Three con­sid­er­a­tions for the phar­ma in­dus­try as Pres­i­dent Trump fo­cus­es on drug pric­ing

by PwC Health Ad­vi­so­ry: Kar­la An­der­son, Rick Ed­munds, Phil Sclafani, Doug Strang and Will Su­vari


Kar­la An­der­son

As a pres­i­den­tial can­di­date, Pres­i­dent Don­ald Trump re­peat­ed­ly de­cried drug prices, sug­gest­ing that Amer­i­cans should be al­lowed to pur­chase the prod­ucts from abroad and that Medicare should be al­lowed to ne­go­ti­ate their prices. As pres­i­dent, he has con­tin­ued to talk about drug pric­ing. Ad­dress­ing Con­gress on Feb. 28, Trump said he would “work to bring down the ar­ti­fi­cial­ly high cost of drugs, and bring them down im­me­di­ate­ly.”

Pres­i­dent Trump and Re­pub­li­can law­mak­ers al­so have promised to re­peal and re­place the Af­ford­able Care Act (ACA), which in­clud­ed deep manda­to­ry Med­ic­aid drug re­bates and ex­pand­ed the num­ber of health­care or­ga­ni­za­tions that could par­tic­i­pate in the 340B dis­count drug pro­gram. On March 6, House Re­pub­li­cans in­tro­duced a bill, the Amer­i­can Health Care Act, or AH­CA, which rolls back the ACA’s Med­ic­aid ex­pan­sion af­ter 2019 but does not ad­dress the law’s drug re­bates or 340B pro­gram ex­pan­sion.

Al­low­ing Medicare to ne­go­ti­ate drug prices at the na­tion­al lev­el, or al­low­ing reim­por­ta­tion of prod­ucts from oth­er coun­tries, could push prices down. Ei­ther of these op­tions would face a dif­fi­cult leg­isla­tive path. Oth­er con­gres­sion­al ac­tions—such as chang­ing the FDA’s or­phan drug pro­gram to nar­row prod­uct el­i­gi­bil­i­ty or cap prices, or re­quir­ing com­pa­nies to jus­ti­fy price in­creas­es at pub­lic hear­ings—may lead to new pol­i­cy pro­pos­als, or new pres­sure on com­pa­nies to ex­plain the prices of spe­cif­ic prod­ucts (see fig­ure 1 for a list of pol­i­cy pro­pos­als).

Pres­i­dent Trump’s de­sire to bring pri­vate sec­tor tools to bear on pub­lic sec­tor pro­grams, such as cre­at­ing a more com­pet­i­tive en­vi­ron­ment for health­care prod­ucts and in­creas­ing cor­po­rate trans­paren­cy, dove­tails with state-lev­el trans­paren­cy pro­pos­als. In Mary­land, a pro­posed state law would re­quire a raft of new dis­clo­sures for drugs that cost more than $2,500 a year. Six­teen states are con­sid­er­ing sim­i­lar leg­is­la­tion to in­crease com­pa­nies’ dis­clo­sures.

These state-lev­el ef­forts can even­tu­al­ly lead to na­tion­al pol­i­cy. CMS’ Open Pay­ments law, al­so known as the “Sun­shine Act,” was born on the state lev­el be­fore it was adopt­ed as part of the ACA.

Three con­sid­er­a­tions for the in­dus­try

Make a plan. At least sev­en ma­jor drug com­pa­nies have tak­en steps to make drug prices more trans­par­ent, or have com­mit­ted to lim­it­ing an­nu­al price in­creas­es. It’s too ear­ly to eval­u­ate whether these ini­tia­tives go far enough to counter on­go­ing crit­i­cism of in­dus­try pric­ing prac­tices. Phar­ma­ceu­ti­cal and life sci­ences com­pa­nies are un­der pres­sure from all sides—in­clud­ing from in­vestors—to jus­ti­fy pric­ing de­ci­sions. Drug­mak­ers should plan for sce­nar­ios that may re­quire new R&D and oth­er fi­nan­cial dis­clo­sures re­lat­ed to spe­cif­ic drugs. Lim­it­ing sharp price in­creas­es, es­pe­cial­ly for sin­gle-source drugs treat­ing high-cost or so­cial­ly po­lar­iz­ing con­di­tions, can help drug­mak­ers avoid dam­ag­ing head­lines and in­ves­ti­ga­tions.

