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In the second in a series of articles summarizing efforts to put each of the “American Patients First” blueprint's four strategies into action, Rick Kelly and Nisha Desai focus on “Better Negotiation”.
In the second in a series of five articles that summarize efforts to put each of the “American Patients First” blueprint's four strategies into action, Rick Kelly and Nisha Desai focus on “Better Negotiation”.
In May 2018, The Trump Administration released its plan to combat rising prescription drug prices and out-of-pocket costs - the “American Patients First” blueprint. The plan identified four key strategies for reform: increased competition, better negotiation, incentives for lower list prices, and lowering out-of-pocket costs.
This is the second in a series of five articles that summarize efforts to put each of the blueprint’s four strategies into action. In the first article, we described proposals aimed at increasing competition. Here we focus on the “Better Negotiation” strategy. The blueprint’s goal of improving government negotiating tools is aimed at lowering the costs of Part B drugs and empowering payers offering PDP and MA-PD plans to lower the costs of Part D. The majority of proposed and implemented changes improve payers’ ability to negotiate by allowing the use of more aggressive drug management techniques that ultimately improve their bargaining power with pharma companies.
Dozens of policy changes to improve negotiating efforts have been proposed, but only the following have been implemented:
There are many proposals described in the blueprint that are at various stages of implementation. If implemented, they would:
HHS and CMS have significantly changed the contracting environment for Part B drugs, opening up opportunities for new approaches to pricing and discounting. To maintain formulary status and optimal coverage with Medicare Advantage plans, many pharma companies will need to re-evaluate their Part B drug pricing and contracting strategies - especially for brands competing with oral therapies. In addition, companies will have to harness the dual forces of HEOR data and value-based contracting to establish brand value.
Proposals not yet implemented could also have broad-ranging impacts on pharma companies-further increasing payers’ leverage to negotiate rebates for Part B and Part D drugs and putting additional pressure on pricing and contracting strategies. In addition, greater drug price transparency will raise the stakes for communications to beneficiaries.
“Better negotiation” proposals in the American Patients First blueprint are intended to improve the negotiation position of Medicare plans for both Part B and Part D drugs. Faced with these game-changing developments, pharma companies have no choice but to adapt–improving strategies for pricing, contracting, value messaging, and more. Those companies that act first to embrace the new normal–meeting the new challenges with strategic innovation–will be game changers themselves, redefining opportunity in the pharma space.
Rick Kelly, RPH, MHA, Cyan Health, and Nisha Desai, MPH, Cyan Health.