In this article Larry Blandford, EVP and managing partner at Precision Xtract, offers initial impressions of the Trump Administration’s blueprint to lower drug prices – American Patients First.
Read the full article below.
Trump Administration Proposes Array of Tactics to Bring Down High Drug Prices
by Angela Maas
Market Access Spotlight
The administration of President Donald Trump — who more than once has accused the pharma industry of “getting away with murder” — recently revealed its plan to reduce prescription drug prices. The American Patients First blueprint is aimed at lowering medication prices and reducing costs for consumers. Unveiled May 11, the blueprint offers multiple strategies but is lacking a lot of detail on many of them.
It remains to be seen how effective — or even how implementable — the various strategies are, which focus on four areas: better competition, tougher negotiation, incentives for lower list prices and decreased out-of-pocket costs. During a press conference unveiling the blueprint, Trump called out various stakeholders within the pharmaceutical channel, but it’s unclear at this point how concerned they should be.
For instance, Trump said that “eliminating the middlemen,” which have become “very, very rich,” would be among the efforts. “They won’t be so rich anymore.”
He also called out pharma, maintaining that the “drug lobby is making a fortune at the expense” of Americans. The reforms, he said, would “derail the gravy train for special interests.” But is that attention warranted?
“It’s easy and certainly not unprecedented for public officials to call attention to the pharma industry,” asserts Larry Blandford, Pharm.D., an executive vice president and managing partner at Precision for Value. “It’s a much easier-to-target stakeholder based on the frequency of filling prescriptions, relative transparency of drug prices compared with provider prices and less personal than calling out someone’s local physician or health system.”
Blandford tells AIS Health that “the pharma industry doesn’t necessarily attempt to diminish its role in drug prices — it mostly wants to assure prices are viewed in terms of the value the products bring to patients, providers, payers and society. So, while drawing attention to pricing, there needs to be similar attention given to assessing value across all stakeholders.”
Among the suggestions floated in the blueprint are the following:
- Moving drugs in Medicare Part B to Part D.
- Taking steps to prevent drug companies from “gaming…regulatory processes” such as Risk Evaluation and Mitigation Strategies (REMS).
- “Experimenting with value-based purchasing in federal programs.”
- “Leveraging” the Medicare Part B Competitive Acquisition Program.
- Evaluating the ability to force manufacturers to include drugs’ list prices in advertisements for the products.
- Implementing tactics to restrict the use of drug rebates.
- Giving Medicare Part D plan sponsors “significantly more power when negotiating with manufacturers.”
- Banning the so-called “gag rule” that prohibits pharmacists from telling Part D beneficiaries when paying out of pocket would be cheaper than using their insurance.
The blueprint, says Steve Wojcik, vice president, public policy, National Business Group on Health, “generally followed what was in the Administration’s proposed budget, by and large.”
Evercore ISI analysts Ross Muken and Michael Newshel agree: “The specific ‘immediate actions’ included in the blueprint are largely a rehash of prior proposals from February’s White House budget that are relatively benign for the industry and not majorly disruptive, driving some relief in the stocks today,” they wrote in a May 11 research note.
‘More Aggressive Actions’ Could Occur
However, they state, the blueprint “does highlight ‘further opportunities’ that include the potential for more aggressive actions — including ‘restricting the use of rebates’ by revisiting the Anti-Kickback safe harbor and considering fiduciary status for PBMs.”
According to Blandford, “The blueprint will impact companies differently depending on their product portfolio. For example, those with medications currently covered under Medicare Part B will be impacted by actions to shift coverage and negotiation within or similar to Part D. With few details, it’s difficult to quantify the implications of each proposed action; each company will need to assess as more details become available.”
Based on the information available, he says, “The highest profile items are likely to be reviewing the safe harbor for rebates, increasing the ability for Medicare private plans to negotiate and manage benefits, the shift in Part B to Part D, and 340B and value-based reimbursement. That said, it is important to note that the goal of lower patient out-of-pocket costs is shared by pharma, so there certainly could be some benefits derived from the outcomes.”
