Congress Struggles to Address Drug Prices

Wrangling over health reform sidetracked a hearing this week on drug pricing before the Senate Health, Education, Labor & Pensions (HELP) Committee. Chairman Lamar Alexander (R-Tenn.) promised in April to address drug pricing at future hearings when Democrats agreed to drop the issue from must-pass legislation to extend FDA user fees, but most Republicans ignored the discussion.

The June 13 HELP committee session heard expert testimony on factors underlying high drug costs and strategies for halting constant price increases. Avalere Health President Dan Mendelson highlighted the need and process for shifting to value-based payments, a theme echoed by all panelists. Allan Coukell, senior director at The Pew Charitable Trusts, explained how drug monopolies limit competition and urged strategies to facilitate generic-drug market entry, reduce exclusivity periods for biologics and orphan drugs, allow Medicare to use formulary tools to negotiate discounts, and require greater transparency in pharmacy benefit management (PBM) contracts. Coukell observed that increased competition doesn’t always drive down prices, noting that firms actually raised prices on older MS drugs when a new, more expensive therapy came to market.

Johns Hopkins professor Gerard Anderson similarly looked to increase competition in pharma markets by ensuring generic-drug maker access to brand supplies for testing, eliminating rebates to PBMs and drug plans, and restricting pay-for-delay deals, patient assistance programs, and market exclusivity for orphan drugs. The abuse of restricted distribution systems, said Anderson, could be limited by requiring pharma companies to make available supplies to any firm that wants to manufacture the drug.

In addition to this week’s “drug pricing 101” session, chairman Alexander said that the panel will hold another hearing in July to hear from pharmaceutical companies and other firms on their take on how the drug development and reimbursement system works. In the fall, the committee will review a new report from the National Academy of Sciences on “Ensuring Patient Access to Affordable Drug Therapies.” 

Many similar issues were discussed at a briefing the next day on “fostering competition in the pharmaceutical distribution chain” hosted by the Brookings Institution’s USC-Brookings Schaeffer Initiative for Innovation in Health Policy. Analyst Neeraj Sood outlined the flow of funds through the pharma supply chain, noting the need to weigh risks in assessing high profit levels for pharma companies vs. other supply chain parties.

PhRMA Senior Vice-President Jennifer Bryant agreed that industry R&D is so risky that it’s “not a surprise” to see high profits and that over time, overall pharma costs are “not spiraling out of control.” Lynn Quincy of Consumers Union objected that consumers do feel the impact of spiraling prices due to high cost-sharing requirements. Quincy added that the drug market has “a lot of natural monopolies,” and that price regulation may be needed to ensure patient access to vital medicines.

Legislation proliferating

There’s no shortage of legislative proposals before Congress that aim to tackle drug prices. A broad measure sponsored by Sen. Al Franken (D-MN) and leading Democrats seeks more transparency in drug pricing through a laundry list of provisions:  manufacturer disclosure of costs, sales, and revenues; curbs on co-pay coupons and patient assistance programs; Medicare negotiation of “fair prices;” drug importing from licensed sellers; increased rebates from manufacturers; limits on various exclusivity periods awarded drugs and biologics; curbs on pay-for-delays deals; efforts to prevent drug shortages; and an end to tax deductions for prescription drug advertising.

Sen. Ron Wyden (D-Ore) recently introduced a proposal requiring pharma companies to publicly justify significant price increases (i.e., hikes of 100% a year or 300% over five years for drugs that cost at least $10 per dose, or for those that account for significant Medicare or Medicaid spending and experience notable price increases). Wyden also has offered a bill to cap out-of-pocket spending for medicines by Medicare beneficiaries once individual outlays exceed $8000 a year, and another measure requires PBMs participating in Medicare to disclose rebates and other discounts from pharma companies.

Meanwhile, there are reports that the White House is readying an Executive Order on drug pricing, an issue President Trump has pledged to tackle. HHS Secretary Tom Price has met with industry leaders to discuss policies needed to support innovation, such as international trade policies. A main theme is expected to be legal changes needed to advance value-based contracts for drugs. 

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