Latest Drugwonks' Blog
What did the President propose?
Lowering the price that Medicare pays for the prescription drugs it purchases.
The President couched his remarks as part of an effort to battle “unfair foreign prices.” But none of his proposals addressed any change in the pricing policies of any other country. It was only a political talking point for public consumption as we come down the home stretch of the 2018 midterm election cycle.
The villain wasn’t the pharmaceutical industry, but “unfair foreign nations who free load off of American drug development."
How will this be accomplished?
The President wants CMS to negotiate directly with manufacturers to achieve price parity with a basket of reference countries. By 2025, the target price decrease would (assuming all things work out according to a yet undeveloped plan) average around 30%.
BUT – it does not address whether or not this decrease in spending would reduce premiums for seniors on Medicare Part B or D or Medicare Advantage plans, although in one scenario (per HHS):
“A senior who receives an eye medicine that currently costs Medicare $1,800 a month but other countries just $300, would see their co-insurance drop from $4,400 a year to $900 a year after full implementation of the proposal.”
How soon will this happen?
These new strategies would be rolled out post 2020 via a pilot program that will be gradually phased-in (and has not yet been developed).
Initially, this will take place via CMMI (Center for Medicare and Medicaid Innovation pilot programs). Specific CMMI pilots would each address a specific product.) For the plan to roll out across the entire spectrum would require federal legislation to revoke the existing non-interference clause which prohibits direct federal negotiations. This is why the President spoke about his desire for “bipartisan support.” Political response from Democratic leaders has been tepid.
The non-interference clause was written by Senators Ted Kennedy and Tom Daschle. Nobody doubts that Trump and his team are shrewd negotiators. But the sorts of "negotiations" that Trump refers to have nothing in common with haggling over a real estate deal. Instead, the action that Trump has proposed — repealing the non-interference clause would result in Medicare drug prices going up and patient choice going down.
Through their own negotiations with drug makers, private insurers that offer Part D plans have had great success in keeping pharmaceutical prices down. In fact, the Congressional Budget Office observed that Part D plans have "secured rebates somewhat larger than the average rebates observed in commercial health plans." The non-interference clause prohibits government officials from intruding in these negotiations.
Doing away with the non-interference clause, on the other hand, "would have a negligible effect on federal spending." In a report from 2009, the CBO reiterated this view, explaining that such a reform would "have little, if any, effect on [drug] prices."
In fact, allowing the feds to negotiate drug prices under Part D likely would have a negative effect on the program. The CBO explains that to achieve any significant savings, the government would have to follow through on its threats of "not allowing [certain] drug[s] to be prescribed."
In other words, the government might drop some drugs from Medicare's coverage. Patients who need those drugs would then be forced to pay for them out-of-pocket, which would make medicines vastly more expensive for the seniors the President wants to help.
This clause has been the key to Medicare's success. Between 2004 and 2013, the Medicare "Part D" prescription drug benefit program cost an extraordinary 45 percent less than initial estimates. Premiums for the program also are roughly half of the government's original projections. These unprecedented results are largely due to Part D's market-based structure. Beneficiaries are free to choose from a slate of private drug coverage plans, forcing insurers to compete to offer the best options to American seniors.
What about Part B drugs?
Per Part B, the President announced a move from physician “buy and bill” payments based on the price of a product to a flat fee-for-service platform. This was previously tried during the Obama Administration as a CMMI pilot program and worked pretty well. It would, among other things, remove the incentive for physicians to prescribe a more expensive product when less expensive options are available. This will be particularly important for biosimilars. Such a change would require changes in both the strategies and tactics manufacturers use to incentive physician prescribing. A "target price" will be set for Part B drugs, but even when the pilot program goes live, it will be slowly phased in (and we don't get to the new target price of drugs until 2025 at the earliest).
Per the HHS plan, initial CMMI “negotiation” pilots will focus on “single source drugs and biologicals, as they encompass a high percentage of Part B drug spending and are frequently used by physicians that bill under Medicare Part B.”
These Part B changes reinforce the absence of any real ties to “foreign prices” since a drug approved in the US before Europe would be priced via domestic negotiation.
