COVID-19 vaccines are likely to drive lasting change in vaccine trade as they become a key factor in global diploma… https://t.co/Gz8Y5dr6hY
National Academies report adds fuel to fire in raging US drug pricing debates
The National Academies of Sciences, Engineering, and Medicine have added their voice to the raging debates about drug prices in the United States. In a new report the Academies claim that consumer access to effective and affordable medicines in the US is currently inadequately served by the pharmaceutical sector and that new policies are needed to address that. The report makes eight broad recommendations, with 27 specific implementation actions, on how to alleviate deficiencies in access to medicines.
Among the specific measures proposed in the report are the following:
- Accelerate competition by ensuring faster market entry of generics and biosimilars: among other measures achieving this could entail deterring pay-for-delay deals, entering reciprocal drug approval arrangements for generics and biosimilars with the regulatory agencies of the European Union, Australia, Canada, Japan and New Zealand, and restricting the use of "dispense as written" prescribing practice.
- Applying consolidated government purchasing power, stronger formulary design and improved drug evaluation methods: specific measures include direct federal negotiation on drug prices, refining methods for establishing the 'value' of drugs and supporting value-based payment methods, and excluding from formularies expensive products when alternative products with similar efficacy exist.
- Improving transparency of financial flows and profit margins in the supply chain: requiring pharma companies and insurers to disclose net prices received and paid, including all discounts and rebates on a quarterly basis.
- Promoting adoption of codes of conduct, discouraging DTC advertising for prescription drugs and directing financial incentives to patients: included in this is a ban on patient coupon programmes, in which pharmaceutical companies give payments or discounts to consumers who fill prescriptions for the company's drug, except in cases where no alternative drug is available in the US
- Adapting insurance benefit designs to reduce the drug cost burden for patients: among other things, this calls for inclusion of the costs and clinical effectiveness of prescription drugs and available treatment alternatives when setting patient cost-sharing rates. The evaluation should address, where feasible, the total costs of care rather than simply the costs of the drugs themselves.
- Eliminating misapplication of funds and inefficiencies in federal discount programmes: the main focus is oversight and regulation of the 340B programme.
- Ensuring financial incentives for orphan drug development are not extended to other drug types: including limiting the market exclusivity awarded to orphan drugs to one 7-year extension and eligibility to only one orphan condition per drug.
- Introducing reimbursement incentives to align prescribing practices with treatment benefit: including creating payment policies for drugs administered by clinicians in medical practices and hospitals that do not differentiate for the site of care and tightening restrictions on pharmaceutical sales visits.
Looking at the list of proposed measures - from price transparency requirements, direct government price negotiation and the clampdown on orphan designation benefits to the DTC ban for prescription drugs and prescriber restrictions - there is barely anything that would be positive for pharmaceutical companies. The recommendations give a damning verdict on the pharma industry and distribution sector. They are even more troubling as they come at a time of already high scrutiny of pharmaceutical pricing in the US. The perception that US list prices are higher than in other major markets has also been confirmed by data on recent price trends from IHS Markit's proprietary PharmOnline (POLI) database.
What next for pharma?
The measures proposed in the National Academies report are far-reaching and certainly too ambitions. Without a doubt they will all face significant opposition from pharmaceutical companies and other stakeholders. However, the very fact they are contained in this proposal suggests that the tide is turning. Measures that would have been anathema to ever consider in the past are now firmly in the public domain and up for discussion.
President Trump himself has on several occasions attacked drug prices as being too high and there is still appetite for some federal level policies, it seems. Just last month the White House was considering launching a bipartisan task force to address the rising cost of prescription drugs in the country, according to the Congressional Quarterly Roll Call news, based on unnamed sources within Congress. The Centers for Medicare and Medicaid services (CMS), the government entity responsible for administering the Medicare and Medicaid services, also appears keen to test some of the measures recently being employed in the private sector such as indication-based pricing.
Attempts to address the rising cost of medicines are even more pronounced at the state level. While attempts at introducing direct price negotiations - such as California's Proposition 61 and the October 2017 Ohio Drug Price Relief Act proposal - appear to have failed so far, price transparency measures seem to have an easier way in state legislature. In October California enacted a new drug-price transparency law and the pharma industry failed to secure an injunction against Nevada's SB 539 pricing law. California also passed a law banning pharma companies form providing consumers with coupons for branded drugs if a generic is available. Some of these recent experiences at the state level have found their way into the National Academies proposals. Importantly also, if the experience of one state with attempted price transparency and cost control methods is positive, other states may seek to replicate it.
So, what is the pharma industry to do in this climate of growing pressure and uncertainty in its largest global market?
In my view, the industry should carefully pick its battles and not oppose every single proposal that comes out at the state or federal level. It should be prepared to make concessions while attempting to set an agenda for the discussion focused on the importance of innovation. In particular, the payment by indication proposals and increased cost effectiveness use might allow companies to still secure high prices for truly innovative treatments. Another small detail in the National Academies report - the recommendation to focus on calculating the cost for the treatment as a whole, rather than focusing on the drug component of it - also indicates one positive approach. Endorsing this method of payment may allow pharmaceutical companies to safeguard price levels by demonstrating that a new expensive drug allows savings to be generated in the healthcare system as a whole.
Milena Izmirlieva is the head of the Life Sciences research team at IHS Markit
Posted 4 December 2017
- What the Aduhelm backlash may mean for pharma pricing in the ‘new normal’
- Vaccine trade becomes a key factor in global diplomacy
- Germany’s ESG Law: A case study for new pharma pricing model
- Canada's PMPRB reform delays add uncertainty
- Industry hopes dashed after EU compromises to squeeze through cross border HTA agreement
- Delytact: The world's first oncolytic virotherapy for brain cancer
- Reimbursement outcomes for combination therapies in breast cancer
- Northern Ireland: A case study for drug pricing controls vs free pricing
Are you ready for what's next? Fast-evolving trends are part of the increasingly complicated factors impacting pric… https://t.co/fXCJRwWnio
The government of Canada has once again decided to delay implementation of the major drug pricing reforms that were… https://t.co/iIxnCAw8dU