Policy and Medicine

President Trump Gives Remarks on Lowering Drug Prices

“We will see those prices go down, it will be a beautiful thing to watch.” President Donald J. Trump

In less than twenty-five minutes, President Donald J. Trump and Health and Human Services (“HHS”) Secretary Alex Azar provided their remarks on lowering drug prices. President Trump began by stating that his “administration is launching the most sweeping action in history to lower the price of prescription drugs for the American people."

President Trump decried the “middle men” stating they “became very, very rich. Whoever those middle men were, a lot of people never figured it out, they’re rich. They won’t be so rich anymore." He shifted to the “drug lobby” and said they were “making an absolute fortune at the expense of American consumers." President Trump also targeted the pharmacy gag rule, which prohibits pharmacists from informing customers on how to money, stating it “is a total ripoff and we are ending it.” He derided how countries pay far less than the same drug offered here. “It’s unfair, it's ridiculous, and it's not going to happen any longer. It's time to end the global freeloading once and for all," exclaimed Trump. He then asked for HHS Secretary Azar to provide remarks.

“The President’s blueprint is a sophisticated approach in reforming and improving this unbelieving complex system.” HHS Secretary Azar

Secretary Azar began by explaining how Washington only talks. “The problem of high prescription drug costs is something that’s been talked about in Washington for a long time. But that’s all its been. Talk, talk, talk,” said Secretary Azar. He then highlight two examples of Trump’s plan: requiring drug prices to be disclosed for pharmaceutical advertisements and tougher negotiations for better deals with the industry. It should be noted that in June 2017, the American Medical Association (“AMA”) adopted this policy at its Annual Meeting. Following the remarks, a Press Briefing was held by Press Secretary Sarah Sanders and Secretary Azar. HHS Secretary explained that actions laid out within Trump’s blueprint “are steps that we can take using our regulatory authorities, especially with the power in the Medicare program.”

Trump’s Blueprint: American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs

The 44-page document is filled with a lot of talking points on how to address high drug prices, but ultimately Trump’s plan lacks specifics. HHS identified four challenges in the American drug market: (1) High list prices for drugs; (2) Seniors and government programs overpaying for drugs due to lack of the latest negotiation tools; (3) High and rising out-of-pocket costs for consumers; and (4) Foreign governments free-riding off of American investment in innovation. To address these challenges, HHS identified four key strategies for reform: (1) Improved competition; (2) Better negotiation; (3) Incentives for lower list prices; and (4) Lowering out-of-pocket costs. HHS provided a high-level overview of “immediate actions” it may undertake to address the key strategies, as well as “further opportunities.”

Improved competition

Immediate Actions

• Steps to prevent manufacturer gaming of regulatory processes such as Risk Evaluation and Management Strategies (REMS)
• Measures to promote innovation and competition for biologics
• Developing proposals to stop Medicaid and Affordable Care Act programs from raising prices in the private market

Further Opportunities

• Considering how to encourage sharing of samples needed for generic drug development
• Additional efforts to promote the use of biosimilars

Better negotiation

Immediate Actions

• Experimenting with value-based purchasing in federal programs
• Allowing more substitution in Medicare Part D to address price increases for single-source generics
• Reforming Medicare Part D to give plan sponsors significantly more power when negotiating with manufacturers
• Sending a report to the President on whether lower prices on some Medicare Part B drugs could be negotiated for by Part D plans
• Leveraging the Competitive Acquisition Program in Part B
• Working across the Administration to assess the problem of foreign free-riding

Further Opportunities

• Considering further use of value-based purchasing in federal programs, including indication-based pricing and long-term financing
• Removing government impediments to value-based purchasing by private payers
• Requiring site neutrality in payment
• Evaluating the accuracy and usefulness of current national drug spending data
• Investigating tools to address foreign government threats of compulsory licensing or IP theft that may be harming innovation and development, driving up U.S. drug prices

Incentives for lower list prices

Immediate Actions

• FDA evaluation of requiring manufacturers to include list prices in advertising
• Updating Medicare’s drug-pricing dashboard to make price increases and generic competition more transparent

