June 15, 2018 (Vol. 38, No. 12)

The Injustice of High Drug Prices Is One of the President’s Top Priorities

Last month President Trump announced his plan for reducing drug prices for Americans. Details were contained in a government document entitled “American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.”

“One of my greatest priorities is to reduce the price of prescription drugs,” said the president. “In many other countries, these drugs cost far less than what we pay in the United States. That is why I have directed my administration to make fixing the injustice of high drug prices one of our top priorities. Prices will come down.”

Working with the president, the Department of Health and Human Services (HHS) identified four challenges in the American drug market: “high list prices for drugs; senior and government programs overpaying for drugs due to lack of the latest negotiation tools; high and rising out-of-pocket costs for consumers; and foreign governments free-riding off of American investment innovation.”

The agency also listed what it called four key strategies for reform: “improved competition; better negotiation; incentives for lower list prices; and lowering out-of-pocket expenses.”

According to HHS the U.S. spends over $300 billion annually on prescription drugs, with Medicare and Medicaid accounting for 40% of that cost.

HHS Secretary Alex Azar strongly backed the president noting that the time to act is now.

“Not only are costs spiraling out of control, but the scientific landscape is changing as well. Securing the next generation of cures for the next generation of American patients will require radical reforms to how our system works. Our blueprint will bring immediate relief to American patients while also delivery long-term reforms.”

Scott Gottlieb, M.D., FDA Commissioner, said he applauded the president’s proposals.

“The FDA shares the goal of ensuring that American patients have access to quality and affordable care that meets their needs,” he said. “This is why we’re prioritizing actions to encourage the timely development and approval of generics and biosimilars.”

Among the president’s other proposals, in addition to support for generics and biosimilars, were “streamlining and accelerating the approval process for over-the-counter drugs; take steps to end the gaming of regulatory and patent processes by drug makers to unfairly protect monopolies; evaluate the inclusion of prices in drug makers’ ads to enhance price competition; speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers; and avoid excessive pricing by relying more on value-based pricing by expanding outcome-based payments in Medicare and Medicaid.”

Controversial Aspects of the Plan

Controversy over the president’s drug price reduction plan did arise, however, based on his support tor two issues during his run for president: importing prescription drugs from other countries and letting Medicare officials negotiate drug prices.

Pharmaceutical companies and a number of Trump administration officials oppose the importation idea with HHS Secretary Azar calling it a “gimmick.” Nevertheless, the Republican governor of Vermont, Phil Scott, signed legislation to allow the importation of prescription drugs from Canada. HHS has to approve the plan.

However, the bigger bone of contention was over the president’s about-face on Medicare: the administration will not allow it to directly negotiate drug prices. The Trump team does plan to make it simpler for private health plans to negotiate for seniors under Part D of Medicare.

According to HHS Secretary Azar, Part D spends about $30 billion a year on drugs. That’s almost 10% percent of what the U.S. spends on drugs each year. Yet, contends Azar, Part D plans are hamstrung by current rules from really negotiating over drugs in these protected classes—allowing pharma to run up huge profits on patients who desperately need these often-expensive drugs.

“You heard President Trump make it clear on Friday how important tougher negotiation is. That is exactly what our plan brings to Medicare, in an effective and targeted fashion. We are delivering on President Trump’s promise to do smart bidding and tough negotiation in Medicare: We are going to bring negotiation to where it doesn’t exist [in physician administered drugs], in Part B, and making negotiation more effective than it is today, in Part D,” he said.

“You can imagine what happens when you’re developing a drug: It’s much more appealing for the drug to go into Part B, where the government just pays the bill you send them, than Part D. … In short order, we will be issuing a request for proposal to make new use of an alternative system for buying Part B drugs, a Competitive Acquisition Program.

“We believe there are more private sector entities equipped to negotiate these better deals in Part B, and we want to let them do it. More broadly, the President has called for me to merge Medicare Part B into Part D, where negotiation has been so successful.”

Encouraged But Regretful

While noting that AARP is “encouraged that the president is focusing attention on lowering prescription drug prices,” Nancy LeaMond, AARP’s executive vice president and chief advocacy and engagement officer, expressed regret that the plan does not allow Medicare to negotiate prices with pharma firms.

 The negotiation referred to is between individual Medicare Part D prescription drug plans (administered by private insurers) and drug makers. The Trump proposal does not include asking Congress to allow Medicare to negotiate with pharmaceutical firms.

With 60 million beneficiaries, Medicare is the single largest purchaser of prescription drugs in the U.S., according to AARP. It is prohibited by law from negotiating prices with pharmaceutical firms.

“High-priced drugs hurt everyone, and seniors, who on average takes 4.5 medications a month, are particularly vulnerable,” noted LeaMond.

Holly Campbell, deputy vice president, public affairs, Pharmaceutical Manufacturers of America, said that while PhRMA believes change is needed, “we have concerns that some of the far-reaching proposed changes to Medicare Parts B and D could disrupt care and raise costs for beneficiaries. Proposals to merge Part B coverage of medicines into Part D could increase patient costs and reduce access. In fact, hundreds of thousands of Part B beneficiaries not currently enrolled in a Part D plan, could lose coverage altogether. Beneficiaries could also see higher Part D premiums and, for some, higher out-of-pocket costs at the point of care.”

While some of these proposals could help make medicines more affordable for patients, others would disrupt coverage and limit patients’ access to innovative treatments, added PhRMA president and CEO Stephen J. Ubl.

“The proposed changes to Medicare Part D could undermine the existing structure of the program that has successfully held down costs and provided seniors with access to comprehensive prescription drug coverage. We also must avoid changes to Medicare Part B that could raise costs for seniors and limit their access to lifesaving treatments,” said Ubl.

“Misaligned incentives in the supply chain are resulting in savings for middlemen, but higher costs for patients. After negotiations, medicine prices increased just 1.9% last year, below the rate of inflation, and yet patients’ out-of-pocket costs continue to skyrocket. Giving patients access to negotiated discounts at the pharmacy counter and protecting seniors in Medicare Part D from catastrophic costs would help make medicines more affordable.”

For the record, GEN reached out to several U.S. senators and representatives to obtain their thoughts on the president’s drug price plan. Only one staff member replied saying “Sorry to be the bearer of bad news, but the [Republican] Senator does not wish to comment.”

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