Democratic Takeover of House Sparks Drug-Price Legislation Talks

P&T Journal - for the original article go HERE.  For a PDF version go HERE.

But Strong Legislation Unlikely Given Patient and Industry Opposition

Representative Elijah Cummings (D–MD), chairman of the House Oversight and Reform Committee, was apoplectic. He was delivering his opening statement at the committee’s first hearing for 2019, titled Examining the Actions of Drug Companies in Raising Prescription Drug Prices. He was describing the devastation felt by his leading witness, Antoinette Worsham, whose diabetic daughter had died for lack of the insulin medicine she could not afford. “It would have cost $1,000 for three months of insulin!” Cummings thundered into the microphone in his opening statement. “She died.”

On the other side of Capitol Hill, that same day, Senator Ron Wyden (D–OR), was pounding his right hand on the dais during the Finance Committee’s first hearing of the year, probably not coincidentally titled (given the House committee’s hearing the same day) Drug Pricing in America: A Prescription for Change, Part 1. Wyden had just addressed Kathy Sego, another mother whose college-age son with stage 1 diabetes had resorted to rationing insulin because the cost per month, even with insurance, was $1,700. “Manufacturers are taking advantage of families like yours,” Wyden, the top Democrat on that important committee, said, his voice rising. Then pounding the tabletop in front of him, he added, “No one has been willing to take them on. That ends today.”

President Trump has been condemning high drug prices since the start of his term, and his Department of Health and Human Services (HHS) has issued a number of proposed regulations that would attack high prices on a number of fronts. In the last Congress, there was plenty of fire and brimstone aimed at drug companies, and from both parties, but no significant pricing-reform legislation advanced. That was in large part a result of legislative roadblocks in the Republican-controlled House.

With Democrats taking control of the House this year, the 116^th Congress looks to be in sync with Trump on drug prices and theoretically—theoretically being the key word—able to move forward with legislation clamping down on unreasonable drug prices. But although there is a lot of rhetorical thundering from Democrats in this new Congress, there are indications that actions may not speak louder than words. Already, key Democratic House committee chairmen have indicated opposition to some of the reforms pushed by the Trump administration, such as ending the current safe harbor for rebates paid to pharmacy benefit managers (PBMs) by drug manufacturers. The HHS proposed a rule in early February ending that safe harbor and proposing a new one that would cover rebates passed along to consumers at the pharmacy counter (see Prescription: Washington column on page xx). Numerous patient advocacy groups support the proposed rule.

However, key Democrats in the House are opposed to ending the current safe harbor for rebates in Medicare, putting them on the PBMs’ side and against consumers. Ways & Means Committee Chairman Richard Neal (D–MA) and Energy and Commerce Committee Chairman Frank Pallone, Jr. (D–NJ) issued a statement saying, “The Trump administration’s rebate proposal will increase government spending by nearly $200 billion and the majority of Medicare beneficiaries will see their premiums and total out-of-pocket costs increase if this proposal is finalized. While we agree that the cost of prescription drugs must be addressed, we are concerned that this is not the right approach.”

That pro-rebates position from Democrats surprised some patient advocacy groups, who are opposed to rebates and support HHS’ proposed rule. Carl Schmid, Deputy Executive Director of the AIDS Institute, says, “I was surprised they took that position. Maybe they didn’t have all the information; maybe it was a knee-jerk reaction because it came from the Trump administration.”

It is too early to tell whether Democrats will propose legislation to nix Trump’s proposed rule on rebates, and, if they do, whether they will gain any Republican support, which is crucial for passing any drug-pricing legislation on broader health care or otherwise. However, some bills that faltered in the last Congress because of Republican control of the House will undoubtedly advance in and probably be approved by this new Congress.

A key example is the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, which would give generic companies more leverage to force brand-name companies to supply drug samples. That bill passed the Senate Judiciary Committee last year with bipartisan support but never came up in the House because of GOP leadership opposition. This year, Pallone replaces Representative Greg Walden (R–OR) as chairman of the House Energy & Commerce Committee. Walden opposed the CREATES Act; Pallone is an enthusiastic supporter. But Erik Komendant, Vice President of Federal Government Affairs at the Association for Accessible Medicines, the generic industry trade group, says, “Nothing is a done deal.” He points out that there are 90 new members in the House and 10 in the Senate. “Many of them campaigned on and heard from constituents about high drug prices,” he says. “And now is the time for Congress to pass CREATES and take meaningful action to lower the cost of prescription drugs for patients.”

