Prescription drug prices are too damn high

| December 17, 2018

Prescription drug prices are too damn high

A few years ago, a candidate for mayor of New York City generated a great deal of media coverage by adopting the slogan: “Rent is too damn high.”

As we get ready to head into a new Congress and a new calendar year, you will likely hear politicians of all stripes and perspectives chanting a new mantra: “Prescription drug prices are too damn high.”

Between 2017 and 2018, more than 200 bills were introduced in Congress that sought to either increase drug price transparency or create regulatory or market-based frameworks that would lead, the authors believed, to lower-priced drugs. As more bills are likely to be introduced in 2019, some politicians are convinced that greater competition will do the trick. Others favor a system that uses the heavy hand of government to force prices down to more reasonable levels.

This concern about the high cost of drugs appears to be widespread. A recent Kaiser Family Foundation poll found 77% of Americans say the cost of prescription drugs is unreasonable.

In the latter part of 2018, members of Congress from both parties and the Trump Administration lined up to debate and/or adopt several different proposals aimed at reducing prescription drug prices.

What is Congress doing to help?

In mid-October, Congress finalized legislation making it illegal for health plans and pharmacy benefit management companies to prohibit pharmacists from proactively sharing drug price information with a customer when there is a difference between the cost of the drug under the plan and the cost of the drug when purchased without insurance.

In a growing number of instances, certain prescription drugs would cost less if the individual paid out-of-pocket rather than utilizing an insurance plan to pay for a medication. This happens because the insurance company’s copay is actually higher than the cost of the drug if the patient paid cash.

Under these so-called “gag clauses,” health plans and pharmacy benefit managers were restricting pharmacists from providing drug pricing information to customers. In signing the bill, President Trump called these gag clauses unjust and said, “These clauses prevent pharmacists from telling patients about more affordable options for prescription drugs.”

Additional legislative initiatives aimed at reducing drug costs to both the government and consumers are expected to be on the agenda when the new Congress convenes in January.

How are CMS and HHS helping?

Within the last two months, no fewer than three different initiatives have been put forward by the Trump Administration to try to create market forces believed to lead to lower drug prices. These initiatives are being undertaken almost simultaneously by the Centers for Medicare and Medicaid Services (CMS), the Food and Drug Administration (FDA) and the Department of Health and Human Services (HHS).

In November, CMS released proposed policies intended to “strengthen and modernize the Medicare Part C and D programs.” The proposed policies would give Medicare Advantage and Part D plans more tools to negotiate lower drug prices.

HHS Secretary Alex Azar said of the proposal, “By bringing the latest tools from the private sector to Medicare Part D, we can save money for taxpayers and seniors, improve access to expensive drugs many seniors need and expand their choice of plans. The Part D proposals complement efforts to bring down costs in Medicare Advantage and in Medicare Part B through negotiation, all part of the President’s plan to put American patients first by bringing down prescription drug prices and out-of-pocket costs.”

It is also being reported that CMS is considering adoption of a policy that would require pharmacy rebates to be passed on to seniors to lower their drug costs and require drug makers to include price information in their advertisements. While publishing price information might confuse consumers who may pay different prices because of their insurance plans, CMS continued to favor including prices in advertising.

Finally, CMS announced in late October that it was publishing an Advanced Notice of Proposed Rule Making to stimulate a national dialogue on linking U.S. drug pricing for physician-administered drugs to a potential International Drug Pricing Index (IDPI) model.

Under this approach, the price Medicare would pay for a drug could be linked to what consumers in Europe and/or Canada pay for the same drug. According to information provided by CMS/HHS, Medicare beneficiaries are paying two to three times as much for some drugs in the U.S. as consumers in Canada or Europe pay for the same medications.

CMS suggests this IDPI model could:

  • Reduce select Medicare expenditures and beneficiary cost-sharing for separately payable Part B drugs (for example, drugs administered in physician offices and hospital outpatient departments).
  • Preserve or enhance quality of care for beneficiaries; offer comparable pricing relative to international markets; remove providers' financial incentive to prescribe higher-cost drugs, while creating revenue stability, minimizing disruption to the current supply chain, and increasing Medicare efficiency and value to reduce federal spending and taxpayer dollars.

What about the FDA?

Feeling left out of this debate, it also appears as though the FDA may put forward some ideas on how to increase competition and reduce drug prices. A few months ago, the FDA announced it is exploring ways to increase opportunities for drug importation from Canada and/or Mexico.

The FDA has created a work group to investigate the idea of allowing importation of certain generic drugs for which there are no real substitutes. According to reports and speeches by senior FDA officials, if a drug company increases the price for a generic drug for which there are no real substitutes, the agency could allow drugs from other countries to be imported.

The theory is with added competition (or fear of competition), prices would come down.

Opponents of drug importation are already lining up arguing that the quality and purity of the drugs sold in Canada and Mexico are inferior to the versions sold in the U.S. It has also been suggested that imported drugs are more vulnerable to adulteration.

Wrapping it all up

Each of the initiatives being promoted by the Trump Administration will require public review and comment prior to adoption. And anything considered by Congress will be subject to debate and votes. It is also conceivable that some of the ideas being suggested by the Trump Administration for adoption via regulation could show up in legislation.

There appears to be broad bi-partisan agreement that prescription drug prices are too damn high.

Unfortunately, like so many things in Washington, the fact that there is a bi-partisan consensus – and this is overwhelmingly reflected by their constituents – doesn’t mean anyone has coalesced around a bi-partisan solution.

Bill Finerfrock
President, Capitol Associates