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Up and Up They Go. Can Drug Prices Be Brought Down to Earth in 2019?
It’s no secret that list prices for prescription drugs are increasing. Every year, pharmaceutical companies are raising their prices whether it is for brand drugs or generics. Novel therapies, often for rare diseases, are coming on the market priced at such high amounts that they put a severe financial burden on many patients. In some cases, high price has become an insurmountable barrier to medications for patients who would benefit from them.
Both Republicans and Democrats recognize that high drug prices are an issue that will resonate with American voters. Advocating for a moderation in price increases will be good politics—and, depending, good policy. On Tuesday, both Republican and Democratic members of the powerful Senate Finance Committee questioned—sometimes fuming with outrage—the executives of seven of the country’s largest pharmaceutical companies. The drug company executives were forced to defend price hikes, higher list prices in the U.S. than elsewhere, and various other pricing policies.
The Trump administration is currently trying to implement a “drug pricing blueprint.” The plan, titled “American Patients First,” released in May 2018, points to four problems:
- High list prices for drugs
- Seniors and government programs overpaying for drugs due to lack of the latest negotiation tools
- High and rising out-of-pocket costs for consumers
- Foreign governments free-riding off of American investment innovation
Ending the “gag orders” on pharmacists was among many of the proposals highlighted in the blue print. As of the end of last year, there were contracts in place where pharmacists were not allowed to let a patient know if there are lower cost alternatives or that a patient’s out-of-pocket cost can be lower if they forgo billing their insurance. President Donald Trump signed bills passed by Senate to eliminate these “gag order” contracts imposed by pharmacy benefits managers and insurance companies. These laws went into effect immediately for commercial insurance and will go into effect for Medicare patients in 2020. When some pharmacies have higher cash prices, this can give the patient an option to choose a pharmacy with cheaper pricing. Theoretically, upon losing business, the pharmacies with higher prices will lower their cash prices to prevent losing more patients. Ending these gag orders has allowed patients to have more control of their spending on essential medications and makes them aware of the options that are available to them.
The United States is at the forefront of inventing novel therapies, and, as the senators noted during this week’s hearing, many of the same medications are available at much lower prices in other countries. Drug prices in foreign countries are usually set by a central governing body. As a result, other countries do not contribute nearly as much as the United States does to the research and development of new treatments. The Trump administration’s goal for the upcoming year is to see what kind of policies it can introduce to correct this imbalance. An International Pricing Index (IPI) model has been proposed. The IPI model focuses on Medicare Part B, which reimburses for physician-administered drugs. Currently, the more expensive drugs physicians administer, the more they get reimbursed, incentivizing physicians to use more expensive drugs for their patients. The IPI model will change the reimbursement policy to align more to price of drugs in other countries. The idea is to give physicians an incentive to use less expensive but similarly effective drugs for their patients.
Despite hue and cry against drug prices, drug companies are continuing to increase their list prices. According to a recent article in the Washington Post, so far in 2019, over 36 drug companies have raised prices on some of their products at an average of 6.3%. President Trump alluded to this in a tweet saying, “Drug makers and companies are not living up to their commitments on pricing. Not being fair to the consumer, or to our Country!”
There are two major bills that are going to be getting increased attention this year due to the Trump Administration’s focus on taming drug costs. First, the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act sponsored by Senator Patrick Leahy, a Vermont Democrat, will help generic drug companies have easier access to sample brand products, increasing overall competition. This falls in line with a proposal that is a part of the blue print, which is to increase the availability of reference products for innovation and creation of biosimilars and generics. Allowing companies that develop biosimilars and generic drugs to have access to reference products helps to streamline and speed up the drug development process.
The second bill is called the Preserve Access to Affordable Generics Act and is sponsored by Senator Amy Klobuchar, a Minnesota Democrat who is campaigning for the 2020 Democratic nomination. Klobuchar, who is casting herself as pragmatist, will prevent brand drug companies from paying off generic drug companies to delay the launch of cheaper drugs. Both of these acts will help companies with reasonable pricing of their products.
As 2019 unfolds and the pressures from lawmakers and regulators increase, it will be crucial to see pharmaceutical companies evolve in their drug pricing strategies. Will they continue to increase their list prices? Will they get behind policy changes that will return rebates to consumers at the point of sale? Will they limit their list price increase to one or two times a year or, perhaps as a way to quiet criticism, raise them by smaller amounts multiple times throughout the year? Might some companies take the high road and not increase prices at all? And how are they going to price their new drugs? Skyhigh prices are putting new therapies out of reach for many patients.
Drug prices, especially list prices, must be brought under control. In the long run, the current level of spending is not sustainable for the American health care system. In the short run, political pressure is building on drugmakers and others. With so many pressing issues on the agenda for the Trump Administration this year, here’s to hoping that this important issue does not take a back seat.