However, CREATES does nothing to solve the more important brand-name- versus-generic conflict: brand-name extension of patents to block the entry of generics, as has been the case of the best-selling drug in the world, AbbVie’s Humira, whose main patent expired in 2016. But AbbVie has extended that drug’s patent to 2034 by gaining other, follow-on subsidiary patents. AbbVie has licensed Humira to seven companies that will be allowed to sell Humira in 2022 in Europe, but not in the U.S. Humira, an arthritis drug, has a list price that has increased from $19,000 to $38,000 a year over six years, according to Wyden.

But where Democrats and Republicans agree––either in substantial numbers as with the CREATES Act, or when a bipartisan team of leading members of an influential committee sponsor a bill––legislation will move. Wyden’s Right Rebate Act (S.205), which closes a loophole that allowed the EpiPen manufacturers to “rip off” consumers, according to Finance Committee Chairman and act co-sponsor Senator Chuck Grassley (R–IA), is an example of a bipartisan bill with a tailwind. At the hearings on February 26, Grassley also referred to Senator Amy Klobuchar’s (D–MN) Pay for Delay bill, of which he is an original co-sponsor. It would limit brand-name companies from paying generics companies to delay the introduction of generics, including biosimilars. Another example is legislation forcing drug companies to include list prices in television advertisements. Such a bill passed the Senate last year by a bipartisan vote but never came up in the House because of GOP committee chairmen opposition. The Trump administration has proposed a rule mandating the publication of list prices but the drug industry has threatened a lawsuit, so congressional passage of a bill would make any lawsuit null and void. There is also bipartisan support for a Grassley bill allowing the importation of lower-priced foreign drugs, a proposal that some patient groups, not to mention the drug manufacturers, oppose.

In fact, the Democrats who are now in control of the House will find Republican members freer—no longer having to buck leadership—to support drug-pricing legislation. Representative Bob Gibbs (R–OH) questioned Gerard Anderson, Professor of Health Policy and Management at Johns Hopkins University, at the Cummings hearings about a number of issues, including orphan drug pricing, the use of risk evaluation and mitigation strategies (REMS) by patented companies to thwart generic introduction, and PBMs. “There are lots of problems about how the PBMs are operating. If we address the orphan issue, the REMS, and the PBMs, we’ll make a lot of progress without over-regulating and disincentivizing, and let the market function,” Gibbs said.

These bipartisan drug-pricing bills will probably not pass Congress as separate legislation. Rather, they will be added to a larger health care bill. Senator Lamar Alexander (R–TN) began a hearing on February 5 in the Senate Health, Education, Labor and Pensions Committee, of which he is chairman, by referring to his request to health care groups to provide suggestions on what the federal government can do to lower the cost of health care for American families. “This year I am committed to passing legislation based on that input,” he stated. Alexander said that he and Senator Patty Murray (D–WA), the ranking Democrat on the committee, have met with Grassley and Wyden “to see if we can find one or two big things and several medium-sized things that will help reduce health care costs.” Alexander is retiring in 2020 so it is likely that the committee, on a bipartisan basis, will pass some health care legislation during this session of Congress to memorialize his tenure.

House Republicans Closely Aligned with Drug Industry

To get some idea as to why House GOP leaders may have been protective of the pharmaceutical industry and opposed legislation such as the CREATES Act, which drug manufacturers have also opposed, one only has to go to www.opensecrets.org. and view the top recipients of drug industry political action committee (PAC) contributions in the 2017–2018 congressional session (the category includes both pharmaceuticals and health care products). OpenSecrets is a database run by the Center for Responsive Politics. Of the top four senators and representatives receiving PAC contributions from the drug industry, three were House Republicans, and all were in leadership positions, especially regarding drug industry legislation. Representatives Greg Walden (R–OR), Kevin McCarthy (R–CA), and Kevin Brady (R–TX), who received contributions of between $315,000 and $460,000, were, respectively, chairman of the Energy & Commerce Committee, majority leader of the House, and chairman of the Ways & Means Committee.