Further Opportunities

• Measures to restrict the use of rebates, including revisiting the safe harbor under the Anti- Kickback statute for drug rebates
• Additional reforms to the rebating system
• Using incentives to discourage manufacturer price increases for drugs used in Part B and Part D
• Considering fiduciary status for Pharmacy Benefit Managers (PBMs)
• Reforms to the Medicaid Drug Rebate Program
• Reforms to the 340B Drug Discount Program
• Considering changes to HHS regulations regarding drug copay discount cards

Lowering out-of-pocket costs

Immediate Actions

• Prohibiting Part D contracts from preventing pharmacists’ telling patients when they could pay less out-of-pocket by not using insurance
• Improving the usefulness of the Part D Explanation of Benefits statement by including information about drug price increases and lower cost alternatives

Further Opportunities

• More measures to inform Medicare Part B and D beneficiaries about lower-cost alternatives
• Providing better annual, or more frequent, information on costs to Part D beneficiaries

The full blueprint is available here. The White House also issued a corresponding Fact Sheet.

Reactions

The stock market largely shrugged off Trump’s blueprint by buying more health stocks (Bloomberg article; see NYT article). Industry spokespersons presented a mixed reaction. 

PhRMA: Pharmaceutical Research and Manufacturers of America (“PhRMA”) president and CEO, Stephen J. Ubl, stated “[t]hese far-reaching proposals could fundamentally change how patients access medicines and realign incentives across the entire prescription drug supply chain. While some of these proposals could help make medicines more affordable for patients, others would disrupt coverage and limit patients’ access to innovative treatments.”  Read the full statement here.

ACR: Dr. David Daikh, President of the American College of Rheumatology (“ACR”), stated ACR “agree[d] the President that drug prices in America are too high and action is long overdue. As the Administration explores sweeping changes to Medicare’s drug distribution system, including the role of pharmacy benefit managers, it is imperative that drug pricing reforms increase transparency, choice, and competition – and not penalize our patients by limiting their access to life-changing treatments.”

AMA: David O. Barbe, M.D., President, AMA, said “[t]he AMA is pleased the Trump administration is moving forward with its effort to address seemingly arbitrary pricing for prescription drugs. Physicians see the impact of skyrocketing prices every day as patients are often unable to afford the most medically appropriate medications—even those that have effectively controlled their medical condition for years. No one can understand the logic behind the high and fluctuating prices. We hope the administration can bring some transparency – and relief – to patients.” Read the full statement here.

Circuit Court Strikes Blow to Maryland Drug Pricing Measure

On April 13, 2018, the United States of Appeals for the Fourth Circuit struck down the first-in-the-nation law aimed at lowering the price of off-patent or generic drugs. The Court, in a two-to-one ruling, stated the law is in violation of the Commerce Clause of the United States Constitution and therefore, is unconstitutional.

In 2017, Maryland became the first state to allow its attorney general to take legal action against drug companies after they increase the price of off-patent or generic drugs. The bill was passed by the Maryland legislature but became law without the signature of the state’s governor, Larry Hogan. Hogan did not sign the legislation due to concerns that it was unconstitutional.

“Although we sympathize with the consumers affected by the prescription drug manufacturers’ conduct and with Maryland’s efforts to curtail prescription drug price gouging, we are constrained to apply the dormant commerce clause to the Act,” Judge Stephanie D. Thacker wrote for the majority opinion. “We hold that the Act is unconstitutional under the dormant commerce clause because it directly regulates transactions that take place outside Maryland.”

Thacker went on to state, “To be clear, we in no way mean to suggest that Maryland and other states cannot enact legislation meant to secure lower prescription drug prices for their citizens.” This may signal that the fight – even in Maryland – is far from over.

The Court remanded the lawsuit back down to the lower court with instructions to enter a judgment in favor of the Association for Accessible Medicines (AAM), the trade group that argued against the law. AAM argued that the law was “overreaching,” vague, and wrongly gave the state power to regulate interstate commerce and business in other states. The suit also claimed that the measure violated the companies’ right to due process.

