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Analysts debate Senate drug pricing bill’s likelihood of making an impact
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The Prescription Drug Pricing Reduction Act, introduced last month by Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Ranking Member Ron Wyden, D-Ore., has passed a Senate committee and now awaits further action.
As the bill stands right now, it would significantly change Medicare Parts D and B, reduce out-of-pocket costs for Americans, save Medicare about $85 billion during the next decade and, in the short term, save Medicaid about $15 billion, according to a press release issued by Grassley.
Experts consulted for this story on the bill’s viability and chances of becoming law displayed some of the same disagreement among lawmakers that has bogged down many other drug price reform proposals.
“The Prescription Drug Pricing Reduction Act has, in some ways, a legitimate chance of becoming law and lowering prices,” Raymond March, PhD, research fellow and director of FDAReview.org at the Independent Institute, told Healio Primary Care.
A former senior CMS official with the Obama administration scoffed at the claim.
“This bill doesn’t have a prayer of passing as is. It doesn't even have enough Republican votes to pass. And that’s sad. Even sadder is that nobody — Republican or Democrat — has enough votes to pass anything that will amount to real drug pricing reform,” Nancy Nielsen, MD, PhD, now senior associate dean for health policy at the University at Buffalo, said in an interview.
Healio Primary Care asked March and Nielsen to discuss their thoughts on the bill and what changes might be made as it works its way through the legislative process. – by Janel Miller
March:
Some form of this bill could pass. The increasing costs of prescription drugs has become too politically relevant for hundreds of thousands of families in the United States for not a single change to come from it.
Perhaps we’ll see some sort of brokerage between pharmaceutical companies and hospital employees who administer the formularies and set the drug pricing. Lawmakers may also find some merit in revisiting and revising the middle-man relationship between drug providers and insurance providers. Politicians may also finally regulate big pharma to eliminate the monopolies they have and force the companies to allow more drugs that serve the same medical purpose into the market because at the end of the day, the only real answer to lowering drug prices is to allow for competition.
I think there will be some promise in investigating pharmacy benefit manager relationships. They play a very large role in negotiating drug prices. Consequently, the deals they make can impact what price distributors will offer patients. Most of what we see as high drug prices are producers covering research and development or regulatory costs. Pharmacy benefit managers are the real negotiators of how much of a profit margin producer get. Understanding how pharmacy benefit managers operate, although not a long-term solution, can work to provide some short-term financial relief for patients.
The Prescription Drug Pricing Reduction Act also proposes many changes to Medicare D, such as simplifying its design, providing an out-of-pocket spending cap; and lowering government spending and premiums. While it is possible that some regulations could be overhauled and more programs could be subject to federal discretion, that part of the bill faces significant obstacles in becoming part of the final law given the significant portion of the population that those types of decisions would impact.
Gene therapy coverage will skyrocket Medicaid costs. Because they are specific to patients, it is very hard to mass produce them, combined with considerable regulatory rigidities, this is why we hear about them costing hundreds of thousands (or in one case $2 million) for patients. Covering them reduces the incentive, and need, to compete to bring down these prices. I think it is a serious mistake.
However, I feel very little of the proposal will be effective in reducing drug prices. Overall it increases oversight into the drug distribution market, which is nearly always passed onto the consumer. Genuine price cuts come from competition, and I don’t see any efforts to improve that within this legislation. I see efforts to try to arrive at the benefits of competition, which only adds costly oversight.
Nielsen:
When you look at the bill which would cap drug prices and tie those prices to the consumer price index, the bill looks tough right? But there have already been 100 amendments submitted, meaning virtually all the Republicans have walked away from this bill already.
Threats to tie drug prices to international pricing index are empty. Very few in Washington want it, and the drug companies don’t want it either. My take on the hearing between drug company CEOs and lawmakers earlier this year is that the lawmakers didn’t buy into the argument that pharmaceutical benefit managers are the sole reason drug prices are so high. So perhaps they’ll retaliate by going after the CEOs. Perhaps.
All that said, there are a few good things in the bill to watch and support, such as bipartisan attention to out-of-control drug prices; value-based pricing for drugs; increased transparency and capping of out-of-pocket costs for Medicare beneficiaries.
But the fact of the matter is that the drug pricing battle has become a game of political chicken. There’s a lot of tough talk in Congress and by President Trump. But probably not much is going to actually happen. And we, past, present and future patients of America will likely be stuck paying high prices for a long time.
Disclosures: Neither March nor Nielsen report any relevant financial disclosures.