The Pharmaceutical Research and Manufacturers Association (PhRMA) contributed $28 million in the 2017–2018 election cycle to candidates and party PACs. Its biggest contribution was to the Grand Old Party Political Action Committee (GOPAC), whose motto is Educating and Electing a New Generation of Republican Leaders. PhRMA’s $215,000 contribution was more than four times the amount of the next biggest contribution GOPAC received, and was a significant percentage of the PAC’s $747,900 total revenue. PhRMA’s millions went to numerous Washington lobbying firms, 10 of whom received more than $250,000 in 2018. Their contributions put PhRMA in the number four position among trade associations, behind the U.S. Chamber of Commerce, the National Association of Realtors, and the Open Society Policy Center.

Among drug industry companies, Pfizer and Amgen were number one and number two in regard to lobbying expenditures ($11.3 million and $10.9 million, respectively), with eight other companies spending over $6 million, including the Biotechnology Innovation Organization (BIO), the trade association for the biologics industry.

Where Debate Is Headed

The big question with regard to any legislation on drug prices is whether facts intercede with rhetoric and emotion. Drug prices in general declined over the past year, according to the Bureau of Labor Statistics, which says that the consumer price index (CPI) for the prescription drug category (all urban consumers) dropped 0.6% between the end of 2017 and the end of 2018. The increase in the CPI for all items was 1.9% over this period; medical care services as a whole were up 2.5%. However, regardless of whether prices are up or down, it is clear that prices for drugs in the U.S. are unquestionably higher than they are elsewhere in the world, often by substantial amounts.

Douglas Holtz-Eakin, president of the American Action Forum, says, “Fundamentally, there is no broad prescription- drug pricing crisis. Indeed, in most instances, things are working just fine. Rather, what we face are more nuanced challenges.” Those nuanced challenges concern new, expensive, and often sole-source specialty drugs. Some sole-source generics have also posted ridiculous price increases. There are some problems, too, with the extension of brand patents in ways that have drawn critics—AbbVie’s Humira being a prime example—as well as efforts to block the entry of generics, which, in Humira’s case, the CREATES Act attempts to alleviate.

Any anger over drug prices and medical costs more broadly will only translate into legislative action where there is bipartisan agreement, Democratic takeover of the House aside. Thus, legislation giving Medicare the authority to negotiate drug prices, which is the topic of one bill sponsored by Senator Klobuchar, a presidential aspirant supported by many Democrats, is going nowhere.

Congress is likely to focus on current costly federal programs that need reform. At the top of that list are the Medicare Part D outpatient drug program, the Part B physician office/outpatient facility-reimbursement program, and the Medicaid drug-rebate program. Outside groups such as the Medicare Payment Advisory Commission (MedPAC) and its Medicaid counterpart annually recommend the reform of all three programs.

Part D spending was over $100 billion in 2016; Part B spending was close to $30 billion. Mark Miller, executive vice president of health care at the Laura and John Arnold Foundation, and former executive director of MedPAC, told the Finance Committee at its January 29 hearings that the average Medicare household will use approximately 15% of their total expenditure on health care. In Medicaid, spending on drugs grew by almost 50% between 2011 and 2017. “The federal government and states spent about $30 billion on drugs in Medicaid in 2017, after rebates,” Miller explained.

Miller said new treatments are launching at increasingly unsustainable prices that are not justified by their research and development costs. He cited life-extending cystic fibrosis treatments that cost close to $300,000 per year. Chimeric antigen receptor T-cell (CAR-T) therapy can easily top $500,000, and several companies have discussed pricing gene therapies in the region of $2 million.

Aaron Kesselheim, MD, director of the Program On Regulation, Therapeutics, And Law at Harvard Medical School, says list prices for brand-name drugs have increased from about 8% to 16% per year over the last decade, well beyond the CPI general inflation rate of 1–3% per year. U.S. drug prices and spending far exceed those of other, similar industrialized countries around the world. For example, in countries like Canada, Germany, France, and Australia, all of which have excellent health care systems, per-capita expenditure for prescription drugs is $400 a year compared to $850 a year in the U.S. The main driver behind the U.S. figure is brand-name drugs, which account for 10% of prescriptions and 75% of outlays.

