HHS Secretary Alex Azar has been almost singularly focused in delivering on the administration’s promises to increase transparency and lower prescription drug prices since President Trump released his American Patients First blueprint in a Rose Garden ceremony a year ago.
The blueprint offered nearly 30 policy recommendations to modernize payment policies, including bringing down out-of-pocket costs for patients.
Just last week, HHS issued a final rule to give patients and doctors more tools to monitor and control costs in Medicare.
For example, after a start-up period, Medicare Part D plans will be required to provide doctors and other prescribers access to price information for different prescription drugs when they are writing the script. The pricing tool would be integrated into clinicians’ electronic prescribing or electronic health records systems. Some plans already are offering these tools, but all would be required to so in two years.
“Getting more information on out-of-pocket costs for prescription drugs to patients and their clinicians early in the process is critical, as there should be no surprises at the pharmacy counter,” according to the Centers for Medicare and Medicare Services.
The rule also will require the Explanation of Benefits document that Part D enrollees receive each month to include information on drug price increases and lower-cost therapeutic alternatives. These and other changes “are significant steps toward a Medicare program, a drug pricing marketplace, and a healthcare systems where the patient is at the center and in control,” Azar said.
To help seniors by lowering out-of-pocket costs at the pharmacy, HHS also is working to finalize its rule on drug rebates, another step toward transparency.
I took a deep dive in this Forbes piece into the rebate reform proposal soon after it was released in January.
The proposed rule is designed to lower prescription drug prices and out-of-pocket costs by encouraging manufacturers to pass negotiated discounts directly on to patients. It would shed sunlight on the complex deals involved in drug purchasing, targeting the rebates that flow through the $325-billion-a-year prescription drug spending pipeline.
Because current rebates generally are calculated as a percentage of the list price of a drug, the higher the list price, the greater the rebate payment.
The deals also mean that patients can face higher co-insurance payments than they would if they were paying a share based upon a drug’s net price. Patients generally are in the dark about the deals between the insurance payers and the PBMs.
Pulling the curtain back on these arrangements would expose the perverse incentives that keep drug prices and co-insurance payments high.
The proposed rebate rule would eliminate the legal protections that pharmacy benefit managers (PBMs) have that allow them to accept rebates as part of their compensation for facilitating access to the drugs. Under the proposed rule, their current safe harbor protection against kickbacks would be eliminated.
The administration says this could result in significant savings for people 65 and older as discounts are instead passed along to consumers at the pharmacy counter.
This proposal opens new opportunities to inject both sunlight and competition into the supply chain, but like any change affecting this huge and complex industry, is not without barbs, including a recent draft Congressional Budget Office estimate that says eliminating the rebates could boost Medicare drug plan premiums.
But CBO provides static analyses that seldom credit innovation, competition, and other efficiencies. Others in the pharmaceutical supply chain, such as wholesale drug distributors, argue they would be able to provide competition to PBMs and would be able to more efficiently deliver discounts to pharmacies—and therefore consumers. Pharmacy distributors and manufacturers already have the infrastructure in place to provide payments to pharmacists at the point of sale and deliver payments based upon existing payment tracking systems.
Solutions to drug pricing are emerging—if political leaders can let the competitive market work. For example, CNBC reported today that pharmaceutical companies are working with a company in the Google family to try to find ways to modernize their clinical trials and speed up the time it takes to bring a new drug to market. This could, in turn, lower prescription drug prices.
It currently takes up to 12 years and $2.6 billion to bring a single new drug to market. If the clinical trial process could be expedited, that would put downward pressure on the price of the final product.
“Verily, Alphabet Inc.’s research organization devoted to the study of health and life sciences, is partnering with Novartis International AG, Sanofi SA, Otsuka Pharmaceutical Co., Ltd. and Pfizer Inc. as it deepens its focus on the medical studies market,” CNBC reported.
“The collaboration will focus on clinical trials as drugmakers hope to use technology offered by companies such as Google to reach patients and expedite the process of gaining approval for their treatments.”
And on the legislative side, Senate Health, Education, Labor, and Pensions Committee Chairman Sen. Lamar Alexander (R-TN) is trying to break the health reform blockade in this Congress with a health reform bill he is expected to unveil soon.
Chairman Alexander’s website lists priorities to Lower Health Care Costs, including drug costs, that are sure to be part of the package. He would stop kickbacks to middlemen to lower the price of drugs like insulin,make sure that pharmacists can tell patients when it is cheaper for them to pay cash instead of using insurance, and bring cheaper generic drugs to market faster by increasing competition.
American Action Forum president Doug Holtz-Eakin explained the larger picture in testimony to the Senate Finance Committee earlier this year: Prescription drug spending as a percentage of total National Health Expenditures has remained steady at 10% for decades, dwarfed by spending on hospitals and physicians. Annual price growth was only 6% in 2018.
On a per capita basis, real net spending on prescription drugs has grown by only 1% since 2007 and actually declined by 2.2% in 2017. But it is spending on specialty drugs, representing only 2% of volume but 46.5% of all expenditures, that is the target of policymakers.
As we head into the hot summer, with health care at the top of the public’s political agenda, expect even more proposals both in Congress and from the Trump administration to address this issue. It is vital that the climate for innovation continue. Careful, targeted legislative and regulatory changes can support rather than impede this progress.