PhRMA Drug Pricing Comments Mainly Stick To Script

With only one new proposal, brand industry association seems to banking on strength of past policy positions as Trump's drug pricing blueprint moves towards implementation stage.

In its formal response to the Trump Administration’s prescription drug pricing blueprint, the Pharmaceutical Research and Manufacturers of America holds the line in opposing any policies that would intensify price negotiation pressures on manufacturers and broadens its attack on the supply chain as the locus of pricing problems.

PhRMA’s July 16 comments to HHS are fairly light on significant new policy ideas and focus heavily on reiterating opposition to many of the proposals floated so far by the Administration.

The response seems at odds with comments made recently to a Washington DC policy gathering by HHS Secretary Alex Azar, who warned that the biopharma industry needs to come forward with proposals to effectively address the lack of price negotiation for prescription drugs covered by Medicare and won’t get away with talking points about preserving innovation and access any more. (Also see "US Drug Pricing Reform: No More Medicare 'Gravy Train,' Azar Tells Pharma" - Pink Sheet, 18 May, 2018.)

PhRMA’s comments include one significant new idea on how to approach lowering drug prices.

Touted as a “bold new policy position,” the idea involves HHS modifying current Anti-Kickback Statute safe harbors in a way that would help to disconnect compensation for pharmacy benefit managers, wholesalers and pharmacies from list prices. The point would be to help reduce the incentives built into the system for high list prices. (Also see "Beyond Rebates: PhRMA Wants HHS To ‘De-Link’ Supply Chain Compensation From List Price" - Pink Sheet, 16 Jul, 2018.)

The proposal would build on the concept, proposed in recent months by the Administration, of moving the drug supply system away from rebates by revoking the Anti-Kickback safe harbor for such arrangements. PhRMA acknowledges that its proposal would create significant disruption in the supply chain and take at least two years to implement.

PhRMA views the policy as complementary to the other main pricing proposal it has been advocating for the past year – requiring that Part D plans redirect negotiated drug rebates to offset patient cost sharing at the point of sale.

Otherwise the comments push back on many of the substantive Administration proposals for Medicare and Medicaid that are framed as ways to enhance price negotiations using existing market forces (as opposed to empowering HHS to directly negotiate drugs prices with manufacturers in Part D).

They include new formulary controls in Part D, such as allowing plans to restrict access to drugs in the protected classes to gain more leverage in contracting. Currently plans are required to cover “substantially all” drugs in six classes: anti-neoplastics, anti-retrovirals, immunosuppressants, anti-depressants, anti-psychotics and anti-convulsants.

Another proposal would eliminate the two-drug-per-class coverage requirement in Part D, again with the aim of giving plans more leeway to threaten manufacturers with non-coverage in pricing discussions.

The Administration also proposes excluding coverage gaps discounts for brands from beneficiary out-of-pocket calculations. The plan would likely slow beneficiaries’ progress to the catastrophic coverage portion of the benefit, when Medicare covers the majority of drug costs.

The proposals are part of a five-point plan advanced by the Administration for lowering costs in Part D. The plan also includes point-of-sale rebates.

The idea behind the package of proposals is that some will increase government costs but others will reduce them and on balance there will be savings. (Also see "Part D Point-Of-Sale Rebates Losing Appeal? CBO Confirms Big Cost To Medicare" - Pink Sheet, 30 May, 2018.)

The problem for biopharma is that the Administration continues to believe that point-of-sale rebates will result in a substantial additional cost to the federal government from higher premiums, a concern that PhRMA disputes.

That’s why the Administration believes it needs other spending reduction ideas to offset the cost of the rebate policy. And because manufacturers do not believe point-of-sale rebates will significantly increase government spending, it apparently does not see the need for other policies that would balance them out.

Medicare Part B Underappreciated, PhRMA Says

PhRMA opposes three Administration proposals for lowering costs in Medicare Part B without offering substitute policies aimed specifically at reducing drug costs – though PhRMA supports HHS attention to policies that discourage the use of more expensive sites of care for administering Part B drugs.

The Administration’s proposals include moving coverage of some Part B drugs to Part D and relaunching the competitive acquisition program, both of which are expected to help increase price negotiation for Part B drugs. (Also see "Part B Drug Competitive Bidding Program Revival: Vendor Request Coming Soon" - Pink Sheet, 16 May, 2018.) Also included is a proposal aimed at restricting price increases for Part B drugs.

HHS Secretary Alex Azar has repeatedly expressed an interest in imposing some restraint on Part B drug pricing but PhRMA suggests the concern may be overblown.

“It is noteworthy that several unique features of Medicare Part B contribute to transparency, stable prices in the program, negotiation, access to care, and predictable cost sharing for beneficiaries,” PhRMA maintained.

Heavy Rebate Burden In Medicaid

In Medicaid, PhRMA objects to ideas floated in the blueprint such as allowing a group of states to experiment with closed formularies, allowing manufacturer rebates to Medicaid programs to exceed 100% of a drug’s cost and excluding copay assistance cards from Medicaid price calculations.

The trade group emphasizes that manufacturers already face a heavy rebate burden in Medicaid and it would be unproductive to add to it because it may increase manufacturer incentives to recoup losses by raising prices in other markets.

“While manufacturer rebates have held down net prescription drug expenditures in Medicaid, the growth in manufacturer rebates and tax obligations is significant,” PhRMA said.

“Consequently … any measures to increase Medicaid rebates or to tax the industry further may not serve the intended purposes of reducing list prices. As [the Congressional Budget Office] and many economists have suggested, imposing mandatory rebates and taxes on drug manufacturers can lead to higher prices for other customers.”

PhRMA’s comments were among many submitted to HHS on the blueprint. After the department wades through them it will announce next steps in its development of drug pricing policies. Administrative action is most likely to come first. (Also see "Congressional Action On Drug Pricing Blueprint Likely To Be Modest" - Pink Sheet, 14 Jun, 2018.)

Administration Price Reduction Proposals Opposed By PhRMA

• Restricting access to drugs in protected classes in Medicare Part D.
• Eliminating the two drug per class formulary requirement in Part D.
• Excluding coverage gap discounts from calculation of true out-of-pocket spending in Part D.
• Moving Medicare Part B drugs to Part D.
• Relaunching the competitive acquisition program in Part B.
• Part B drug price inflation restrictions.
• State Medicaid experiments with closed formularies.
• Allowing Medicaid rebates to exceed 100%.
• Excluding copay assistance cards from Medicaid average manufacturer price or best price calculations.

Medicare Drug Pricing Policies Supported By PhRMA

• Point-of-sale rebates in Part D (but not paired with higher coinsurance).
• De-linking supply chain compensation from list price.
• Establishing a maximum out-of-pocket spending limit in Part D.
• Fixing the out-of-pocket spending cliff in Part D that will cause a spike in the threshold for catastrophic coverage beginning in 2020.
• Reverse changes made in the Bipartisan Budget Act that increased Part D coverage gap discount for brands to 70% while shifting plan responsibility from 25% of costs to 5%
• Allow Part D beneficiaries to more evenly spread out their out-of-pocket payments over the year.