But legislation to trim federal and patient spending on Part D, Part B, and Medicaid is hardly a done deal, given the broad opposition from drug manufacturers, PBMs, and patient advocacy groups to many of the Trump administration’s regulatory initiatives meant to cut federal and patient costs by reining in prices of specialty drugs, which account for the lion’s share of federal (and commercial) drug spending.

The Medicare Part B program allows physicians and hospital outpatient clinics to bill Medicare and patients, where there is a deductible or co-payment or both based on the “average sales price” alone—that is, what the market can bear—with no consideration as to the value or cost-effectiveness of the drug. Again, these are typically the expensive oncology, hepatitis C, and arthritis drugs, often biologicals. Among the 75 drugs with the highest annual Part B expenditures in 2016 (accounting for about $20 billion, or 77% of Part B drug spending), prices for 65 of the 67 drugs with evaluable data (97%) were considerably higher than the median prices in other high-income countries (Japan, Germany, Switzerland, and the UK), and generally made and sold by the same manufacturers as in the U.S. In May 2018, drug prices were, on average, 46–60% lower in those countries than in the U.S.’s Medicare drug-benefit program.

Pressure on Congress from Interest Groups

Trump’s Centers for Medicare and Medicaid Services has already proposed a major reimbursement change for Part B drugs (see the March 2019 issue of P&T), basing drug prices on international prices and a competitive acquisition program where hospitals and physicians would have less incentive to buy the highest-priced drugs, which spikes their reimbursement. But importing international drug prices into Medicare has been panned by Express Scripts and other PBMs, who argue that it would destroy the PBMs’ incentive to participate because they would buy drugs from U.S. manufacturers at high prices and have to sell them at low foreign prices. There has been considerable opposition to that from interest groups and drug manufacturers, among others.

Democrats in Congress have endorsed an international pricing index, not just for Part B drugs but for all drugs, paid for by the federal government and private employers. Their Prescription Drug Price Relief Act would peg the price of prescription drugs in the U.S. to the median rate in Canada, the UK, France, Germany, and Japan. If pharmaceutical manufacturers refuse to lower drug prices below that level, the federal government would approve cheaper generic versions of those drugs, regardless of any patents or market exclusivities in place. It is unclear, however, whether that bill will gain any Republican support. Schmid of the AIDS Institute says his group opposes the bill.

The flip side of questionable Republican support for those pricing caps is the questionable Democratic support for Trump-proposed changes to Part D, including new power for pharmacy and therapeutics committees to limit access to drugs. Chief among those changes is a constriction of the current six “protected classes” by allowing the use of step therapy and prior authorization, neither of which can be used in those six categories at present. That initiative, like the Part B initiative, is aimed at the specialty drug category by, for example, forcing cancer patients to try less expensive alternatives before being prescribed the most expensive oncology drugs. The American Society of Clinical Oncologists calls the proposal “misguided.” The six classes are: (1) antidepressants; (2) antipsychotics; (3) anticonvulsants; (4) immunosuppressants for the treatment of transplant rejection; (5) antiretrovirals; and (6) antineoplastics, except in limited circumstances. The Trump administration argued that the protected classes do not allow normal price negotiations and that there is “a strong incentive for the promotion of overutilization, particularly off-label overutilization, of some of these drugs.”

The Obama administration also published a proposed rule in 2014 that would have relieved Part D plans from providing “all or substantially all” of the drugs in the six protected categories. But patient groups complained to Congress and bipartisan pressure forced the Obama administration to cease and desist. Now the Trump administration has picked up the cudgel against the six protected classes.

Patient and physician groups and drug companies are besieging Congress once again. In response, Senators Marco Rubio (R–FL) and Kyrsten Sinema (D–AZ) have circulated a letter to HHS Secretary Alex Azar decrying the changes. They wrote that although they applauded the administration’s commitment to lowering drug prices, “undermining the protected class status of medications could have much larger consequences in the long term.” Representatives Barbara Lee (D–CA) and Will Hurd (R–TX) are readying a similar letter from House members.

