The rising costs of prescription medicines have made headlines for the past two years. From the dramatic new cancer breakthroughs to century-old drugs, spiraling price tags have caught lawmakers’ eyes. Martin Shkreli’s AIDS drug price hike and the soaring cost of EpiPen, insulin, and other lifesaving treatments have added to mounting public pressure. Polls show both Democratic and Republican voters consistently rate the cost of medicine as their No. 1 health concern.
The drug industry had prepared to spend millions of dollars on an advertising and lobbying war to fight an expected effort by a Hillary Clinton administration to address soaring prices. Then came the curveball: the election of Donald Trump and a Republican Congress. The overhaul of the Affordable Care Act and other Republican priorities now will likely take priority over drug pricing.
But the question won’t go away and policymakers will have to address drug costs as they grapple with entitlement spending, pressures on state budgets and the ongoing shifting of health costs onto patients, a trend that is likely to accelerate post-Obamacare.
That was the consensus of a broad range of high-level voices from the drug and insurance industries, Capitol Hill, physicians, researchers and advocates who took part this month in a POLITICO working group. In an on-the-record discussion moderated by POLITICO’s executive editor for Health, Joanne Kenen, joined by health reporters Sarah Karlin-Smith and Brett Norman, the group assessed state and federal policy options for tackling rising drug costs. The group also discussed steps payers and providers are taking toward outcome-based pricing and transparency. In order to encourage a free and frank conversation, comments were not attributed to individual participants. What follows is their candid assessment of the problem and possible next steps. The participants are listed at the end of this report.
THE FEDERAL ARENA
1. Drug prices will remain on the federal agenda
President-elect Trump campaigned on populist promises to push for government negotiations of drug prices in Medicare Part D and importation of cheaper medicines. Those ideas haven’t made it to his transition website and it’s not clear whether he will pursue policies that run counter to GOP orthodoxy. The drug pricing conversation may take a back seat to other health policy priorities early in the Trump administration, particularly as negotiations to replace and repeal Obamacare get underway in Congress.
“We’re not going to have the big discussion about drug costs that we would have otherwise had.”
Yet most participants expected drug costs to remain on the federal agenda—particularly as the next election is only two years away. And the pressure to bring down entitlement spending, or to radically overhaul Medicaid and cap spending, will increase the pressure on the pharmaceutical sector.
“It’s going to be a too-attractive issue in the next political cycle to ignore.”
“How it presents itself is certainly going to look different given the election outcome, but I don’t think anybody that’s engaged in this area should have any sort of sense that the volume and the level of proposals are going to die down at all.”
2. Election results have changed the policy options
Participants did not expect broad federal rate-review, price controls, or extensive importation. (Some could envision importation on a limited scale for very expensive drugs.) One potential solution touted by the Obama administration—a large-scale test of new ways of paying for physician-administered drugs in Medicare—will not see the light of day, participants agreed.
“If it wasn’t already, the Medicare Part B demo is really dead now.”
But participants did envision several vehicles for Congress to address drug costs.
“Very little is really off the table. … We’re about to build in like a nuclear-sized hole in the federal budget. And so all kinds of ways of filling that hole will be back on the table.”
Policy Option 1: Obamacare replacement and entitlement reforms
A Republican-led legislative agenda of replacing the ACA and potentially sweeping entitlement changes is expected to impose broad constraints on federal health care spending across programs–and drug spending is a big part of both Medicare and Medicaid. The GOP favors capping federal contributions to Medicaid, which is now an open-ended entitlement.
“Whether that takes the form of Medicaid per capita [caps] or block-granting or whether it’s like [ACA] subsidies and the exchanges or premium support contributions ...That is going to lead to intense, intense, intense cost containment like we’ve never seen before.”
Policy Option 2: Reauthorization of FDA user fee bills
Four user fee bills that fund nearly half the Food and Drug Administration are in need of congressional reauthorization in 2017. The so-called UFAs cover brand drugs, generics, biosimilar and medical devices. Participants said they would be a logical vehicle to address costs.
“If anybody thinks that a UFA is going to get on the floor of the Senate and the Democrats aren’t going to take a run at doing some high-drug cost legislation, then you’ve not been in this town.”
Republicans are likely to focus on efforts to speed up FDA drug approvals, particularly of generic drugs and biosimilars.
