All of the pieces are firmly in place to finally lower the prices Americans pay for prescription drugs — without disrupting innovation — if Congress acts in three areas, Arnold Ventures Executive Vice President of Health Care Mark Miller told the House Ways & Means Committee in testimony this month.
“We have legislation in both houses of Congress, we have a president who seems willing to act, and we have voters demanding action,” he said. “We don’t view this as an opportunity. We view this as an obligation.”
Miller, who formerly served at the Medicare Payment Advisory Commission and Centers for Medicare and Medicaid Services, says legislation has already progressed through committees in both houses on the following key issues:
Ending anticompetitive behaviors and reforming patent law
Committees in both the House and Senate have voted out bills that address industry efforts to reduce competition. One of those is the CREATES Act, which would help put an end to industry abuse of the REMS drug safety program. Manufacturers sometimes use the REMS program to deny generic drug makers access to samples they need to produce equivalent versions. This keeps lower-cost generics off the market, driving up costs for patients, employers, and taxpayers to the tune of $13.4 billion a year.
More than 50 brand-name drugs refuse to give generic drug developers samples, according to the FDA. For example, Celgene’s multiple myeloma drug Revlimid is often cited for blocking access to samples — it makes the company over $6 billion in annual revenues in just the U.S.
“A package of patent reforms are important because they fix systemic problems that allow prices to go up and keep them high,” David Mitchell, President of Patients for Affordable Drugs and himself a multiple myeloma patient, told the Senate Judiciary Committee earlier this year.
Another problem is “pay-for-delay” tactics that allow pharmaceutical companies to block development of cheaper generics using patent settlements. For example, drug maker Teva paid $300 million to four potential competitors to delay generic competition for its narcolepsy drug Provigil. Such settlements grew by 50 percent between 2010 and 2015. The bipartisan Preserve Access to Affordable Generics and Biosimilars Act (H.R. 2375), would limit such anticompetitive agreements and put the burden on manufacturers, rather than the FTC, to prove an agreement is not anticompetitive.
Ending supply chain distortions
Yes, it’s complex, but Miller focuses the committee on one area of this issue: Medicare Part D, which pays for retail prescriptions for Medicare beneficiaries. Right now, the structure of Medicare Part D creates problematic incentives that end up moving enrollees with high drug costs quickly through the donut hole and into the catastrophic phase, where taxpayers pick up a larger portion of the bill. The structure also incentivizes pharmacy benefit managers and plans to put higher-cost brand name drugs ahead of generics on formularies.
Both the Senate Finance Committee Bill and H.R. 3 include proposals to restructure the Medicare Part D catastrophic cap, a change Miller says would protect beneficiaries and reduce taxpayer liability by putting pharmacy benefit managers and the manufacturer at greater risk when the beneficiary experiences catastrophic drug costs.
Addressing unjustified price increases
The list price of brand prescription drugs in the U.S. increased 110 percent between 2012 and 2016, and drug prices here are double that of 19 peer countries. Miller recommends addressing head-on annual price increases that are unjustified by the value of a drug.
Both the Senate Finance Committee Bill and H.R. 3 include an inflation rebate, which would require manufacturers to pay Medicare a penalty if their list price (the price set by manufacturers before rebates and discounts) grows faster than inflation. This would limit taxpayer subsidies of those increases and indirectly reduce commercial sector prices, Miller says. It would also help Medicare beneficiaries struggling to afford medications — when list prices rise quickly, so does their portion of cost-sharing.
Bottom line from Miller: “The time to act is now.”