Anyone who thinks Democratic control of the House will lead to congressional passage of important drug-pricing legislation oughtn’t bet their 401(k) on that. Although drug companies, PBMs, physician groups, and patient advocacy organizations swear they want to do “something” about high drug prices, they are simultaneously opposing many of the proposals that would reduce those prices the most. One almost can’t blame Congress for being frozen in its tracks.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Views Conflict on Trump’s Drug-Pricing Blueprint

P&T Journal - for the original article go HERE.  For a PDF version go HERE.
Most Actions Face Political, Legal, and Technical Roadblocks

Battle lines have been drawn and heavy political armaments have been moved to the front line as drug-industry partisans fight to protect the parts of their turf endangered by the policy advances proposed in President Donald Trump’s Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.¹ Its aggressive concepts, such as forcing the posting of drug list prices, ending rebate payments to pharmacy benefit managers (PBMs), introducing formulary management to Part B of Medicare, and changing formulary requirements for Part D, have been the equivalent of a trumpet rallying call to manufacturers, PBMs, health insurers, pharmacy professionals, and patient groups, who are often on the opposite sides of any anticipated initiative.

The wide-ranging Blueprint includes 136 questions or possibilities of changes that cover Medicare most heavily, but also affect Medicaid and private plans. The spotlight on the president’s suggestions burns a bit more brightly after Pfizer, Novartis, and Merck claimed national headlines this summer for postponing plans to raise drug prices in the third quarter of 2017 with the intention of giving the Trump administration time to finalize details and actions stemming from the Blueprint.

Some in the pharmaceutical distribution chain have even proposed doing Trump one better. Fanning the flames of the controversy surrounding high list prices, Express Scripts, the giant PBM, thinks drug companies should “reintroduce their products as competing brand drugs, with new/different NDCs [national drug codes], that would allow the market to move to lower list price products.” A spokeswoman for Pharmaceutical Research and Manufacturers of America (PhRMA), the drug manufacturers trade group, declined to comment on that proposal, which goes beyond anything in the Blueprint.

P&T committees could take on both added responsibilities and added burdens as a result of any Trump administration initiatives, particularly with regard to Medicare. The Trump administration wants to allow PBMs to negotiate prices for some or all Part B drugs. Those are pharmaceuticals infused or injected in either a physician’s office or an outpatient clinic. Currently, Medicare pays the list price for those drugs and patients pay for them subject to a Part B deductible of $250. These are often expensive oncology drugs, which, if they were paid for under Part D, as the administration wants, would be subject to formulary management by P&T committees at Part D plans or their PBMs. There is no guarantee, however, that patients would pay less for oncology, hepatitis C, and other expensive drugs under Part D. They could conceivably (in some instances) pay more.

Part D is also under the microscope as far as its formulary and P&T committee policies are concerned. The American Medical Association (AMA) thinks that disclosure of P&T committee information for Part D Medicare plans would constitute “a critical step forward.” There are a few rules today governing P&T committee membership, but very few if any requiring significant “transparency.” An AMA spokesman did not respond to a query asking what kinds of disclosures the group has in mind.

Backing From Congress Unlikely

The fact that drug companies are sitting on the edge of their seats waiting for the administration to put a plan in place doesn’t mean a plan will evolve quickly. It clearly won’t. Health and Human Services (HHS) Secretary Alex Azur told the Senate Health, Education, Labor, and Pensions (HELP) Committee on June 26, six weeks after the Blueprint was released, that, for example, he believes his department, through the Food and Drug Administration, has the authority to force drug companies to disclose list prices in television advertisements. But he added that he would welcome legislation to “shore up” that authority because manufacturers will “certainly challenge” any new requirement in court. He went on to say that he would also welcome legislation eliminating the 100% cap on drug rebates imposed under the Patient Protection and Affordable Care Act, “which would create a significant disincentive for drug companies to raise list prices.”

Congress is unlikely to jump at those requests. Senator Dick Durbin (D–Illinois), the second-ranking Democrat in the Senate, introduced the Drug-Price Transparency in Communications Act (S. 2157) in November of 2017.² No Republican has cosponsored it and no hearings have been held. In March of 2017, Senator Ron Wyden (D–Oregon) introduced the Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act of 2017 (S. 637), which would require the HHS to publish rebates PBMs obtained from drug manufacturers under Part D and the Marketplace Exchange insurance program.³ Again, no action taken, no Republican co-sponsors obtained. Neither the House Energy and Commerce Committee nor the Ways and Means Committee, the two committees with jurisdiction over health care, have held hearings on drug prices, much less the Blueprint.

