Democrat-Controlled House Will Turn Up The Volume On Drug Pricing

With US House of Representatives now controlled by Democrats, lower chamber of Congress will likely increase hearings and investigations into industry pricing practices, but any legislation will likely need to dovetail with President Trump’s agenda to advance.

Drugmakers could see an uptick in congressional investigations, hearings and public pressure to reduce the prices of their products now that the Democrats have regained control of the US House of Representatives, but the prospects for any major legislation aimed at reducing drug prices materializing appear murky at best.

Although the GOP managed to maintain its control of the Senate, Democrats are expected to use their newfound power in the lower chamber to set the stage for the 2020 election cycle.

Drug prices will, therefore, almost certainly stay on their radar in the rhetorical sense.

One of the most notable changes likely to come with the Democrat-controlled House is the expected elevation of Rep. Elijah Cummings, D-MD, to the chairmanship of the powerful Committee on House Oversight and Government Reform. Currently the ranking member of the committee, Cummings has been a frequent and harsh critic of biopharma executives, to whom he has routinely cast blame for the "skyrocketing" cost of prescription drugs.

Drug prices have received some degree of bipartisan attention from the Oversight Committee in recent years. Members from both parties have torn into executives from Turing Pharmaceuticals AG and Mylan NV at a series of hearings on the issue. (Also see "At Drug Pricing Hearing, Innovator Companies Mainly Escape Congressional Wrath" - Pink Sheet, 4 Feb, 2016.) and (Also see "EpiPen Price Hearing: House Plays Bootleg Tape Of Shkreli Event" - Pink Sheet, 22 Sep, 2016.)

But Cummings has also led some more partisan efforts investigating the pricing practices of companies. In November 2016, for instance, Cummings and Sen. Bernie Sanders, I-VT, requested the Justice Department and the Federal Trade Commission (FTC) investigate possible collusion among manufacturers of diabetes products, alleging that "in numerous instances the price increases have mirrored one another precisely."

Similarly, Cummings and fellow Oversight Committee Member Rep. Peter Welch, D-VT, sent letters to a slew of drugmakers in August 2017 requesting information on strategies for pricing their multiple sclerosis products. Now with subpoena power to compel the appearance of witnesses and the production of documents, Democrats on the committee could play a central role over the next two years in dragging drugmakers through the mud.

The House Energy and Commerce Committee, the authorizing committee for the Department of Health and Human Services (HHS) and its various agencies, could also play an investigative role in pressuring drugmakers through its Subcommittee on Oversight and Investigations.

Avalere Health Founder Dan Mendelson told the Pink Sheet in an interview that he believes that there will be "a dramatic increase in investigations" which will focus on topics such as price transparency, alleged collusion on pricing, and rebating policies.

Peter Pitts, president of the Center for Medicine in the Public Interest and a former US FDA associate commissioner, agreed that a Democrat-controlled House will lead to "a litany of hearings and debates on drug pricing under its various manifestations."

Pitts added that discussions of pricing transparency are "entirely appropriate, as long as they include the entire drug pricing ecosystem" that includes the role of pharmacy benefit managers (PBMs) in addition to the pharmaceutical industry.

Legislative Items Face Uncertain Future

But while investigations will likely take a prominent position in the Democrat-led house, the prospects of tangible legislative items related to drug pricing are unclear.

HHS Secretary Alex Azar has explained that there are several aspects of the Trump administration's drug pricing blueprint he believes could be acted on administratively, but there were also several items for which he requested legislative support from Congress, such as the required disclosure of list prices in direct-to-consumer (DTC) advertisements. (Also see "How Drug Promotion Might Change Under Trump's Rx Pricing Plan" - Pink Sheet, 14 May, 2018.)

Azar has also sought congressional support for moving drugs from Medicare Part B to Part D to bring some degree of price negotiation to medications administered by a physician. The HHS secretary has stressed that his department has the power to conduct a demonstration or a pilot, although he also said he hopes for additional statutory authority in the future. (Also see "Part B Drugs Could Be Switched To Part D Under Trump Pricing Plan" - Pink Sheet, 14 May, 2018.)

