Trump pro­pos­al ta­pers Medicare pro­tec­tion for cer­tain drugs if drug­mak­ers don't tem­per pric­ing

In its op­po­si­tion to the in­dus­try stan­dard of re­lent­less and of­ten ex­or­bi­tant drug price hikes, the Trump ad­min­is­tra­tion seems to be do­ing more than huff­ing and puff­ing. Af­ter threat­en­ing to switch to a sys­tem that pegs US prices against cheap­er rates abroad ahead of the mid-term elec­tions last month, HHS out­lined a pro­pos­al on Mon­day that could rule out cer­tain drugs from be­ing in­clud­ed as part of guar­an­teed Medicare cov­er­age, if their mak­ers con­tin­ue to hike prices un­de­terred.

Seema Ver­ma

Medicare part D — a vol­un­tary out­pa­tient pre­scrip­tion drug ben­e­fit for Medicare en­rollees, pro­vid­ed through pri­vate plans ap­proved by the fed­er­al gov­ern­ment — re­quires in­sur­ers to in­clude drugs from six pro­tect­ed class­es (an­ti­de­pres­sants, an­tipsy­chotics, an­ti­con­vul­sants, im­muno­sup­pres­sants for treat­ment of trans­plant re­jec­tion, an­ti­retro­vi­rals and an­ti­neo­plas­tics) as part of their for­mu­la­ries. So if a drug falls in­to any of those cat­e­gories, the in­sur­er is oblig­ed to car­ry it, giv­ing the man­u­fac­tur­er sig­nif­i­cant clout to charge what it likes for the treat­ment.

Al­though fed­er­al law pro­hibits the HHS from di­rect­ly in­ter­fer­ing in drug price ne­go­ti­a­tions be­tween Part D plan spon­sors and drug­mak­ers, the new pro­pos­al, which is open to the pub­lic for com­ment, of­fers the in­sur­er the abil­i­ty to claw some of that ne­go­ti­at­ing pow­er back.

“This move un­der­scores our view that the ad­min­is­tra­tion con­tin­ues to see in­sur­ers (and po­ten­tial­ly PBMs) as their part­ners in their fo­cus to low­er drug costs,” Cred­it Su­isse an­a­lysts wrote in a note.

The pro­pos­al sug­gests the in­sur­er be giv­en the op­por­tu­ni­ty to ex­clude a drug if its mak­er were to raise the price be­yond a cer­tain thresh­old over a spe­cif­ic pe­ri­od. It al­so em­pow­ers the in­sur­er to kick a treat­ment off its for­mu­la­ry if the drug rep­re­sents a new for­mu­la­tion of an ex­ist­ing sin­gle-source drug or bi­o­log­i­cal prod­uct, re­gard­less of whether the old­er for­mu­la­tion is on the mar­ket. In ad­di­tion, in­sur­ers could low­er costs by com­pelling pa­tients to un­der­go step ther­a­py, which in­volves try­ing a cheap­er drug on for size – if that treat­ment doesn’t con­fer ad­e­quate ben­e­fit, on­ly then is a more ex­pen­sive drug giv­en, sim­i­lar to the pol­i­cy al­lowed for Part B drugs in 2019.

In an in­ter­view with Bloomberg, CMS ad­min­is­tra­tor Seema Ver­ma said the pro­pos­al could save $692 mil­lion over a decade.

“We see this as some­what ex­pect­ed and priced in (and not worst case sce­nar­ios) and good pub­lic­i­ty for HHS Sec­re­tary Azar and the ad­min­is­tra­tion. While we ac­knowl­edge drugs that cost CMS the most are like­ly to be im­pact­ed in the long term, many of these changes are like­ly to un­der­go re­vi­sions and a com­ment pe­ri­od that may mod­er­ate and would not be im­ple­ment­ed un­til 2020+,” not­ed Jef­feries’ Michael Yee.