The focus of Part B drugs “in the line of fire” are largely drugs oncology-related medicines that represent the highest gross cost to CMS.
The new HHS document (Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures ) also notes that prices cited in the study, ”may not accurately reflect the actual amount paid in the US or abroad,” because they generally do not show the effects of rebates offered by drug manufacturers.” A key question is how the President’s plan will insert more market-based forces into Part B while retaining existing price transparency.
HHS is requesting comment in an Advance Notice of Proposed Rulemaking (ANPRM).
What's next?
The President’s proposals do not address the “other 90%” of healthcare costs in the U.S. Those that have nothing to do with pharmaceuticals. Are we really willing to risk investment for development of innovative medicines by slicing and dicing 10% of healthcare costs but ignore the middlemen, insurers, PBMs, hospitals and other entities that consume the lion’s share of healthcare spending in the US?
Bottom line, nothing is going to happen quickly and nothing will happen comprehensively at least until 2020 at the earliest.
Stay tuned.
Lowering the price that Medicare pays for the prescription drugs it purchases.
The President couched his remarks as part of an effort to battle “unfair foreign prices.” But none of his proposals addressed any change in the pricing policies of any other country. It was only a political talking point for public consumption as we come down the home stretch of the 2018 midterm election cycle.
The villain wasn’t the pharmaceutical industry, but “unfair foreign nations who free load off of American drug development."
How will this be accomplished?
The President wants CMS to negotiate directly with manufacturers to achieve price parity with a basket of reference countries. By 2025, the target price decrease would (assuming all things work out according to a yet undeveloped plan) average around 30%.
BUT – it does not address whether or not this decrease in spending would reduce premiums for seniors on Medicare Part B or D or Medicare Advantage plans, although in one scenario (per HHS):
“A senior who receives an eye medicine that currently costs Medicare $1,800 a month but other countries just $300, would see their co-insurance drop from $4,400 a year to $900 a year after full implementation of the proposal.”
How soon will this happen?
These new strategies would be rolled out post 2020 via a pilot program that will be gradually phased-in (and has not yet been developed).
Initially, this will take place via CMMI (Center for Medicare and Medicaid Innovation pilot programs). Specific CMMI pilots would each address a specific product.) For the plan to roll out across the entire spectrum would require federal legislation to revoke the existing non-interference clause which prohibits direct federal negotiations. This is why the President spoke about his desire for “bipartisan support.” Political response from Democratic leaders has been tepid.
The non-interference clause was written by Senators Ted Kennedy and Tom Daschle. Nobody doubts that Trump and his team are shrewd negotiators. But the sorts of "negotiations" that Trump refers to have nothing in common with haggling over a real estate deal. Instead, the action that Trump has proposed — repealing the non-interference clause would result in Medicare drug prices going up and patient choice going down.
Through their own negotiations with drug makers, private insurers that offer Part D plans have had great success in keeping pharmaceutical prices down. In fact, the Congressional Budget Office observed that Part D plans have "secured rebates somewhat larger than the average rebates observed in commercial health plans." The non-interference clause prohibits government officials from intruding in these negotiations.
Doing away with the non-interference clause, on the other hand, "would have a negligible effect on federal spending." In a report from 2009, the CBO reiterated this view, explaining that such a reform would "have little, if any, effect on [drug] prices."
In fact, allowing the feds to negotiate drug prices under Part D likely would have a negative effect on the program. The CBO explains that to achieve any significant savings, the government would have to follow through on its threats of "not allowing [certain] drug[s] to be prescribed."
In other words, the government might drop some drugs from Medicare's coverage. Patients who need those drugs would then be forced to pay for them out-of-pocket, which would make medicines vastly more expensive for the seniors the President wants to help.
This clause has been the key to Medicare's success. Between 2004 and 2013, the Medicare "Part D" prescription drug benefit program cost an extraordinary 45 percent less than initial estimates. Premiums for the program also are roughly half of the government's original projections. These unprecedented results are largely due to Part D's market-based structure. Beneficiaries are free to choose from a slate of private drug coverage plans, forcing insurers to compete to offer the best options to American seniors.