Taylor Haulsee, spokesman for the Senate HELP Committee, did not respond to an inquiry asking whether the committee had plans to take up the Durbin and Wyden bills or to develop its own drug-pricing legislation. If the Republican president expects help from the Republican Congress to smooth the way for some of his more controversial policy proposals, he may be waiting a long time. That said, there is no question that the Trump administration has already moved perceptibly in some minor areas on drug pricing. But the Blueprint raises the stakes for drug companies, pharmacy benefit managers, insurance companies, health professionals, and consumers. Here are some of the more flammable, high-profile possibilities:

• requiring drug manufacturers to include list prices in drug ads
• putting a ceiling on out-of-pocket payments by Part D participants
• reducing from two to one the number of drugs offered in the six Part D protected classes
• allowing state Medicaid programs to use formularies and P&T committees
• moving drugs now paid under Part B to Part D and subjecting them to utilization review
• reimbursing for drugs based on their indication
• charging higher prices for a drug when it is used off-label

How Out of Whack Are Drug Prices?

The premise of the Trump administration’s attempt to rein in drug prices is that those prices are out of control. As a general premise, that probably is inaccurate. The American Hospital Association (AHA) cites figures from National Health Expenditures data showing that retail drug spending increased by 1.3% in 2016. But the AHA argues that while that level of growth may appear low, it follows two consecutive years of expansive growth in retail drug spending: 12.4% in 2014 and 8.9% in 2015.⁴
What are particularly worrisome are launch prices for new brand-name drugs. The AHA cited:⁴

• Taltz (Eli Lilly), used for treating psoriasis, costs $50,000 a year.
• Keytruda (Merck), used for treating melanoma, costs $152,400 a year.
• Kymriah (Novartis), used for treating leukemia, costs $475,000 for a course of treatment.
• Spinraza (Biogen), used to treat spinal muscular atrophy, costs $750,000 for the first year of treatment and $375,000 per year thereafter.

Moreover, there has been a spate of exorbitant price increases for existing brand-name drugs. America’s Health Insurance Plans (AHIP) says that during June 2018 and the first two days of July, drug companies announced more than 100 separate price increases for prescription drugs with an average increase of 31.5% and median percentage increase of 9.4%. Seemingly unfathomable price increases for old generics have led to Congressional hearings.

High drug prices can also be untenable in some instances for hospitals, where drug prices are bundled into diagnosis-related group (DRG) reimbursement. In 2016, the AHA and the Federation of American Hospitals worked with NORC at the University of Chicago (a nonprofit research institute) to document hospital and health system experience with inpatient drug spending. Specifically, NORC found that, while retail spending on prescription drugs increased by 10.6% between 2013 and 2015, hospital spending on drugs in the inpatient space rose 38.7% per admission during the same period.⁵ In its comments to the HHS, the AHA stated: “These price increases, from the hospitals’ perspective, appeared to be random, inconsistent and unpredictable: large unit price increases occurred for both low- and high-volume drugs and for both branded and generic drugs.”

Is Value Pricing the Answer?

There are some who argue that seemingly unreasonably high drug prices themselves are not the problem. Jonah Houts, Vice President for Corporate Government Affairs at Express Scripts and the author of the company’s comments, suggested that lowering drug prices as an absolute goal might not even be the smartest thing to do. “The central flaw with focusing on incentivizing lower drug prices is that this concept necessarily assumes clinical efficacy of all drugs are equal across all classes and disease indications,” he wrote. “Incentivizing payments for lower-priced drugs comes at the expense of discouraging considerations of clinical effectiveness or other factors such as likelihood for adherence, then even the ‘cheapest’ drug ends up costing Medicare significantly by failing to potentially treat the patient’s condition according [to] their needs. Of course, such failures may eventually lead to more costly medical interventions in the future, or worse—patient harm.”