In 2014, the Oba­ma ad­min­is­tra­tion was forced to aban­don an at­tempt to lim­it the num­ber of pro­tect­ed class­es, af­ter the plan pro­voked a storm of crit­i­cism from pa­tient groups and Con­gress. Trump’s pro­pos­al, how­ev­er, has not at­tempt­ed to re­duce the num­ber of pro­tect­ed cat­e­gories or elim­i­nate the cov­et­ed pro­tect­ed class sta­tus, which is “a fear some in­vestors had ex­pressed could im­pact Gilead $GILD — re­al­iz­ing that HIV drugs aren’t even in the top 20 for Medicare ex­pen­di­ture,” added Yee.

The CMS pro­pos­al in­clud­ed a raft of oth­er changes, in­clud­ing pro­vid­ing in­for­ma­tion that could help en­rollees low­er their out-of-pock­et costs, by ne­ces­si­tat­ing the in­clu­sion of drug price in­for­ma­tion and low­er cost al­ter­na­tives in the “Ex­pla­na­tion of Ben­e­fits” that Part D plans send to mem­bers. An­oth­er pro­vi­sion im­ple­ments a statu­to­ry re­quire­ment that pro­hibits phar­ma­cy gag claus­es.

PhRMA, a large lob­by­ing group rep­re­sent­ing the phar­ma­ceu­ti­cal in­dus­try, said they were still re­view­ing the CMS pro­pos­al in re­sponse to ques­tions from End­points News.

“But we al­ready have sig­nif­i­cant con­cerns about the im­pact of these pro­pos­als on ac­cess for the sick­est and most vul­ner­a­ble Medicare Part D ben­e­fi­cia­ries,” said Juli­et John­son, deputy vice pres­i­dent of pub­lic af­fairs. “Let­ting plans re­strict ac­cess to the med­i­cines that pa­tients re­ly on, par­tic­u­lar­ly for those with se­ri­ous and com­plex health con­di­tions like HIV/AIDS, can­cer and men­tal ill­ness, re­duces ad­her­ence to those med­i­cines, jeop­ar­diz­ing their health, in­creas­ing their need for in­pa­tient care and re­sult­ing in poor­er health out­comes for se­niors and high­er costs for tax­pay­ers.”

Ac­cord­ing to the Kaiser Fam­i­ly Foun­da­tion, rough­ly 43 mil­lion of the 60 mil­lion with Medicare are en­rolled in Part D plans in 2018. To­tal re­im­burse­ment for brand­ed drugs in Part D in­creased 77% from 2011 to 2015, de­spite a 17% drop in the num­ber of pre­scrip­tions, ac­cord­ing to HHS es­ti­mates re­leased ear­li­er this year, which al­so showed that Part D unit costs for brand­ed drugs rose near­ly 6 times faster than in­fla­tion over the same pe­ri­od.

CMS’ lat­est pro­pos­al, and Trump’s gen­er­al brava­do against the phar­ma in­dus­try, may not nec­es­sar­i­ly trans­late to ma­te­r­i­al change. In the first nine months of 2018, there were 96 price hikes for every price cut, ac­cord­ing to an analy­sis by the As­so­ci­at­ed Press pub­lished this Sep­tem­ber, and more re­cent­ly Pfiz­er $PFE said it planned to in­crease prices on 41 of its drugs in Jan­u­ary.

Mean­while, oth­er law­mak­ers are al­so work­ing on ways to quell the scourge of drug price hikes. Last week Sen­a­tor Bernie Sanders and Rep­re­sen­ta­tive Ro Khan­na re­vealed their in­tent to in­tro­duce a leg­is­la­tion called the Pre­scrip­tion Drug Price Re­lief Act. If signed in­to law, the bill would re­quire the HHS to en­sure Amer­i­cans don’t pay more than the me­di­an price in five ma­jor coun­tries: Cana­da, the Unit­ed King­dom, France, Ger­many and Japan for pre­scrip­tion drugs. It al­so in­cludes a pro­vi­sion that could shat­ter the cur­rent sys­tem of patent pro­tec­tion, by al­low­ing the gov­ern­ment to ap­prove gener­ic ver­sions of patent­ed brand­ed drugs if their mak­ers were to refuse to cur­tail their prices be­low that me­di­an lev­el.

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