One of the practices within the pharmaceutical system that has received a large amount of attention is rebates. Trump said that the administration will address the ability of “middlemen to pocket rebates.” Specifically, the blueprint includes as a “further opportunity” — as opposed to an “immediate action” — “measures to restrict the use of rebates, including revisiting the safe harbor under the Anti-Kickback statute for drug rebates,” as well as “additional reforms to the rebating system.”
“I think the idea that’s the scariest is that rebates go away altogether,” says Lisa Bair, CEO of Quantuvis. The threat may lead companies to “self-police” and get “better in the negotiating process…with the goal of getting better access,” she tells AIS Health. “Everybody has to be mindful” of this threat.
“The blueprint will impact companies differently depending on their product portfolio.”
However, Bill Sullivan, principal consultant at Specialty Pharmacy Solutions LLC, questions whether the rebate system is really in jeopardy. For one, he points to legislation defining kickbacks: “The federal Anti-Kickback Statute (‘Anti-Kickback Statute’) is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of federal health care program business. See 42 U.S.C. § 1320a-7b. The Anti-Kickback Statute is broadly drafted and establishes penalties for individuals and entities on both sides of the prohibited transaction.”
Sullivan points out that “payers and PBMs do not fit the definition of being in a position to ‘induce or reward the referral of federal health care program business’ since rebates are not paid by manufacturers on federal program transactions.”
For drug rebates to be considered kickbacks, he tells AIS Health, “an amendment to the current law would be the first practical step to clarify/define rebates as kickbacks as (I believe) it is not at all clear now. However, since there are no rebates on ‘federal’ business, it is a moot point. A totally new law prohibiting kickbacks on commercial business would also be required for this campaign to be truly meaningful. Such prohibitions already exist for physicians (e.g., self-referral), but there is no effective ‘self-referral’ for a payer/PBM.”
Asked about the likelihood of drug rebates being considered kickbacks and, thus, illegal, Sullivan replies, “The drug lobby is right up there with the NRA, military manufacturers and insurance companies. Payers (and PBMs) will push back on any legal remedies since their financials would be radically impacted by huge reductions in ‘unearned revenue’ (= rebates). They would have to put all drugs on a level pricing plane, and that would likely raise costs by eliminating ‘preferred’ formularies.”
The issue of removing the safe harbor for rebates is one that FDA Commissioner Scott Gottlieb, M.D., and HHS Secretary Alex Azar mentioned ahead of Trump’s speech. Muken and Newshel point out that Azar criticized PBMs and rebates in a press briefing “and called for ‘fundamental structural change.’ At this point it’s still a threat, and now the question is whether the administration follows through or not on actions that could pose bigger risks to the drug channel.…With that [HHS rulemaking] notice kicking off a regulatory process that could still yet result in more disruptive proposals — and in the meantime political rhetoric on drug pricing likely to get louder as the midterm elections approach and Democrats call for even more aggressive actions — we don’t think the clouds have cleared yet.”
Efforts Will Target Ex-U.S. Drug Prices
Trump also stated that the administration “will demand fairness overseas” in drug pricing. “Americans will not be cheated any longer,” he contended. The blueprint explains that “HHS may support better negotiation by…working in conjunction with the Department of Commerce, the U.S. Trade Representative, and the U.S. Intellectual Property Enforcement Coordinator to develop the knowledge base necessary to address the unfair disparity between the drug prices in America and other developed countries. The Trump Administration is committed to making the appropriate regulatory changes and seeking legislative solutions to put American patients first.”
Elan Rubinstein, Pharm.D., principal at EB Rubinstein Associates, contends that “the most troublesome idea is that HHS suggests leaning on countries that control drug prices to ‘…address the unfair disparity between the drug prices in America and other developed countries’ — as if the market pricing solution in the U.S., if implemented in all industrialized nations, would lead to better control of drug spend internationally.”
