Will Pharma Accept the Democrats’ Drug Pricing Deal – Or Continue to Fight Reform?

After extensive debate and discussion, Democratic leaders in the House and Senate appear to have reached a compromise on a relatively modest plan for controlling prices on certain prescription drugs. The latest deal greatly reduces the scope of medicines that would be subject to price negotiations, penalizes firms that raise prices faster than inflation, and sets a $2000 annual cap on out-of-pocket (OOP) drug costs for Medicare beneficiaries. An added sweetener is a $35 OOP monthly maximum on patient outlays for insulin, a high-profile consumer issue.

The modified plan addresses several main concerns raised by moderate Democrats in the House and Senate. Rep. Scott Peters (D-Ca) has been most visible in proposing to limit Medicare price negotiations to older medicines with expired patents to protect investment in small biotech firms. Peters has been receptive to caps on price increases and on patient OOP costs, but also opposed to taxing firms that don’t negotiate.

The latest compromise authorizes negotiations for only 20 drugs per year and only for older products that have exceeded exclusivity periods, with exceptions for small biotech companies. The package won support from Sen. Kyrsten Sinema (D-Ariz), who has been a main opponent of drug price negotiations, but broader Senate backing remains unclear.

However, industry continues to object to any Medicare price negotiations. Such action gives the government the power to dictate drug value and threatens the development of new treatments, according to the Pharmaceutical Research and Manufacturers of America (PhRMA).¹ The Biotechnology Innovation Organization (BIO) urges its members to carefully assess the latest pricing plan, reminding them that any kind of price controls threatens continued funding for biopharma R&D. Generic drug makers also object to language that sets inflation-based rebates on generics and biosimilars.

Moving forward

The ongoing debate highlights the complexities of drug pricing, which has faced Congressional reform efforts for decades. Going forward, policy makers still will consider additional options for reallocating rebates, reducing patient costs, skewing payments to high-value therapies, boosting contributions from the wealthy, and subsidizing those who can’t afford needed medicines.

Analysts at the Medicare Payment Advisory Commission (Medpac) also are examining for its June 2022 report to Congress potential policies for reimbursement of Aduhelm for Alzheimer’s disease due to its potentially large impact on Medicare Part B. Options include curbs on payment for new first-in-class drugs with limited clinical evidence, reference pricing to spur competition from therapeutic alternatives, and changes in the coverage policy for Part B drugs. None of these proposals are new, and most would require legislative change. The Biden administration also seeks to promote competition in the pharmaceutical market through executive orders and policy initiatives. The Innovation Center in the Centers for Medicare and Medicaid Services (CMS) is examining new pilots to test changes in both Part D and Part B reimbursement, as well as increased price transparency.

Manufacturers, moreover, are adopting value-based pricing deals with insurers to address opposition to high launch prices for new treatments. Pfizer has offered refunds to patients and payers if its lung cancer drug Xalkori fails to deliver promised effects.² Similarly, Takeda Pharmaceuticals has an arrangement with Point32Health in New England (recently formed by Tufts and Harvard Pilgrim) to provide a rebate on patients that don’t respond or can’t tolerate lung cancer treatment Alunbrig. The two drugs cost $15,000-$20,000 a month per patient, and the deals aim to support prescribing of therapies that may have benefit for some individuals.

Notes

1. https://www.phrma.org/resource-center/Topics/Cost-and-Value/PhRMA-Statement-on-Democrats-Drug-Pricing-Deal-in-Reconciliation-Package

2. https://www.xalkori.com/pfizer-pledge-warranty-program