The ac­tion is in the states. Last year, Ver­mont be­came the first state to en­act drug-pric­ing trans­paren­cy re­quire­ments. New prod­uct-spe­cif­ic re­port­ing re­quire­ments in states like Mary­land or New York could in­flu­ence leg­is­la­tion in oth­er states, or at the fed­er­al lev­el. Con­duct­ing in­ter­nal analy­ses of pric­ing pat­terns across brands can help drug­mak­ers de­vel­op nar­ra­tives to de­fend pric­ing de­ci­sions and in­flu­ence new trans­paren­cy reg­u­la­tions.

Con­sid­er nov­el ap­proach­es. Val­ue-based con­tract­ing may help pro­tect pric­ing pre­mi­ums for prod­ucts that de­liv­er their in­tend­ed out­comes. Mi­cro­fi­nanc­ing op­tions may im­prove pa­tient ac­cess to high-cost spe­cial­ty and rare dis­ease drugs.  Over­all, shift­ing the fo­cus from in­di­vid­ual drug pric­ing to­wards phar­ma­coeco­nom­ic val­ue is in the best in­ter­est of all stake­hold­ers.

 

The Trump ad­min­is­tra­tion and new state-lev­el pro­pos­als could im­pact drug prices

Pro­pos­al Po­ten­tial im­pact Sta­tus
State-lev­el price caps, price in­crease lim­its, or price trans­paren­cy reg­u­la­tions Lim­it­ed abil­i­ty to dri­ve rev­enue growth through pric­ing will sharp­en the need for vol­ume and share growth, putting a pre­mi­um on in­no­va­tion. Trac­tion on the state lev­el could in­spire fed­er­al ef­forts. Pend­ing in 16 states—The phar­ma­ceu­ti­cal in­dus­try spent more than $100 mil­lion to de­feat a Cal­i­for­nia pro­pos­al in 2016 that would have capped drug prices paid by state in­sur­ance plans to the re­bate price paid by the De­part­ment of Vet­er­ans Af­fairs.
Re­peal ACA Med­ic­aid re­bates Re­peal of the Med­ic­aid drug re­bate would raise prices for prod­ucts used by Med­ic­aid ben­e­fi­cia­ries. No mo­men­tum—AH­CA does not re­peal Med­ic­aid drug re­bates, which knock an av­er­age of 23.1% off the av­er­age man­u­fac­tur­er price.
Re­peal ACA 340B pro­gram ex­pan­sion Rein­ing in the 340B ex­pan­sion would be a win for drug­mak­ers, but could lim­it ac­cess to heav­i­ly dis­count­ed 340B drugs. No mo­men­tum—AH­CA does not re­scind 340B ex­pan­sion. A pro­posed rule adding ad­di­tion­al 340B over­sight was with­drawn.
Al­low Medicare Part D to ne­go­ti­ate drug prices A Con­gres­sion­al Bud­get Of­fice (CBO) analy­sis de­ter­mined that Medicare ne­go­ti­a­tions wouldn’t bring down prices sub­stan­tial­ly. In dis­cus­sion—No spe­cif­ic pro­pos­al has emerged that would al­low Medicare to cen­tral­ly ne­go­ti­ate prices for all Part D plans.
Al­low reim­por­ta­tion of drug prod­ucts A 13-year-old CBO as­sess­ment pre­dicts on­ly a small re­duc­tion in prices from reim­por­ta­tion. In dis­cus­sion—No cur­rent leg­isla­tive path. A bill that would have al­lowed drug im­ports from Cana­da was vot­ed down by Sen­ate Re­pub­li­cans and De­moc­rats in Jan­u­ary.
Tweets and oth­er pub­lic sham­ing Pres­i­den­tial tweets and con­gres­sion­al fo­cus could im­pact stock prices, drug prices and prod­uct com­mer­cial­iza­tion plans. Ac­tion tak­en—Con­gres­sion­al hear­ings and Pres­i­den­tial tweets could con­tin­ue.

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