“The GOP congressional leaders are talking about how to restore the economy by freeing up and reducing government overregulation. And one of the places that you’re hearing about daily is the FDA.”
Many participants pointed to a need for policies that promote more competition from biosimilars, which are akin to generic versions of the complex new drugs known as biologics. This could include allowing pharmacies to dispense a biosimilar instead of a brand biologic, like they can with generics and traditional brand-name drugs.
However, participants warned that FDA reform via the UFAs would not be a silver bullet. The number of generic drug applications awaiting FDA action was described as too small to create enough competition to bring down drug prices.
“The idea that there’s a sort of pent-up savings sitting at FDA right now in the form of unapproved generics is, to my mind, an unproven proposition.”
“The FDA absolutely has a role there, but I would just tell you, that’s not going to be the panacea. It’s not. If we just feel good about resolving the backlog, it’s a sound bite, folks. Just to be candid. It’s important, but it isn’t going to solve the issue in and of itself.”
Policy Option 3: Patent reform
Patent reform could also reappear on the congressional agenda in 2017. The tech industry wants to change the inter partes review process, to allow a faster method for challenging patents through the U.S. Patent and Trademark Office rather than the courts. The drug industry has pushed hard to be carved out of IPR, which it argues makes it too easy to challenge brand drug patents. The outcome of patent reform could dictate how soon cheaper generic or biosimilar drugs get to market.
Policy Option 4: Transparency measures
Another area ripe for congressional attention is price transparency. That has several dimensions, including R&D costs, as well as the often-opaque rebates to pharmaceutical benefit managers, particularly as they directly affect what consumers pay.
“Donald Trump has said he’s supporting of price transparency. … it fits in line with his and the Ryan proposal’s expansion of consumer-directed health care. You need that information, so I think it’s definitely going to be advanced.”
Participants also predicted that the FAIR Drug Pricing Act, proposed by Sens. John McCain (R-Ariz.) and Tammy Baldwin (D-Wis.), could get a look by the next Congress. The legislation would require companies to publicly disclose and justify planned increases of more than 10 percent, and reveal information about research and development costs.
However, no one in the room thought transparency—even paired with some public shaming—would on its own restrain prices across the board. Some participants also warned of unintended consequences, arguing that increased transparency could perversely lead to higher drug prices. If a company is going to have to reveal big price hikes, it would have an incentive to enter the market with an initial high price, to avoid future increases that would trigger subsequent disclosure requirements.
THE STATES
If the federal government doesn’t tackle drug pricing fast enough, participants agreed, state governments would. Drug costs are a drain on state budgets through Medicaid, public-sector employee health plans, prisons and other programs. In 2016, drug price transparency bills were introduced in several states, and one passed in Vermont. Most of the proposals, like the federal McCain-Baldwin effort, would require drug companies to disclose how much they spend on research and marketing. Some would require drugmakers to give advance notice of price increases above a certain threshold. At least one state, Maryland, is also looking at potential price-gouging legislation which could “make these companies think twice before they do something like what they did on EpiPens.”
Those proposals are likely to resurface next year, though the upheaval surrounding the repeal and replacement of Obamacare could shift focus away from drugs for some time. Capping federal contributions to Medicaid would also force states to take another look at their drug purchasing.
“Right now, [drug pricing] is probably the hottest topic in state health policies. But when we get into the discussion about what happens to Medicaid, that could obviously trump it.”
“I understand the limitations [of the state transparency push] … but at the very minimum we need to know: if you’re saying we need these higher prices because of research, well, how much is spent on research? … How much of your research is paid for by the government?”
Several participants voiced concerns that drugmakers might seize on transparency as a big concession—and use that to block more meaningful state action aimed at the actual underlying prices.
“Transparency laws … are a patina that basically don’t give us real data, but pharma will say, ’We gave at the office.’ You’ve already forced us to do transparency, we can’t do anything more.”
States could proceed with efforts to import drugs from certain countries, such as Canada, that have safety standards comparable to those in the U.S. Expanding states’ bulk purchasing of drugs is another proposal on the table, and states may look to negotiate extra rebates on Medicaid pharmaceuticals, too.
“Importation and reimportation is of interest, particularly to the conservative states … It would be targeted for more expensive drugs.”
Value-based purchasing agreements between states and drug companies, which would aim to base prices on health outcomes or other social spending saved by drugs over time, are likely to be pursued. But because they are negotiated one drug at a time and there’s no broadly accepted framework for determining value, they’re unlikely to be a major factor in the near future.
