New Report Stresses Importance of Affordable Drugs

The high and increasing costs of prescription drugs are “unsustainable” and can impede patient access to quality care, according to a new report on “Making Medicines Affordable: A National Imperative” from the National Academies of Sciences, Engineering, and Medicine. Although the report acknowledges great success in recent years in the development and delivery of important new drugs by biopharmaceutical companies, and the possibility that curbs on drug prices could limit R&D, the health policy experts conclude that the greater imperative today is to make prescription medicines more affordable for everyone.

To this end, the panel chaired by Norman Augustine, former CEO of Lockheed Martin, urges the federal government to use its considerable purchasing power to directly negotiate prices of medicines. It also advises Congress to expand flexibility in formulary design to minimize consumer costs. Such negotiations would gain from greater transparency in prices, profit margins, and financial flows through the biopharmaceutical supply chain. Insurers, moreover, should disclose average net prices paid for drugs, and data from manufacturers would clarify average net volume and drug prices in different markets. And reimbursement policies would be revised to avoid encouraging clinicians to administer more costly medicines in doctors’ offices.

To prevent inappropriate prescribing of newer, more expensive therapies, the panel also seeks to discourage direct-to-consumer advertising of drugs by eliminating the tax deduction for outlays in this area. Clinicians and hospitals would further restrict pharma sales visits, the use of free drug samples, and other inducements.

Insurers also would set annual limits on beneficiary outlays for prescription drugs and make other changes in drug benefit plans to avoid imposing excessive burdens on individual patients. The report recommends an end to “pay-for-delay” agreements that postpone generic-drug entry into a market and proposes regulatory and legal changes to foster competition. One specific is for Congress to revise the Orphan Drug Act to ensure appropriate use of market exclusivity awards and achieve more reasonable pricing.

Industry dissents

The two industry representatives on the panel of 17 health policy leaders added a dissenting view to the 150-page report, noting challenges in calculating appropriate prices for important new medicines and the need to fully assess how the committee’s recommendations would affect future innovation. Former Merck Executive Vice-President Michael Rosenblatt and former Genzyme Chairman Henri Termeer (who died in May 2017) oppose government negotiating of drugs, formulary exclusions based on price, broader drug importation, greater exercise of government “march-in” rights, and blanket curbs on drug advertising.

At the same time, five members of the panel complain that the recommendations don’t go far enough to promote transparency and price reform, and that alternative payment models are needed to achieve such goals.