White House Unveils Proposal on Drug Pricing

by Holland & Knight LLP
Contact

Holland & Knight LLP

On Feb. 9, 2018, the Trump Administration released a 30-page report analyzing domestic and global factors influencing drug pricing. The report by the Council of Economic Advisers (CEA) is expected to inform the HHS' Fiscal Year (FY) 2019 budget request as the report came in advance of a drug-price plan that is part of the president’s budget request.

The report addresses a number of policy issues including, but not limited to, Medicare drug reimbursement, weakening pharmacy benefit managers (PBMs), biosimilar competition and the 340B program. Notably, some of the recommend changes could be done through regulation while others would necessitate statutory changes.

Key proposals include:

Competition Abroad

An extended theme in the report was that foreign countries take measures to curb high drug prices. The report blames high drug spending in the United States on nations that have fixed drug prices and “free ride” off the innovation of companies that pay for drug research and development by raising their U.S. prices. The report continues by suggesting that “the United States could take actions that change the incentives for these countries to price drugs at levels that appropriately reward innovation, rather than disproportionately putting that burden on American patients and taxpayers.”  However, the report did not provide a clear recommendation for how to increase spending in other countries.

Medicare Part B 

The report outlines several potential changes for reform proposed by the Medicare Payment Advisory Commission (MedPAC), the Government Accountability Office (GAO) and the Office of the Inspector General (OIG). Recommended reforms include: (1) introducing physician reimbursement that is not tied to drug prices; (2) moving Medicare Part B drug coverage into Medicare Part D, and (3) changing how pricing data is reported to increase transparency.

In regard to moving Part B drug coverage into Medicare Part D, the report notes, the 71% of Medicare beneficiaries who participate in Part D would receive prescriptions that they would fill and their physicians would administer, removing any economic incentive from prescribing decisions.

HHS Secretary Alex Azar has said moving outpatient drug coverage into Part D would yield savings by allowing the companies that administer the program to negotiate on behalf of the government.

Medicare Part D

The report notes that the Medicare Part D program “creates perverse incentives for plan sponsors and pharmacy benefit managers (PBMs) to generate formularies that favor high-price, high-rebate drugs” that speed patients through the early phases of the benefit structure. Accordingly, the report recommends requiring plans to share drug manufacturer discounts with patients, allowing plans to manage formularies, lowering co-pays for generics, and discouraging formulary design that speeds patients to the catastrophic coverage phase.

Specifically, the report suggests revising the Social Security Act’s requirement to include two “non-therapeutically equivalent” drugs within each category and class. The document suggests that “this requirement eliminates the ability of Part D sponsors to negotiate for lower prices when there are only two drugs on the market since drug manufacturers know that CMS must cover both.” The report also recommends that Part D plans be permitted to vary cost-sharing amounts for low-income subsidy (LIS) enrollees.

Food and Drug Administration (FDA)

The report suggests that the FDA should do more to speed up new drug development, including rewarding companies that invest in the pooling, curating and validating of potential biomarkers and surrogate endpoints. Further, the report goes on to outline how FDA can improve the process for approving new drugs by facilitating the validation and qualification of new drug development tools that allow sponsors to demonstrate safety and efficacy more efficiently and earlier. The report also recommends extending the expedited review process to products that are second or third class that have no generics.

340B Program

The report says two significant problems have emerged in the 340B program. First, “imprecise eligibility criteria has allowed for significant program growth beyond the intended purpose of the program. Second, providers earn significant profits from qualifying for the program, which can be used to fund other forms of care or shareholders’ dividends rather than provide care for low income patients.”  The report notes that “drug reimbursement could be restricted under the program to cover only uses the drugs are intended to treat,” which would constrain the ability of providers to use 340B to cross-subsidize other care. The report also suggests restricting the drug discount program to poor patients, and it raises concerns with current 340B eligibility standards.

Biosimilars

The report notes that biosimilars have the potential to be cheaper than their reference products and save $44 billion over the next ten years. The report acknowledges that biosimilar approval has taken time—with only nine-FDA approved biosimilars and none considered interchangeable.  The report also addresses regulatory uncertainty that has impeded biosimilar reimbursement. Accordingly, the report calls on the FDA to more quickly release final guidance on biosimilar interchangeable designations. The report states “if these guidelines are relatively easy and inexpensive to adhere to, it could spur interchangeable applications and approvals, which could result in more effective competition with the reference biosimilar and lower prices.”

Pharmacy Benefit Managers (PBMs)

The report argues that the PBM market is “highly concentrated,” and calls for policies to decrease concentration in the PBM market and other segments of the supply chain. The report did not say how decreased concentration might be achieved but notes that policies to decrease concentration can increase competition and further reduce the price of drugs paid by consumers.

Medicaid Drug Rebate

The report suggests broad reforms to the drug rebate program including calling for CMS to provide more guidance on how value-based contracts and price reporting would affect other price regulation(s). The report also suggests that CMS could revise rules to specify how manufacturers calculate best price.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Holland & Knight LLP | Attorney Advertising

Written by:

Holland & Knight LLP
Contact
more
less

Holland & Knight LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.