“People are concerned about and worried about the time it’ll take, and it’s drug by drug by drug. And states like to think in two-year budgets.”
One alternative that has surfaced to alleviate immediate pressure on state budgets, especially with the costly hepatitis C treatments, are financing models that would allow states to spread out the cost of drugs bought in a given year over time. The prices stay the same, but states essentially take out a loan, like a mortgage. Some object to the “forward-funding” idea because it doesn’t address the underlying price issue—just the payment timetable—and the costs could pile up for states over time.
“It’s attractive to think that the states could actually do some things that would be positive and that could be modeled for the country, but I’m skeptical. And I’m skeptical for financing because it compounds year after year.”
Private Sector
Much of the innovation in how to pay for drugs is already underway in the private sector. Drug companies and insurers are experimenting with “value-based” or “outcome-based” models, although the concept is much further along in how insurers reimburse doctors and hospitals than how they pay for drugs. The expansion of value-based payment experiments in the pharmaceutical sector is certain, and many observers believe it could address some important vagaries in the market.
There are many challenges. Who decides what “value” is? How can it be reliably measured?
“There are three trends in the private sector that are going to dominate. And one certainly is that more and more Americans are going to be involved in high-deductible health plans. And they’re going to face directly these costs out of pocket. Secondly, we’re going to see a lot more capitation, and that means that the interests of hospitals and doctors are opposed to higher drug costs that don’t produce value. That’s going to be an internal tension.”
“We’re light years ahead of where we are in terms of the types of value-based arrangements that we see on [the hospital] side of health care versus where we are with pharmaceuticals.”
“[The payment models] are going to have to be tested, I would argue, in small demonstrations, in ways that everybody can look at it and evaluate whether it works.”
Because of changes in insurance plan design, patients are exposed to a greater share of prescription drug costs, meaning consumers—and their doctors—will play a large role in the debate on drug costs.
“Patients ultimately will drive this because if the costs keep going up and up, they’re going to mandate that the politicians help fix these problems.”
One challenge now is that patients don’t necessarily know their costs for a course of treatment, and doctors don’t have ready access to that information either. Insurance coverage varies widely, formularies are complicated, and patients may not know how much of their deductible is left to pay.
“When someone has cancer, they want everything possible, but they don’t want to mortgage their home or pay with their kid’s college tuition for a drug that may only just add a month or two to life.”
A host of factors go into conversations about value—how long will a cancer drug, for instance, extend a particular patient’s life? Not all patients reap the same benefit. What are the side effects and overall quality of that life? Finally, what is the cost that the patient has to pay, and how does the financial burden compare with the benefit?
“The hope is that in the future … you will be sitting with your patient in the room and the patient will say, ‘Doctor, is this drug really a value to me?’ And you can then weigh the pros and cons. We’re not there yet, but hopefully in the next five years, we might get there.”
Working Group Participants:
Peter Bach, Director, Center for Health Policy and Outcomes, Memorial Sloan Kettering Cancer Center
Jenny Bryant, Senior Vice President, PhRMA
Allan Coukell, Senior Director for Health Programs, Pew Charitable Trusts
Chester “Chip” Davis Jr., President & CEO, Generic Pharmaceutical Association Representative
Vincent DeMarco, President of the Maryland Citizens’ Health Initiative
Don Dempsey, Vice President, Policy and Regulatory Affairs, CVS Health
Matt Eyles, Executive Vice President, Policy and Regulatory Affairs, AHIP
Sarah Karlin-Smith, Health Care Reporter, POLITICO
Ronan Kelly, Assistant Professor of Oncology, Johns Hopkins
Joanne Kenen, Executive Editor for Health Care, POLITICO
Brett Norman, Health Care Reporter, POLITICO
Trish Riley, Executive Director, National Academy for State Health Policy
John Rother, President and CEO, National Coalition on Health Care
Ameet Sarpatwari, JD, PhD, Instructor in Medicine, Harvard Medical School; Associate Epidemiologist, Brigham and Women’s Hospital
Melissa Schulman, Senior Vice President, Government and Public Affairs, CVS Health (*Sponsor)
Grace Stuntz, FDA Policy Adviser, Senate HELP Committee Republican Staff
Steve Wojcik, Vice President, Public Policy, National Business Group on Health
No comments:
Post a Comment