Events by the Alliance

Drug Price Blueprint: The Likely Impact

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What is the likely impact of the Drug Price Blueprint? American Patients First, the Trump Administration’s drug price blueprint to lower costs, contains provisions with the potential for a significant impact on the health care marketplace, according to Alex Jung, managing director in the Parthenon-EY practice of Ernst & Young LLP.

Jung provided a policy perspective on American Patients First at The Alliance Annual Meeting on “Keeping A Lid on Specialty Rx Costs” held Sept. 11, 2018, at Monona Terrace.

Jung said American Patients First reflects an understanding of how money flows in the health care marketplace. She noted that Alex Azar, a former pharmaceutical company executive who is now the U.S. Secretary of Health and Human Services (HHS), has been both lauded and criticized for proposing changes to the drug market.

Jung said consumers who shared cost information on social media were one of the drivers that brought visibility around drug price variability to the forefront of the discussion at the federal level.

Four Elements to the Drug Price Blueprint

American Patients First is “very focused on the incentives in the system,” Jung said. It offers more than 50 regulatory and legislative measures aimed at reducing drug costs for consumers.

These measures are organized in four sections:

Increasing competition aims to increase the market share for generic and biosimilar versions of medications. Jung noted that mergers and acquisitions in the pharmaceutical sector have created very large corporations that are difficult to negotiate with without significant leverage through scale. Employers can improve their negotiating power by using their coalition partners to aggregate their scale and purchasing power.
Bettering negotiations is focused on improving Medicare Part D, but Jung noted that it also impacts self-funded employers because it addresses the barriers that make it difficult for generic and biosimilar drugs to enter the market, including addressing drug manufacturers’ tactics for delaying the introduction of generics.
Lowering list prices seeks to ensure that discounts and rebates are passed along to the intended patients instead of benefitting stakeholders in the middle (“middlemen”).
Lowering out-of-pocket costs is based on helping patients understand drug prices, rebates and treatment alternatives. Self-funded employers are likely to be part of this conversation as the need to educate patients starts with plan design and understanding deductibles and copays, Jung said.

Avoid ‘Demonizing’ Drug Companies

While it’s tempting to blame pharmaceutical companies for marketplace woes, that’s unfair to them in a system where these companies must spend $2 billion to $2.5 billion to research and develop a single new drug. Yet of every 10 new drugs developed, only one may make it to market.

The cost of research and development for successful and unsuccessful drugs alike is passed along only to U.S. consumers, since other markets worldwide refuse to help pay for that cost. Pharmaceutical companies are typically the only backers for the development of new medications so “demonizing” the companies and their researchers will result in less development work.

“We have no choice to pay for it unless we choose to create a public agency to do so,” Jung said.

She added that the U.S. needs a constructive dialogue about which diseases to prioritize for additional research, so research investments go to identified needs such as new antibiotics as well as to creating highly profitable specialty drugs.

“Demonizing” pharmaceutical companies could also prompt them to go elsewhere. China and India are changing intellectual property rules to persuade drug companies to make their products there, for example.

Two Tactics for Lowering Costs

Jung singled out two American Patients First measures for their ability to foster marketplace changes.

Requiring drug company marketing for prescription drugs include the list price. Jung said the goal is to “rationalize the pricing system” to one common price. This will happen because consumers won’t stand for paying a different price than the one provided in marketing and advertising media. The measure, which was introduced as an amendment to a defense spending bill, has already received unanimous support in the Senate.
Creating a price dashboard so consumers can compare insurance out-of-pocket prices with cash prices. Pharmacists are typically barred from discussing cash prices with consumers by “gag clauses” in PBM contracts. The Know the Lowest Price Act that recently passed Congress and was signed into law by the president banned this practice. Jung called this the “single most powerful” lever the Trump administration can use because it creates “immediate transparency with a huge ripple effect.”

Employer Voices Are Important

Alliance members have adopted a new health policy resolution that calls for a variety of reforms to drug pricing, marketing and pharmacy benefit design in the name of ensuring appropriate care at an affordable cost. Congress and the administration are working on these issues, but employer voices will be needed to make sure that both Congress and the administration follow through on the work they have started. You can help by being ready to reach out to members of Congress if it appears that Congress stalls in its efforts to pass aspects of American Patients First.

Fiduciary Duty

Self-funded employers have a “fiduciary duty“ to act in the best interest of health plan participants. That should prompt them to look carefully at whether drug rebates are collected and paid appropriately and whether their plan’s drug formularies protect enrollee’s best interests. A bill requiring disclosure of rebates that are collected and paid is currently making its way through Congress but is currently focused on Medicare. Employers have a long history of copying what Medicare does in other areas, like determining what to cover, and will likely evaluate this as well.

All of these efforts are about shared responsibility. Employers have asked patients to be accountable and share in the costs of their care but there is a duty for them to act in the best interest of their health plan beneficiaries and not disadvantage the sickest Americans.

Jung urged employers to work together in coalitions, be a voice for their employees’ needs, and make sure their PBMs and other vendors are acting in their best interests.

Get a Specialty Rx Toolkit

The Midwest Business Group on Health’s (MBGH‘s) National Employer Initiative on Specialty Drugs is an employer-driven research project that offers a Specialty Rx Toolkit to provide resources for employers. View the slide presentation from Cheryl Larson, MBGH president and the leader of the specialty drug initiative.