An area of the blueprint for which Azar has said definitively necessitates legislation is the end of gaming of the 180-day first generic exclusivity clock, where a first generic sponsor sits on its exclusivity and prevents the entry of additional generics. (Also see "Congressional Action On Drug Pricing Blueprint Likely To Be Modest" - Pink Sheet, 14 Jun, 2018.)

However, broader, more partisan healthcare issues will likely take priority over any items related to biopharma policy, as the Democrats will seek to develop a platform to battle Trump in the 2020 presidential election.

"The focus is really going to be on pre-existing conditions and 'Medicare for All,'" Mendelson said. "And the goal really will be to set the stage for the next election."

With the Democrats controlling only one house of Congress, "really what they get is a megaphone," Mendelson continued. "They don't get the ability to shape the policy in a way that is meaningful without giving the president legislative victories."

Legislation A Remote Possibility

Nevertheless, it is possible that Democrats could join with Trump is passing legislation that fits his drug pricing agenda if enough Republicans in the Senate get onboard, says Dan Judy, a research analyst at North Star Opinion Research. 

"It’s not crazy to imagine Democrats in Congress putting something together pulling a few Republicans over from the Senate who have been working on these issues for a long time, passing something that the president will sign," Judy said Oct. 24 at an Alliance for Health Reform reporter’s breakfast. "If it’s a comprehensive solution [to drug pricing] that remains to be seen."

Legislation for list price disclosure in DTC advertisements could be one of the areas where the stars align, as Democrats – and to a smaller extent Republicans –  have made legislative efforts in the past on the issue.

The Senate initially approved an appropriations bill in August with an amendment sponsored by Sen. Chuck Grassley, R-IA, Dick Durbin, D-IL, and Angus King, I-ME, that would authorize HHS to develop regulations requiring the disclosure of list prices in DTC advertising, although the provision was ultimately stripped from the final bill. (Also see "DTC Ad Price Disclosure Provision Stripped From US Funding Bill" - Pink Sheet, 19 Sep, 2018.)

Congress is unlikely to develop bipartisan support for moving drugs from Part B to Part D. Several Democrats from the Senate Committee on Health, Education, Labor and Pensions have expressed skepticism about whether the B-to-D shift would work. (Also see "Shifting Medicare Part B Drugs To Part D: Legislative Prospects Cloudy" - Pink Sheet, 14 Jun, 2018.)

If Democrats decide not to hand Trump any legislative victories, it will likely stymie the extent to which Azar can carry out the blueprint and limit any further moves to those that can be accomplished through regulatory action.

In the Senate, there is likely to be little change in the general approach to drug pricing. However, biopharma will lose one steadfast champion with the retirement of Sen. Orrin Hatch, R-UT. (Also see "Sen. Hatch, Biopharma Industry Champion, Ready To Hang Up His Gloves" - Pink Sheet, 3 Jan, 2018.) Grassley has been floated as his potential replacement as chairman of the Finance Committee.

Potential Democratic Items

Pitts predicts that with Democrats in charge of the House, the lower chamber will put forward what he calls "a banner of bad ideas." One such policy would be a renewed push for a broad drug importation program, Pitts says.

FDA is currently exploring a narrow drug importation program targeting sole-source products that are off-patent and off-exclusivity. Although agency commissioners have historically opposed drug importation, FDA has stressed that any resulting policy would be narrowly tailored. (Also see "Drug Importation Can Be Triggered By 'Excessive' Price Increases; Now US FDA Has To Decide What That Means " - Pink Sheet, 19 Jul, 2018.)

Any broader importation program would also likely fail to get passed the Senate, as Republicans have consistently shot down such proposals. (Also see "Drug Importation Blocked But Not Forgotten As User Fee Bill Clears Senate Cmte" - Pink Sheet, 11 May, 2017.)

