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their list prices in direct-to-consumer advertising. Also, HHS is directing CMS to make Medicare/Medicaid prices more transparent. In addition, HHS wants to ban “gag clauses” that prevent pharmacists of some Medicare patients from telling them when they can save money by not using insurance.
Another area of nearer-term focus is streamlining the approvals of generic drugs as well as copycat biologic medicines, known as biosimilars, something FDA Commissioner Scott Gottlieb has repeatedly emphasized as a priority. The report says FDA will issue guidance to address loopholes companies use to delay or block generic competition, and policies to improve the availability and adoption of generics.
But when it came to the “bolder” actions that HHS was proposing, the blueprint raised more questions than answers. For example: the plan had several questions about implementing value-based purchasing in federal programs, and restricting the use of rebates, an opaque practice between drugmakers and PBMs. These deals are confidential and they outline the difference between a drug’s “list” and “net” price. That difference—the rebate—is split amongst the plan sponsors, PBMs, and at times, patients in the form of lower out-of-pocket costs. PBMs consider them an important tool to lower drug costs and insurance premiums.
PBMs like Express Scripts and CVS Health wield significant influence over drug prices, both through rebates and by controlling which treatments insurers will cover. PBMs say this makes them crucial players in lowering drug prices. Just a few weeks ago, for instance, Express Scripts, the nation’s largest PBM, cut a deal with Regeneron Pharmaceuticals (NASDAQ: REGN) to reduce the price of the expensive cholesterol-lowering drug alirocumab (Praluent), in return for quick access to the drug. Express Scripts’ chief medical officer Steven Miller said at the time that patients could expect their out-of-pocket costs for the drug to drop by about a third.
But critics, such as the drug industry, have said that PBMs actually keep costs high. Because PBMs pocket at least a portion of the rebates they take from drug makers, they are incentivized to look for the best rebate, and not necessarily the drugs with the lowest price for patients, according to critics. A higher list price means a bigger potential rebate.
Administration officials and appointees have been highly critical of PBMs and the rebate system in various speeches this year. FDA commissioner Gottlieb, for instance, floated the idea of making rebates illegal under an anti-kickback law (something mentioned in the blueprint as well). Earlier this week, Seema Verma, who runs the Centers for Medicare and Medicaid Services, targeted PBMs, saying they get paid both by drug manufacturers and insurers, making it “unclear who they’re actually aligned with.”
The Pharmaceutical Care Management Association, which represents PBMs, said in a statement today: “Getting rid of rebates and other price concessions would leave patients and payers, including Medicaid and Medicare, at the mercy of drug manufacturer pricing strategies. … Simply put, the easiest way to lower costs would be for drug companies to lower their prices.”
PhRMA, the pharmaceutical lobby group, said in a statement that some of the proposed Medicare changes might raise costs to seniors, and, as it often has, blamed the “middlemen” for the rising costs.
The plan also takes aim at foreign governments that impose price controls on drugs made in the U.S., making them much cheaper to buy outside of the U.S. Earlier this week, HHS Secretary Azar accused various foreign countries of “free-riding” off of U.S. drug research. Trump said today that U.S. trade representative Robert Leitheiser has been instructed to “make fixing this injustice a top priority with every trading partner.” But the plan had few concrete details about how the administration would address this.
Craig Garthwaite, a health policy professor at Northwestern University, tweeted earlier this week in the runup to today’s speech:
Let’s be clear about this once and for all — if foreign countries pay more American patients won’t be paying less.
All that will happen from other countries paying more is additional products that are not sufficiently profitable today will come to market. https://t.co/ds9IwaGWt4
— Craig Garthwaite (@C_Garthwaite) May 9, 2018