Opinion: The drug pricing deal isn't really a victory for Dems, or a loss for PhRMA. But it could be a harbinger of change
Although House and Senate Democrats have finally cracked their Mission: Impossible to allow the federal government to negotiate some drug prices, the negotiations will include so few drugs and have so many stipulations attached that the end result may be more of a drop in the ocean than the monsoon that drug price negotiations could’ve been.
Congress is waiting for a CBO score before officially voting, but early estimates point to about $100 billion in drug pricing savings over ten years from the deal. That’s basically the equivalent of what the pharma industry spends on DTC marketing over a decade. Or about five years of what pharma companies spend on marketing to health care professionals.
The Medicare negotiations deal is also complicated by extensive limitations — it’s only for expensive Medicare Part D and B drugs, 10 to start, the drugs must have no generic/biosimilar competitors, and the negotiations can only start post-exclusivity, or 9 years after the launch of small molecule drugs and 13 years for biologics. It’s unclear what kind of dent, if any, the deal will make on drug prices over the longer term, or for those outside of Medicare.
“CMS will determine the final price, based on criteria that are rather pro-industry – thus it seems more of a notice-and-comment rather than actual negotiation,” Bernstein biotech analyst Ronny Gal wrote in a recent investor note. “Our early impression is that the net impact is positive for pharma stocks.”
Meanwhile, industry group PhRMA, which successfully flooded Capitol Hill with 20 lobbyists for every senator, is once again disingenuously crying foul. This is typical of PhRMA, which often makes a big, public stink about already-limited bills while watering them down further behind closed doors.
And pharma companies, famous for hiring teams of lawyers to find loopholes in complex statute, will surely navigate their way around at least some of the negotiations, or potentially forge deals to bring more innocuous competition to market more quickly so as to avoid any negotiations at all.
But these side effects (pun intended) of the negotiations deal might actually be a good thing. And although the numbers might be a drop in the ocean, and the negotiations themselves slanted in pharma’s favor, the deal still disrupts the woefully inadequate status quo.
Rachel Sachs, a law professor at Washington University in St. Louis who studies drug pricing and innovation, said she didn’t think companies potentially bringing in more competition prior to the government negotiations starting “would be a bad outcome, from a policy perspective, particularly if we end up with more than one competitor to drive down prices. It might also cut down on the need for some pay-for-delay or citizen petition reform.”
Peter BachOther drug pricing experts like Peter Bach have also come out in favor of the deal’s ability to negotiate prices post-exclusivity, rather than when the drugs launch, the latter of which is typical in European countries.
“Focusing on drugs that have logged years on the market means there will be more (and in many cases clear) evidence of how well drugs work. Rarely true at launch,” he wrote. “This is where the money is.”
And Bach insisted to me that is the right step and targeting the right problem:
So much money is in the top expenditure drugs that focusing there — and thus using negotiating resources efficiently — makes sense. I know the push and pull of politics and n[umber] of drugs and stuff makes for good theatre, but my question is where are we compared to where we were 5 years ago when nobody knew what a rebate was or that the biosimilar market was designed to fail or that long monopolies were not just a little long, they were generations long.
Ultimately, if Democrats are able to shepherd their negotiations deal across the finish line (and they’re expected to), the net effect won’t be instantaneous savings or the collapse of the biopharma industry, but perhaps an signpost on the way toward a more sustainable path.