Pitts further posits that House Democrats will likely call for banning DTC advertising or removing the tax write-offs for it. They may also facilitate discussions on the Bayh-Dole Act, which permits universities to seek ownership of inventions made with federal funding, Pitts says.

Democrats are also expected to renew their push for authorizing HHS to negotiate drug prices directly with manufacturers in Part D. But congressional Republicans have consistently opposed the idea, as has Azar himself, which makes any possibility for legislative traction inconceivable.

The Trump administration instead has touted its allowing of Medicare Part D plans to negotiate indication-specific pricing for prescription drugs starting with the 2020 benefit year, as well as Medicare Advantage plans to use step therapy to manage Part B drugs, as ways to lower costs. (Also see "Medicare Part D Plans Can Start Negotiating Indication-Based Pricing This Fall" - Pink Sheet, 30 Aug, 2018.) and (Also see "Step Therapy For Medicare Part B Drugs Will Lower Costs By 20%, HHS Projects" - Pink Sheet, 8 Aug, 2018.)

Difficulties With Own Agenda

With a Democrat-controlled House, industry is expected to face greater challenges in promoting its own legislative priorities than it would have if Republicans held their majority in both chambers. One of biopharma's top priorities is legislation reducing the discount for branded drugs provided to beneficiaries in the Medicare Part D coverage gap. An increase in the discount from 50% to 70% was slipped into a funding bill in March, catching industry lobbyists off guard.

The Pharmaceutical Research and Manufacturers of America (PhRMA) has been working to reduce the increase ever since, so far unsuccessfully. (Also see "Part D Coverage Gap Discount Relief Misses Ride On Opioids Bill" - Pink Sheet, 30 Sep, 2018.) But industry is expected to make a big push in the coming weeks.

In other Part D reforms, PhRMA wants lawmakers to attend to the pending coverage gap “cliff” with legislation that would correct, or at least delay, an upcoming surge in out-of-pocket spending requirements for seniors in the gap. The increase is scheduled to begin in 2020.

The Affordable Care Act changed the way that the Part D out-of-pocket spending threshold had originally been indexed in order to slow its trajectory. But that was a temporary fix that expires at the end of 2019.

PhRMA has also been pushing for reforms of the 340B drug discount program. The group’s aim is to rein in the scope of the program, which has grown exponentially in recent years without a corresponding increase in regulatory oversight. Both chambers of Congress have held hearings on 340B but consensus on legislation to reform it may take time. (Also see "340B Reform: US House Bills Mark The End Of The Beginning" - Pink Sheet, 12 Jul, 2018.)

Potential Pharma Champions Defeated

Although the Republicans held onto their majority in the Senate, there were two notable GOP candidates who lost that biopharma would have liked to see in the upper chamber: Bob Hugin in New Jersey and Patrick Morrisey in West Virginia.

Celgene Corp.'s former CEO, Hugin lost his bid to unseat the incumbent Democrat Bob Menendez. Hugin spent 19 years at Celgene working in several different capacities, most recently serving as the company's executive chairman. (Also see "Appointments: Celgene, Merck KGaA, Ipsen, Ablynx, Advicenne, Dragonfly, Ritter And The ABPI" - Scrip, 31 Jan, 2018.)

Hugin has publicly echoed industry's frequent argument on drug pricing, which is that the list price does not reflect the price that consumers pay for their medication amid a complex supply chain. (Also see "High Prices And High Taxes: Do They Go Together?" - Pink Sheet, 25 Apr, 2016.)

Morrisey, for his part, lost out to incumbent Democrat Joe Manchin. Currently Attorney General of West Virginia, Morrisey previously worked as a lobbyist for the pharmaceutical industry during his time in private practice.

A victory for either candidate would could have meant a new lawmaker to fill Hatch's shoes in the Senate as the biopharma sector's biggest cheerleader.