Have you heard that drug prices are too high? If not, you have not been listening to President Donald Trump, Secretary of Health and Human Services ("HHS") Alex Azar, or almost any member of Congress. In the past year, a dizzying array of drug pricing actions and proposals have come out of the White House and Congress, as well as the governor's offices and legislative halls in most states.
Despite the unprecedented attention, drug makers increased prices an average of 5.1% to start 2020, compared to average increases of 5.2% in January 2019 and 8.0% in January 2018.1 While the Trump administration likely will claim that its policies deserve credit for this modest reduction in the rate of increase, there appear to be no signs of any price decreases. Moreover, apart from a doomed provision for direct government negotiation of prices in Speaker Nancy Pelosi's bill, and (perhaps) a not-yet proposed rule for international reference pricing for Medicare Part B (discussed below), there are not even any current proposals that would limit the launch price of a new drug. Indeed, this year saw the largest list price for a new drug in American history: $2.1 million for the gene therapy Zolgensma.2 Drug makers' arguments—that the ability to set their own prices is essential to continue the notable medical triumphs that have resulted from their research and development efforts in the past half century—largely have continued to carry the day.
That said, in the twenty months since the President unveiled his "American Patients First" strategy (the "Blueprint") in May 2018,3 there has been a great deal of governmental activity that is affecting, and will continue to affect, the ways in which Americans access prescription drugs. These include reforms of Medicare's prescription drug benefit programs, greater transparency into drug prices and price increases, more support for generics and biosimilars, and the prospect of importing cheaper drugs from other countries. At the same time, just the continuing conversation about (and therefore potential for) more consequential governmental measures—direct negotiation, restructuring the supply chain to channel rebates to consumers instead of "middlemen" like pharmacy benefit managers, or international reference pricing—is likely to impact, at least at the margins, the behaviors of drug makers, insurers, providers, and others.
With this context in mind, this Alert will recap what happened on prescription drug pricing at the federal and state levels in 2019, and will speculate as to what bears watching in 2020.
In the year and a half since the Blueprint's release, the Trump administration has released a flurry of proposed and final regulations with a mixed record of success. The administration has implemented a handful of more modest reforms that are less controversial, but do not promise to be very consequential. These include actions by the Food and Drug Administration ("FDA") to promote competition, new transparency requirements in the Medicare program, and expanded tools for Medicare Advantage and Part D plans to steer beneficiaries towards less expensive products.
However, the administration also suffered a series of policy defeats in 2019. In the face of congressional and public pushback, HHS abandoned two of its more ambitious proposed rules to weaken the Medicare Part D protected classes and to eliminate protections under the Anti-Kickback Statute for manufacturer rebates to plans and pharmacy benefit managers ("PBMs"). The administration also had to drop language related to exclusivity for biologics from its trade agreement with Canada and Mexico, while a federal district court vacated HHS's proposal to require drug price disclosures in television advertisements.
With little implemented thus far that appreciably lowers drug prices and with a competitive election on the horizon, President Trump is still searching for a signature drug pricing win. Accordingly, the administration has teed up two controversial proposals for potential implementation in 2020: importation of drugs from Canada and the use of international reference pricing within Medicare Part B. If pursued, both policies could provide a strong talking point for the Trump campaign, but likely would face political, legal, and/or operational challenges.
On Capitol Hill, there appears to be a fairly bipartisan consensus that Congress ought to do something to address drug prices, but little agreement as to what such a bill should entail. On a largely party-line vote in December, Speaker Nancy Pelosi and the House Democrats passed a bill that would dramatically alter the U.S. drug market through government price negotiations and international reference pricing, but is opposed by the White House and Senate Republicans. In the Senate, Republican Finance Chairman Chuck Grassley is seeking to build support for a bipartisan drug pricing package that has the administration's blessing, but has encountered resistance from Republicans who object to the bill's provisions requiring manufacturers to pay inflationary rebates under Medicare Parts B and D. Meanwhile, a group of House and Senate Republicans have introduced legislation that packages together bipartisan bills that would make modest reforms to the drug pricing landscape, but lack the more consequential changes sought by Sen. Grassley and most congressional Democrats. The first half of 2020 likely will determine whether any comprehensive drug pricing package can pass this Congress. The 2019 year-end spending bill punted a range of must-pass legislation to May 2020 to give congressional leaders more time to arrive at a bicameral compromise on drug pricing.
Compared to their federal counterparts, states were far more successful at enacting drug pricing legislation in 2019. Last year, 37 states enacted at least one drug pricing bill.4 New laws covered a range of topics from PBM licensure and wholesale importation to price reporting and transparency.
With the 2020 elections around the corner and public polls suggesting that drug prices remain a top concern of voters,5 the new year is poised to bring even more activity and rhetoric focused on prescription drug prices.
To see the full article click here
1 See Tami Luhby, Democrats and Republicans Promised to Lower Drug Prices, Instead They've Gone Up Again, CNN (Jan. 5, 2020), https://www.cnn.com/2020/01/05/politics/2020-drug-price-increases/index.html.
2 Denise Roland, At $2 Million, New Novartis Drug is Priciest Ever, The Wall Street Journal (May 24, 2019), https://www.wsj.com/articles/at-2-million-new-novartis-drug-is-priciest-ever-11558731506.
3 U.S. Department of Health and Human Services., American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs (May 2018), https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf (herein "The Blueprint").
4 National Academy for State Health Policy, State Prescription Drug Legislative Tracker 2019 (Dec. 5, 2019), https://nashp.org/wpcontent/uploads/2019/09/Rx-end-of-year-Tracker-2019-12.5.2019.pdf.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.