Judge James A. Wynn dissented from the majority opinion, saying the other judges had interpreted the commerce clause too broadly. Wynn wrote that their ruling would stop “Maryland from protecting its citizens against unconscionable pricing practices by out-of-state generic drug manufacturers.”

Reactions to the Decision

“We’re gratified by the decision because we believe that the law would have the reverse impact than it was trying to achieve,” said Jeff Francer, AAM’s general counsel, noting that the legislation did not apply to expensive brand-name drugs. “Generic drugs bring great savings to people and are not the cause of the great budget issues around health care that are impacting the states.”

“As Association for Accessible Medicines (AAM) has always maintained, this law, and any others modeled from it, would harm patients because the law would reduce generic drug competition and choice,” AAM Chief Executive Chip Davis said in a statement.

The Office of Maryland Attorney General Brian Frosh has yet to announce its next steps with respect to the law. "We remain committed to pursuing efforts to eliminate price gouging and to safeguarding Marylanders' access to prescription drugs," he said. Frosh's office said it was still assessing how to respond to the ruling. The state's lawyers could seek another review by all the judges in the 4th Circuit or take the case to the Supreme Court.

It has been said that other states were contemplating passing similar legislation prior to this ruling. It will be interesting to see if other states attempt to set up a similar law, which would open the doors for an appeal, which may, in turn, eventually lead to a circuit split and an issue ripe for Supreme Court review.

Physician Specialty Groups Caution Against Proposed Drug Pricing Changes

Nine of the nation’s leading physician groups – including the American College of Rheumatology, American Academy of Neurology, American Academy of Ophthalmology, and American Urological Association – joined together this week to urge the Trump Administration to reconsider some of the policy changes suggested in recent drug pricing proposals that would have negative effects on patient care.

In a letter sent to U.S. Department of Health and Human Services Secretary Alex Azar, the groups cautioned that the Administration’s proposal to consolidate certain physician-administered drugs covered under Medicare Part B into the Part D program while reducing physician reimbursements for new drugs below the current payment rates would create access issues and force patients to seek treatment in higher-cost sites of care.

“While are we are supportive of some concepts recently presented, we do have serious concerns regarding other policy suggestions,” stated the letter, “We believe HHS should make policy proposals designed to reflect the needs of complex care patients, reduce administrative burdens, and increase access to care.”

In the letter, the groups note that Medicare Part B and D are different programs with differing formulary structures and that cost sharing would be difficult to consolidate without significantly increasing out-of-pocket costs for patients – especially those who have no choice but to rely on biologics. And because Medicare Part D does not allow for supplemental coverage, patients would be on the hook for larger portions of these expensive biologic therapies.

The groups also warned that changing Medicare Part D formulary standards to require a minimum of only one drug per class rather than the current two could limit patient’s access to the medical therapies judged to be the most effective choice by their physician.

Additional concerns centered on how the Administration’s proposal to reduce physician reimbursements for in-office treatment from the current ASP +6% (which is 4.3% due to sequestration) to Average Sales Price (ASP) +3% would be damaging to patient access. By reducing physician reimbursements below the cost of obtaining and providing these complex therapies, many practices – especially small and rural practices that are unable to negotiate bulk discounts from manufacturers – may be forced to stop administering biologic therapies to Medicare patients altogether, the specialty groups warn. This would drive patients into more expensive and less convenient settings to receive needed therapies – if such alternatives even exist.

In their letter, the groups are supportive of policies that would lower drug prices while at the same time increasing access to vital medications, including:

• Requiring Medicare Part D plans to apply a substantial portion of rebates at the point of sale;
• Establishing a beneficiary out-of-pocket maximum in the Medicare Part D catastrophic phase providing beneficiaries with better protection against high drug costs;
• Decreasing the concentration in the pharmacy benefit manager (PBM) market and other segments of the supply chain; and
• Providing guidance from CMS on how drug-related value-based contracts and price reporting would affect other price regulations.

“Our organizations are dedicated to ensuring that physicians have the resources they need to provide patients with high-quality care,” the letter concludes. “We look forward to being a resource to you and we welcome the opportunity to meet with HHS to discuss our concerns and positions in more detail.”