Biotech Voices, Politics, Pricing

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.

Biotech Voices is a contributed article to Endpoints News. 

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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