//  12/12/18  //  In-Depth Analysis

Take Care is pleased to present a series of posts offering thoughts on how Congress might address key issues in the healthcare system.

Unlike most other issues, the problem of high drug prices is an area where the Democratic-controlled House and the Republican-controlled Senate might find common ground in the upcoming Congress.  The President has repeatedly stated that he views the issue as a top priority, but Congress has not yet passed significant legislation to address it.  The Department of Health and Human Services (HHS) has recently indicated its intent to regulate on this issue (for my summaries of recent proposals, see here, here, and here), but even if it proceeds to final rulemaking, Congressional involvement will be needed to address the problem for the more than 150 million Americans with private insurance.

Drug pricing is likely to be a priority in the next Congress, not only because it is a priority for large, bipartisan majorities of the American people, but also because the incoming leadership of many influential committees and subcommittees have made it a signature issue.  Representative Elijah Cummings, who is likely to lead the House Oversight Committee, has prioritized this issue, as has Representative Lloyd Doggett, who may take over the Health Subcommittee of the Ways and Means Committee.  Further, Senator Chuck Grassley, the incoming leader of the Senate Finance Committee, has already released a bipartisan (if narrow) bill on drug pricing, suggesting that he may be less friendly to industry than his predecessor, Senator Orrin Hatch.

A bill introduced by Democrats in the spring of 2017—the Improving Access to Affordable Prescription Drugs Act (which I summarized here)—may yield clues for Democrats’ areas of focus on drug pricing going forward. Based on that bill and the actions we have seen so far from Democrats, I expect to see the House conduct hearings and put forth bills in three primary areas: (1) constraining bad actors within the pharmaceutical industry; (2) lowering patients’ out of pocket costs; and (3) using more direct tactics to lower the prices of pharmaceuticals. 

Constraining Bad Actors

American patients and other industry actors have a long list of grievances with the pharmaceutical industry beyond the simple fact of high prices.  Companies often raise their prices year after year, at rates far exceeding inflation.  They try to prevent generic competition even after their patents or other market exclusivity periods have expired—often through actions like paying off generic drug companies (so-called “pay for delay” agreements), filing frivolous citizen petitions with the FDA, or preventing generic drug companies from accessing enough of their drug to make the requisite showing of bioequivalence before the FDA.

Expect to see more investigation of these practices, as well as more bills targeting them.  The Improving Access to Affordable Prescription Drugs Act would have imposed a tax on companies engaging in large, unjustified price increases, and would have punished both innovator and generic companies who engage in pay-for-delay behavior.  The CREATES Act, first introduced in 2016, would allow generic companies to sue branded companies who refuse to sell them enough samples to satisfy the FDA approval process.  Although the CREATES Act enjoys bipartisan support, it has not yet become law.  Things may be different if a Democratic House is able to pass the bill.

Lowering Patients’ Out-of-Pocket Costs

Today, too many Americans have trouble affording their out-of-pocket costs for the pharmaceuticals they need. Even insured patients may spend thousands of dollars at the pharmacy for their medications. Providing lower costs and more certainty for patients—particularly those whose need for medications may vary over the course of a month, including diabetes patients with variable insulin requirements—would be valuable. Expect to see some bills with proposals like those in the Improving Access to Affordable Prescription Drugs Act, which would have capped prescription drug cost-sharing at $250 per month for individuals and $500 per month for families.  Some legislators might even propose eliminating cost-sharing for particular categories of drugs, as the Affordable Care Act did for preventive interventions.

It will be interesting to see whether these proposals are made on their own or whether they are made as part of a package including other strategies to lower prescription drug prices.  After all, capping patients’ out-of-pocket costs will lower a patient’s exposure to the costs of their own medication, but it does not necessarily lower the drug’s price. Because more patients can now afford their medications (which would be a positive development), we might even spend more, not less, on pharmaceuticals.  Insulating patients from these high costs is valuable, but if these proposals are made on their own, they will make the long-term, underlying problem worse, not better.

Direct Tactics to Lower the Prices of Pharmaceuticals

Proposals in this category would directly address high pharmaceutical prices, from a number of different perspectives. Some of these proposals would have an immediate, significant impact, while others would have more measured results.  For instance, the Improving Access to Affordable Prescription Drugs Act contained proposals that would promote generic drug competition in classes with few competitors (a small but real step toward lowering prices). It also included provisions to reduce the length of exclusivity periods currently provided by the FDA, which would allow more market competition for drugs earlier in time.

A number of proposals in this category are likely to focus on drug price negotiation, including through Medicare Part D.  Right now, Medicare is legally required to cover at least two drugs per therapeutic class—and for six classes of drugs, Part D must cover essentially all drugs. (HHS has recently put forth a proposed rule that would relax this requirement, but it will be some time before we know whether HHS will advance it, and if so, in what form.)  Where Medicare is required by law to cover a drug, its bargaining power is severely limited, allowing pharmaceutical companies to set high prices with impunity.  Many other countries deal with this problem by allowing their public payers or regulators to decline to cover a drug if they do not receive a satisfactory deal from the manufacturers. However, this creates access problems for patients who might need such drugs, and patients do not want to be subject to such constraints.

More recent proposals, such as the new bill from Representative Doggett and the forthcoming proposal from Senator Sanders and Representative Khanna, aim to address this tradeoff between price and access.  Representative Doggett’s bill begins by allowing Medicare to negotiate with pharmaceutical companies for preferential prices for their products.  But if Medicare cannot negotiate a mutually agreed-upon price, Medicare doesn’t just get up and walk away from the table: HHS issues a compulsory license for the drug in question, allowing other companies to make and sell the product at a lower price for our market.  Senator Sanders and Representative Khanna are focused on the private market, but their goal is similar: if the price of a drug in the United States is higher than the median price in five other countries (Canada, the UK, France, Germany, and Japan), HHS would issue a compulsory license to enable the production of less-costly generic versions of those products. 

These more radical proposals are unlikely to become law, as they may go too far for Republicans in the Senate. But the Democrats should set forth their vision of a pharmaceutical pricing system that supports innovation and access, some of which may even become law in the next two years.


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