Certainly there is a good argument to be made for value-based drug pricing, which is in its infancy and has had trouble getting out of the crib because of, if one listens to the manufacturers, impediments ensconced in federal law such as the Anti-Kickback statute and the rules for reporting the Medicaid Best Price. That said, value-based drug pricing doesn’t help some patients, especially less well-heeled ones, who may have high deductibles and out-of-pocket costs. The fact that, in the long run, they may avoid the costs and terrible effects of a chronic disease such as hepatitis C may be hard to appreciate if they go bankrupt in the short term.

The HHS raises the possibility of “indication-based” pricing, in which consumer and payer costs are linked to the effectiveness of a drug’s indication. Joint comments submitted by a large number of patient advocacy organizations across many disease states said, “This is highly concerning for patients for a number of reasons. Patients using the medications in higher-priced indications would be discriminated against through higher cost-sharing and could have impeded access as a result.”

High List Prices and Their Link to Cost-Sharing

Those higher out-of-pocket costs are often linked to the “list prices” posted by the drug companies. The health insurers use those prices to determine coinsurance and deductible amounts. But the insurer doesn’t pay the list price because it, or its PBM, negotiates discounts and rebates, which don’t find their way to the pharmacy counter when the consumer reaches for his or her wallet. Patient out-of-pocket costs under Medicare Part D are distributed unevenly each year, such that patients face 100% coinsurance until they reach their deductible ($405 in 2018), up to 25% coinsurance until the patient reaches the initial coverage limit ($3,750 in 2018), 35% coinsurance in the coverage gap until the patient reaches the out-of-pocket threshold ($5,000 in 2018), and finally up to 5% coinsurance above that threshold. “For example, in 2015, beneficiaries without low-income subsidies who had spending above the catastrophic threshold (over 1,000,000 individuals) spent on average $5,200.92,” Bristol-Myers Squibb said in its comments. “These high out-of-pocket costs present affordability challenges that jeopardize patient adherence to needed medicines, which could in turn increase costs to the broader health care system.”

According to PhRMA, more than half of all new brand-name osteoporosis prescriptions, more than 40% of all new brand-name autoimmune and oral antidiabetic prescriptions, and more than 30% of all new brand-name antipsychotic prescriptions brought to a pharmacy in 2016 had cost sharing greater than $250. “Not surprisingly, many of these prescriptions went unfilled,” the group stated.

Two Part D reforms included in the president’s fiscal year 2019 budget proposal would provide much-needed financial relief for beneficiaries facing high cost-sharing and high annual out-of-pocket costs:

• Requiring plan sponsors to pass through a substantial share of negotiated rebates at the point of sale would immediately lower out-of-pocket costs for millions of beneficiaries.
• Establishing a maximum annual limit on beneficiary out-of-pocket spending would provide a true catastrophic benefit to protect the sickest patients.

The drug manufacturers have been pushing hard behind the proposal to force PBMs to fork over rebates at the pharmacy counter, a proposal the Trump administration appears to favor indirectly in the form of replacing rebates with a fixed price discounting model for PBMs. Big pharma believes rebates are bad, high list prices are not so bad. What they object to is the health insurers basing coinsurance and deductibles on those list prices. Manufacturers believe the health plans should pay all or a portion of all rebates off those list prices to the consumers who pick up that drug at the pharmacy counter instead of using the rebates to lower premiums for all members of a plan. Their argument appears to be that all plan members ought to suffer a little for high list prices rather than just those with expensive chronic conditions, who are suffering a lot.

Although the list price/rebate relationship is frequently cited as the main cause of high consumer drug prices, AHIP argues that rebates are not prevalent, including for the most expensive drugs. A report by the consultant Milliman found that nearly 90% of Part D drug claims were for drugs with no rebates. The Milliman report also found that, when measured on an individual drug basis (i.e., not a script count basis), approximately 70% of brand-name drugs did not have significant rebates. Further, physician-administered drugs paid for under Part B, which account for 30% of prescription drug spending, typically do not receive rebates.⁶

Power to the P&T Committee?