What about Part B drugs?
Per Part B, the President announced a move from physician “buy and bill” payments based on the price of a product to a flat fee-for-service platform. This was previously tried during the Obama Administration as a CMMI pilot program and worked pretty well. It would, among other things, remove the incentive for physicians to prescribe a more expensive product when less expensive options are available. This will be particularly important for biosimilars. Such a change would require changes in both the strategies and tactics manufacturers use to incentive physician prescribing. A "target price" will be set for Part B drugs, but even when the pilot program goes live, it will be slowly phased in (and we don't get to the new target price of drugs until 2025 at the earliest).
Per the HHS plan, initial CMMI “negotiation” pilots will focus on “single source drugs and biologicals, as they encompass a high percentage of Part B drug spending and are frequently used by physicians that bill under Medicare Part B.”
These Part B changes reinforce the absence of any real ties to “foreign prices” since a drug approved in the US before Europe would be priced via domestic negotiation.
The focus of Part B drugs “in the line of fire” are largely drugs oncology-related medicines that represent the highest gross cost to CMS.
The new HHS document (Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures ) also notes that prices cited in the study, ”may not accurately reflect the actual amount paid in the US or abroad,” because they generally do not show the effects of rebates offered by drug manufacturers.” A key question is how the President’s plan will insert more market-based forces into Part B while retaining existing price transparency.
HHS is requesting comment in an Advance Notice of Proposed Rulemaking (ANPRM).
What's next?
The President’s proposals do not address the “other 90%” of healthcare costs in the U.S. Those that have nothing to do with pharmaceuticals. Are we really willing to risk investment for development of innovative medicines by slicing and dicing 10% of healthcare costs but ignore the middlemen, insurers, PBMs, hospitals and other entities that consume the lion’s share of healthcare spending in the US?
Bottom line, nothing is going to happen quickly and nothing will happen comprehensively at least until 2020 at the earliest.
Stay tuned.
The WSJ article on John Arnold and Laura and John Arnold Foundation campaign to reduce spending on new drugs portrays John Arnold as a really rich guy who just wants to reduce the price of drugs. If only.
The focus of the Arnold initiative is limiting the development of and access to the new medicines, particularly those for ultra-orphan conditions, by gaining control over the clinical research process, the measurement of health outcomes and the development of institutions to arrive at and enforce clinical decisions. There is little room for the kind of democratic decision-making and deliberation that characterizes medicine, at least for now.
It is using ICER, funded by Arnold, (and also funded by insurance companies/PBMs) and the Center for Evidence-Based Decision Making at Oregon Health & Science University, to take control of the coverage decisions of Medicaid, Medicare and of course, health plans. Through these entities, Arnold is increasing the power of PBMs and government agencies to limit access to new medicines, guided of course, by ICER recommendations of the value of these treatments (to PBMs and plans). They provide a short window for public input, but there is no mechanism for allowing different communities with different traditions to choose treatments based on what they value.
Value is defined as limiting total drug spending to an arbitrary level. And that level is in turn based on Arnold’s erroneous belief that new drug spending will drive health plans, families and our economy into bankruptcy. But it is a fact, based on evidence that Arnold ignores and would never fund, that new drug spending overall reduces the total cost of treating disease. New drugs do not just compete with old medicines or similar products. They are substitutes for less effective and more efficient forms of treatment. The trend in cancer and other disease is towards less hospitalization, more productivity, better health as we spend more on medicines. As I have noted before, nearly 90 percent of spending on childhood infectious diseases is on medicines. Would we want to turn back to a time when we didn’t? Societies have avoided financial and existential catastrophes by using new medicines to stem the progression and incidence of disease.
This is a calculus that Arnold, with his billions, has purposely rejected. Instead, he has funded sloppy and misleading research about the cost of drug development and the value of medicines. And he spent millions funding a network of groups that are using this twisted evidence to take control over drug coverage decisions
Across the country, ICER and other Arnold funded organizations are packing health technology assessment panels, which are often funded by Arnold or supported by Arnold funded entities to restrict access to new medicines and diagnostics. And they are doing so by justifying these decisions using the same sloppy and misleading research Arnold funds.
