What about the German negotiation model? Biden steers drug pricing debate to a showdown
From an ill-fated proposal to ban rebates for pharmacy benefit managers to an executive order demanding a “most-favored-nation price” for Medicare, if nothing else President Donald Trump has introduced Americans to a flurry of ideas to rein in pharma, an industry he once accused of “getting away with murder.” And now we’re getting the first glimpse of what a Joe Biden presidency might mean for prescription drug pricing.
Speaking to a press pool last week, Biden suggested he is in favor of a variation of the German model — where drugmakers must undergo national level negotiation for both government and commercial insurance.
The approach would give an independent group the power to estimate the “fair value” for any given therapy, Bernstein analyst Ronny Gal noted, and would cover both newly introduced and existing drugs.
While critical details are still missing, Gal reckoned that under this proposal, pharma companies can likely still charge higher prices than they could under the international pricing index, a yet-to-be-implemented Trump policy that industry execs have blasted as “radical” and “horrible.”
It would be fair to point out that once this mechanism is established, it becomes relatively easy for Congress to reset drug prices by changing the dollar value assigned to QALY. Thus, this would be in effect, moving away from free market price setting for drugs. However, it is much better than benchmarking international prices (IPI) and if this is the starting position of the democratic front runner ahead of the election ahead of negotiations in Congress… it certainly could have been worse
QALY, or quality adjusted life year, will be the key variable. If a Biden administration follows ICER, the independent drug price watchdog, and sets the value of a QALY as $100,000 to $150,000, which would in effect keep the same gap in US and European pricing. At least theoretically.
“Some drugs will do better, others worse,” he reasoned. “However, there will not be a wholesale rating of US prices lower.”
Bernie Sanders and Elizabeth Warren, Biden’s top rivals on the primary campaign trail, had promised to utilize the federal government’s compulsory licensing powers to break patents on blockbuster drugs to subdue uncooperative players. But Biden stood out as one of the only Democratic candidates whose platform didn’t feature this policy.
Notably, though, Democrats in Congress do seem to support more aggressive regulations. Nancy Pelosi’s signature healthcare bill included a provision that echoes the international pricing index and passed the House, where she had a majority, before getting shot down in the Senate. It is unclear if Congress would play a role in setting pricing or appeal mechanisms under Biden’s proposal.
Other questions — or “devil is in the details” issues as Gal put it — that are still unresolved include whether there will be a set price or a suggested ceiling; and when it would be implemented.