherence, and other engagement elements.

Dr Shinn: So, it’s safe to say that it’s too controversial to gain any sort of traction, at least in the short-term. 

Dr Vogenberg: Over time, some sort of compromise will have to occur. 

Will the administration proposals related to protected class drugs see the light of day anytime soon? 

Ms Andel: HHS tried to do this under the Obama administration and backed off in the face of public comments. According to MedPAC, most products in the protected classes are generic now, so I question how much money this would save. There are some newer antidepressants, antipsychotics, and antiretrovirals, but I am not sure how many plans would actually drop coverage of those absent the protected class requirement. They have cost-sharing and utilization management tools they could use to limit coverage. Plans will always have pressure to have broad coverage of drugs that treat cancer. 

Dr Karnack: I worry that restricted access may occur, especially with chronic autoimmune diseases. I also see a lot of unanswered questions. For example, are biosimilars included? I also worry about prior authorization and step therapy becoming roadblocks that cause patients to miss their therapeutic window for treatment. 

Dr Hsu: I agree that it is a difficult and challenging concept. Unless it is explained and well-justified, I don’t see it getting implemented. 

Dr Spivack: Modernizing Part D is long overdue, including using some of the pharmacy management tools that have been successfully deployed in commercial plans. This need is amplified by the growth in the number of drugs that treat chronic conditions.  Taxpayers should not be held accountable for the reinsurance costs involved as Part D beneficiaries enter the catastrophic coverage phase faster due to higher drug prices. There was a 50% increase in the number of enrollees entering
Part D catastrophic drug coverage between 2010 and 2015. Reinsurance spending is now the most rapidly growing cost in the Medicare drug program. 

Dr Shinn: At this point I don’t see why drugs in these classes should be treated any differently than those in other classes. Allowing formulary exclusion if the drug price increase exceeds inflation is just common sense. 

Mr Smith: Protected classes will erode away due to minimal net pricing differences.

What is driving use of generic drugs, altering copay amounts, and how coupons are applied? 

Ms. Andel: As far as I can tell, the regulations do not define “generic alternative.” And while the rule’s preamble refers to medications that “contain the same active ingredients as those brand name drugs,” a preamble doesn’t have the force of law.

Some in the lay press, including The New York Times, reported that this rule might inadvertently drive up patient copays, particularly for those who take certain medications for multiple sclerosis (MS) or HIV. It pointed out that even generics in these categories can be expensive. 

Ms Andel: I think the lay press is a little confused by this issue. For instance, the Times piece uses generic Copaxone an example where MS patients would be hurt. But this drug shouldn’t be impacted, since it is the generic alternative. The same holds true for HIV drugs that don’t have generic alternatives yet. In my reading, the rule would only block coupons for an innovator product when a generic is available.  It seems that CMS intends to impact a situation where a brand manufacturer has launched a copay coupon program to ward off generic competition at the end of their patent life.

Let’s look at state efforts. Califonia’s move to pool resources to negotiate prices is getting the lion’s share of attention, but other states appear to be tired of federal inaction. Do you see more states following suit?

Ms Andel: Only large states with existing infrastructure in place can pull off what California intends to. 

Dr Shinn: If California or any other state can pool its resources and getting pricing, I don’t see anything fundamentally wrong with that. 

Mr Sontupe: I agree. However, negotiating steep discounts means that some drugs may no longer be available. It will be interesting to see which manufacturers choose not to play ball and pull out of the government programs. 

Dr Spivack: The experience gained in California will be helpful to other states that are grappling with the same issues. Apart from this specific proposal in California, I foresee increasing action at a state level, especially since Democrats gained majorities and governorships in a number of states in the last election. 

Dr. Karnack: The idea that health care is a right and not a privilege has firm roots in certain states. If the federal government can’t agree on that, more states will develop their own plans. Of course, this will increase the “have” and the “have-not” states. 

When it comes to regulating and pressuring pharmaceutical companies, how much is too much? Pharma executives like to point out that their business’ failure rate dictates pricing. Could there be a tipping point where innovation stifled? 

Dr Hsu: While it is true that increased profits can promote innovation, where is the data to show that failure rates [need to] dictate increases? Sure, there are anecdotes, but no evidence. 

Dr Karnack: Look at the direct to consumer advertising spend—you have to think there are sufficient funds to be innovative.     

Dr Vogenberg: When pharmaceutical companies make this argument, they are talking to themselves. The public is sick of price increases. Innovation might be impacted to an extent, but all that matters now is public opinion. It is about time for a correction, not only for the manufacturers, but for PBMs as well. 

Dr Spivack: One of the clearest and most prevalent examples of unreasonable and unjustifiable drug price increases relates to the use of insulins for those with diabetes. In January 2019, the Health Care Cost Institute released a report showing the median price of insulin nearly doubled over a 4-year period despite little change in the drug product itself. It is the single biggest contributor to the dramatic increase in the cost of managing this disease. 

Mr Sontupe: Initial drug prices need to be more reasonable. Payers and pharma need to work together to drive value-based pricing. But it can go too far. I find it interesting that insurance companies, retail pharmacy chains, and PBMs continue to make huge profits, but pharma companies are the bad guys. And don’t forget that one of the big reasons drug spending is so high is that people taking these meds are living longer. What used to be a death sentence is now a chronic disease. 

Dr Shinn: I agree that pharmaceutical companies get painted as the bad guys, despite their life-altering and life-saving contributions. Of course, they are not saints, nor are the middlemen PBMs. This is something that has to be sorted out, and I think that is happening now.   

Ms Andel: In the end, no one thinks that research and development will come to a screeching halt. But I do think that on the margins it could have an impact. I will also be interested to see if manufacturers and the US government are successful at getting other countries, especially some of the wealthier countries like the United Kingdom, Canada, and Germany to pay higher prices. More equitable distribution of the total cost of drug development is one possible solution. It would still generate the revenue pharma manufacturers need to incentivize continued R&D while providing some relief for the United States.