“They want drug companies to increase their prices in EU and Japan,” says consultant Jim Martin, Ph.D. “I like that … we are going to ask pharma to increase prices overseas so they can lower prices here. Hmm … We will put tariffs on goods to protect IP [i.e., intellectual property]. It seems like a similar disconnect,” he tells AIS Health.
Other Countries Have Central Control
On this issue, the blueprint, asserts Rubinstein, “does not address the key problem, which is that net prices for brand name drugs are much higher in the U.S. than in other industrialized nations. The proposed solution does not include using government payer leverage to negotiate better net prices, although Trump’s quote on pg. 20 would seem to imply that he supports this: ‘We’re the largest buyer of drugs in the world, and yet we don’t bid properly.’
“But of course, the problem is that the U.S. market isn’t a ‘we’ while most other industrialized nations have central control of drug price and access — meaning they are a ‘we,’” he says.
Rubinstein and Martin also are skeptical of the proposal to move Part B drugs to Part D — something that “has been talked about before,” points out Martin. Rubinstein asks whether the administration is “even aware of chain-of-control, product quality and physician/clinic resistance re: ‘brown bagging’ (that is, dispensing an infusible to the patient, and the patient takes the prescription to the clinic for infusion)?”
In a speech following Trump’s, Azar mentioned the idea of mandating that pharmaceutical ads disclose the drugs’ prices. “We’re going to look into having the FDA require this,” he said.
However, points out Rubinstein, the agency does not have the power to do this. On its website, the FDA spells out exactly what content different types of ads are required to include — based on requirements by Congress that the FDA oversees — and not one of the types says an ad must contain pricing information.
“There is certainly active debate on whether the FDA has the power to enact this,” notes Blandford. “While there could be some initial impact, it’s possible patients will become desensitized to a drug’s list price since most competitors in a therapeutic class will have a similar price, and, in reality, it’s not what they’ll pay on a regular basis.”
Bair agrees. Pricing is “so complex” that there’s “no way you can say what the price actually is.” Multiple factors, including the health plan a person has, the actual insurance through the plan and “what’s going on in the market at the moment,” will make a drug’s price different depending on each person. “I don’t know how they think they can accurately display the price,” she says. “I don’t think that’s achievable.”
Lack of Details Makes Impacts Unclear
So what actions proposed by the administration might have the most impact on drug prices?
According to Wojcik, “Given the trend and outlook for specialty pharmacy prices and spending, those that would increase biosimilar competition and eliminate Medicare and Medicaid policies that unintentionally drive up prices for specialty pharmacy would have the most impact if implemented.”
“Without more details, it’s really too early to assess the impact of each action,” Blandford maintains. “Moreover, we need to keep in mind the focus is lowering list prices. Several reports have shown that net prices have risen only moderately over the last few years. So, clearly the biggest impact on closing the gap between list and net prices would be changes to the safe harbor for rebates. Beyond that, the focus really needs to shift to considering prices related to value. That will impact drug prices, but more so in alignment with the broader health care system’s drive toward value-based care, not just low prices for health care services.”
Some points within Section IV of the blueprint, says Rubinstein, “may help reduce net drug prices — like encouraging value-based prices and site-neutral Medicare payment for drugs. Indication-based pricing is interesting as a way to encourage higher value use of drugs, but it would be difficult and confusing to manage.”
That said, Rubinstein maintains that “several things in this section are potentially problematical — like allowing Part D plans ‘flexibility to manage high cost drugs that do not provide Part D plans with rebates or negotiated fixed prices, including in the protected classes,’ eliminating the appeals process and restarting the [Medicare Part B] drug competitive acquisition program.”
At the close of his speech, Trump contended that “these reforms are just the beginning.…It’s going to happen, and it’s going to happen quickly.…We’re going to see prices go down. It’ll be a beautiful thing.”
Download the blueprint at https://tinyurl.com/y7wgme35.
Contact Bair through Victoria Shockley at email@example.com, Blandford through Tess Rollano at firstname.lastname@example.org, Rubinstein at email@example.com, Sullivan at firstname.lastname@example.org and Wojcik through Ed Emerman at email@example.com.