Insurance companies and their PBMs argue that with regard to the Part D program, the best way to cut costs would be to allow P&T committees more leeway in formulary development. That could entail decreasing from two to one the number of drugs that formularies have to offer in each class and category and doing away with the “all or almost all” language that forces Part D plans to offer all drugs in six categories, the so-called “protected” classes: immunosuppressants, antidepressants, anti-psychotics, anticonvulsants, antiretrovirals, and antineoplastics.

CVS believes Part D plans’ P&T committees are well qualified and structured to ensure that beneficiaries have an appropriate choice of drugs in these six classes on the plan’s formulary. Another reason CVS feels the six protected classes ought to be eliminated is that plans cannot impose any type of utilization management edits on the use of the drugs, even if these are based on clinical criteria. This is because Part D plans may only apply prior authorizations and transition fill limitations to beneficiaries who are considered new starters to these drugs. When beneficiaries are new to the plan, however, the plan frequently does not have enough claims history (at least 108 days) to determine whether the drug is considered new as opposed to ongoing therapy. In this case, the plan is required to assume that the drug is ongoing therapy and to provide it without the opportunity to recommend more cost-effective or clinically superior therapies.

Part B

While P&T committees are limited in certain respects, in terms of what they can do in Part D, they do not even have a role in Part B, which pays for physician-administered drugs, often expensive oncology medications. Part B drugs are provided “incident to” physician services and include some antigens, injectable osteoporosis drugs, erythropoiesis-stimulating drugs, blood-clotting factors, oral end-stage renal disease drugs, cancer medications, parenteral and enteral nutrition, nebulizers, immunosuppressive agents, intravenous immune globulin, and vaccines. Part D drugs are infused either in a physician’s office or a hospital outpatient clinic.

HHS Secretary Azar noted at a June 12, 2018, Senate HELP hearing that cost-savings are the key rationale for moving drugs from Part B to Part D, saying that “right now, we’re paying sticker price for these drugs, no discounting. We ought to be able to get 20 to 40% discounting, as we do in Part D, on those drugs. That’s $30 billion of spend.” The Blueprint, however, doesn’t specify which drugs might be switched to Part D, and what would happen if a Medicare recipient did not have a Part D plan.

For a variety of reasons, however, there are some categories of drugs now paid for under Part B that might have a smoother path than others into Part D, including insulin, antiemetics, inhalants, immunosuppressants, and oral anticancer medications, according to the Pharmaceutical Care Management Association, which represents PBMs and like seemingly every interest group—including PhRMA, which is totally opposed to the switch—has concerns about a Part B-to-D move.

Site Neutrality

A potential Part B-to-D shift for drugs brings up another potential Trump administration move likely to affect hospital outpatient clinics, where many Part B drugs are infused. The HHS is considering a site-neutral payment policy to account for differences in reimbursement between the outpatient prospective payment system and the physician fee schedule for drug administration services. In short, hospital outpatient reimbursement for Part B would be reduced.

The AHA opposes a site-neutral payment policy for drug administration services under Medicare Part B. Hospitals with newer off-campus hospital outpatient departments are already subject to significant payment reductions for the “nonexcepted” services they furnish in these settings.

The Blueprint has a host of other suggestions related to the uptake of biosimilars, risk evaluation and mitigation strategies (which have been cited as reasons to deny generic-drug companies samples of brand-name drugs), 340B, Medicaid, and so-called “gag clauses” imposed on pharmacists and other programs. For Medicaid, the Blueprint suggests a new demonstration authority for up to five states to test drug coverage and financing reforms that build on private-sector best practices. This would open the door to “closed formularies” developed by P&T committees, now absent from state Medicaid drug programs. But there is opposition to that limited initiative, as there is to everything the Blueprint considers, from one corner of the industry or another. As to formularies in Medicaid, GlaxoSmithKline says, “We strongly oppose any proposals that ration access to prescription drugs in Medicaid through a closed formulary.”

One thing stands out from reading through some of the 3,000 comments on the Blueprint. They all start out pledging fealty to the Trump administration’s efforts to lower drug prices. Then they all degenerate into opposition to most of the Blueprint’s suggestions. Normally that reaction—and it is broad and deep—would be enough to sink any significant reforms. Of course, President Trump has been known to remain impervious to any cloud of negativity surrounding him—witness trade tariffs or immigration, for instance. Will drug pricing be the next arena in which he upends conventional thinking?

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.