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Volume 38, Issue 12
Efforts intensify to bring outlays more in line with global trends.
Challenges to pharma pricing models have escalated this past year, and now threaten to impose significant changes on industry marketing and new drug development. The imperative to reduce spending on prescription drugs is one area of agreement between Democrats and Republicans, and with control of Congress now split
between the two parties, political leaders are looking to curb outlays to promote public health and patient access to medicines.
This past year brought kudos to biopharma companies, as manufacturers tested, and FDA approved, multiple innovative medical products, including important new gene therapies, cancer treatments, vaccines, and complex generics and biosimilars. Such advances have benefited from FDA efforts to streamline clinical testing methods, clarify regulatory policies, and accelerate application reviews to speed new therapies to market.
Despite these achievements, industry faces ever more severe criticism for setting prices based on marketing and financial strategies and not actual costs. Traditional claims that high returns on investment in R&D are needed to support costly research programs have lost credibility. Leading manufacturers and industry critics alike acknowledge that list prices reflect what the market will bear, and not underlying research and production outlays, and that drug prices in the US greatly exceed those in other countries with central healthcare systems able to control drug coverage and spending.
The mounting campaign to bring pharma prices more in line with global trends has produced a range of strategies for reshaping biopharma coverage and reimbursement in the US. Congress considered dozens of drug pricing bills over the past year, but only approved measures to eliminate “gag clauses,” which prevent pharmacists from informing patients of cheaper alternative medicines. In May, the Trump administration announced a broad blueprint to lower drug prices that attacks rebates paid by manufacturers to pharmacy benefit managers (PBMs) and payers and proposes notable changes in how the Centers for Medicare and Medicaid Services (CMS) pays for drugs. A recent proposal aims to increase “transparency” in drug costs by requiring manufacturers to disclose list prices in direct-to-consumer (DTC) ads.
A main target is to reform Medicare Part B drug reimbursement, which primarily affects injectables administered in doctors’ offices and hospital clinics to treat cancer, rheumatoid arthritis, eye disorders, and immune disease. A new “International Pricing Index” (IPI) payment model links Part B reimbursement to the average price paid in foreign industrial nations and is projected to save more than $17 billion over five years. The Trump administration proposes to launch it as a pilot plan to avoid waiting for Congressional approval (see here). CMS also looks to reduce spending by Medicare Part D plans by limiting coverage requirements for “protected drug classes,” and it is authorizing state Medicaid programs to enter into value-based payment arrangements with manufacturers.
Industry is mounting strong opposition to the Part B reform and the IPI model, but may find limited support. In the fall, pharma companies failed to scale back an earlier Medicare policy change that increased manufacturer discounts for Part D drugs covered by the “donut hole” by an estimated $4 billion over five years.
Several leading pharma companies reduced prices or delayed rate hikes this year in an effort to quell the mounting outcry. In July, according to press reports, Novartis and Pfizer said they would defer mid-year price increases until the end of the year. Merck & Co. and Amgen similarly announced price cuts on certain products and delays in increases.
But such voluntary action is isolated and uncertain. More reports and public hearings on drug pricing will come as House Democrats take over key investigative and health policy committees. A recent report from a bipartisan Congressional caucus attacks high prices for insulin and urges payers to eliminate rebates and shift to outcomes-based payment contracts for diabetes drugs. Even though Republicans maintained their majority in the Senate, leaders of both parties agree on the importance of making new medicines more affordable for public and private payers and for consumers. The larger challenge for all sides is to maintain incentives for biomedical innovation in such an anti-pharma climate.
Jill Wechsler is Pharmaceutical Executive’s Washington Correspondent. She can be reached at email@example.com