Will Congress Enact Curbs on Drug Pricing?

June 18, 2019

Congress is weighing in on drug pricing with a range of measures that differ in style and substance.

There is great enthusiasm on Capitol Hill and in the Trump Administration for taking action to reduce outlays for prescription drugs, but the path forward is not clear. Multiple House and Senate Committees are weighing in on the issue with a range of measures that differ in style and substance.  In the Senate, the Finance Committee and the Health, Education, Labor and Pensions (HELP) Committee look to build bipartisan support for broad legislative packages, while the House Ways & Means Committee and the Energy & Commerce panel are crafting reform measures with multiple provisions-some conflicting and overlapping.

Amidst all the proposals to expand patient access to affordable treatments are initiatives to maintain rewards for innovation, such as patent exclusivities and market-based pricing. A prominent administration proposal for bringing down outlays is to peg US prices to those of other industrial nations, such as the United Kingdom, Canada, and Japan. However, the White House has pulled back from that approach, which is strongly opposed by the pharmaceutical industry, and has run into difficulties in looking to limit or alter rebates paid by manufacturers to pharmacy benefit managers.

Negotiating prices

A main Democratic proposal aims to authorize the government to negotiate prices on drugs covered by Medicare drug plans, and in some cases by private insurance. While Democratic leaders initially sought to limit negotiations to a short list of high-priced drugs, pressure from progressive party members to expand the scope of such negotiations prompted House speaker Nancy Pelosi to agree to broader price negotiating authority. Some Senate Democrats also back government price negotiations, but diminishing support from the Trump Administration has tamped down Republican interest.

Moves to permit drug importing have moved forward at the state level, while also gaining broad support in Washington. Florida recently approved a program to bring in drugs from Canada for Medicaid and other state agencies and to authorize more general importing of drugs from outside the United States. But, as with a similar law in Vermont, the Department of Health and Human Services (HHS) has to approve these programs, which has not occurred in the past with similar plans. This time, though, HHS Secretary Alex Azar has backed import flexibility, and some expansion in drug importing is likely to be included in a drug pricing package.

Patent policy reform also may play a role in the drug pricing debate, as House and Senate Judiciary Committees look to devise patent reform measures likely to spur competition in the prescription drug market. Proposals call for curbs on “gaming” the patent system by drug companies looking to extend monopolies, and for the Federal Trade Commission to crack down on manufacturers that file multiple patents on a drug to delay competition.

Medicare spending caps

Then there are numerous proposals to reduce drug outlays by Medicare and Medicaid. Pharma companies and patient groups look to cap or limit out-of-pocket (OOP) spending by Medicare Part D beneficiaries and to spread OOP costs over the entire year. Industry also wants to provide co-pay assistance to Medicare beneficiaries, as occurs in the commercial market, and there’s interest in eliminating the current catastrophic phase of the Medicare drug benefit, retaining initial coverage, and a catastrophic phase. Such approaches soften the impact of high drug prices on individuals, but without greatly undermining pharma pricing practices.  

Industry also supports revisions in current laws that limit drug price flexibility. There is interest in revising the anti-kickback statute to permit government and commercial health plans to devise new payment models for high-priced therapies based on outcomes or long-term effects. Similar policy changes would permit Medicaid to pay for certain medicines over time. Such measures may be linked to policies to prevent brands from “gaming” the system by blocking generic-drug makers from ready access to brand supplies for testing and by discouraging biosimilar prescribing. Biopharma companies continue to fend off such measures and to add in changes opposed by generic-drug makers, such as a limit on the 180-day exclusivity awarded for the first generic to market.

Meanwhile, industry has mounted an attack on the Trump administration’s requirement that pharma marketers post drug list prices in DTC ads, a high-profile strategy designed to utilize price transparency to limit increases. Leading biopharma companies Merck, Eli Lilly, and Amgen recently went to court to cancel the rule just before its July implementation date, claiming that required disclosure of a drug’s wholesale acquisition cost (WAC) would be misleading because consumers seldom pay that price. The lawsuit also maintains that HHS lacks authority to impose such a rule and that it violates First Amendment protections for advertisers. Pharma companies, instead, propose voluntary posting of more relevant consumer price information, with references to company web sites.  

Despite all these differences and difficulties, a deal on legislation appears more likely this year than in the past, as consumers, states, payers, and lawmakers look to rein in healthcare and drug spending. Congressional leaders hope to enact initial proposals this summer to have time to negotiate a final package in the fall. Drug pricing legislation will be part of a broader health bill that addresses issues, such as “surprise” medical bills from hospitals, combating the opioid crisis, access to contraceptives, and the administration’s controversial ban on funding research involving human embryos. Progressive Democrats continue to campaign for Medicare-for-all, while Trump still promises a major plan to replace the Affordable Care Act. To move forward, House Democrats and the White House will need to reach some kind of agreement on what is possible this year, and that prospect seems to shift every day.