In Oregon, a panel tasked by the state’s Medicaid program initially rejected coverage for Foundation One genetic testing to determine which drugs work in treating cancer. The panel was run by the Center for Evidence-Based Decision Making funded by the Arnold Foundation and chaired by Vinay Prasad who is also funded by Arnold. The Center relied on upon input from ICER, Cochrane Library (Wiley Online Library, Medicaid Evidence-based Decisions Project (MED), and the Washington State Health Technology Assessment Program which contracts with ICER to determine the value of new technologies. All of these experts receive Arnold funding.
The Prasad chaired HERC voted against paying for the genetic test and reversed itself only after Brian Druker, who discovered the first truly targeted cancer drug, accused the panel of discriminating against poor people with cancer. The Center has conducted similar evaluations for 23 state health programs.
Last year’s National Academy of Science study on making medicines affordable was underwritten in large part by the Arnold Foundation. In addition, 3 members of the NAS committee guiding the recommendations receive funding from the Arnold Foundation. The key proposals: limiting patient access to new medicines and forcing them to try cheaper drugs first to save insurers money.
And all these efforts, as well as the Arnold funded researchers that sustain them, are reported in Kaiser Health News, ProPublica and HealthNewsReview.org, all with Arnold funding. In addition, all these outlets ensure Arnold funded articles are widely syndicated.
Finally, Arnold is spending nearly $10 million on negative, misleading political ads in New Jersey attacking the Republican candidate for US Senate, former Celgene CEO Bob Hugin. The actual ad buys are being made by Patients for Affordable Drugs Now, a group fully funded by the Arnold Foundation and, when it is not running malicious ads, attacks real patient organizations as pharma mouthpieces in an effort to reduce their influence.
For all the talk about lowering drug prices, the Arnold program focuses on reducing incentives for innovation to reduce the number of new medicines, reducing prices by enriching insurers and PBMs by jacking up rebates and most important, deny the poor, minority communities and people with the deadliest and debilitating illnesses states access to the kind of advances wealthier and more entitled groups will get. Ultimately, the guiding impulse of the Arnold enterpise is that the sickest and most vulnerable people in society aren’t worth spending money on because it comes at the expense of healthier and wealthier people.
In this regard, the Arnold project is similar in approach and purpose used by earlier philanthropic efforts to address the financial burden of spending more and more money on individuals with hard to treat or intractable conditions. In 1930, well-intentioned billionaires supported eugenics to solve the rising cost of health care and social services, arguing that reducing the number of such ‘defectives’ was a better strategy.
Today, the Arnold Foundation, without malice and with the same sense of noblesse oblige, supports reducing the development of, access to and spending on new medicines for people with the greatest health risks. The Arnold Foundation is hell-bent on giving a handful of well-paid elites in academia, business, politics and the media control over technologies that not only determine if we live or die but how we live or die to ensure the economic sustainability of society. This enterprise, like the eugenics movement it has replaced, is more dangerous precisely because it is well-intentioned.
The focus of the Arnold initiative is limiting the development of and access to the new medicines, particularly those for ultra-orphan conditions, by gaining control over the clinical research process, the measurement of health outcomes and the development of institutions to arrive at and enforce clinical decisions. There is little room for the kind of democratic decision-making and deliberation that characterizes medicine, at least for now.
It is using ICER, funded by Arnold, (and also funded by insurance companies/PBMs) and the Center for Evidence-Based Decision Making at Oregon Health & Science University, to take control of the coverage decisions of Medicaid, Medicare and of course, health plans. Through these entities, Arnold is increasing the power of PBMs and government agencies to limit access to new medicines, guided of course, by ICER recommendations of the value of these treatments (to PBMs and plans). They provide a short window for public input, but there is no mechanism for allowing different communities with different traditions to choose treatments based on what they value.
Value is defined as limiting total drug spending to an arbitrary level. And that level is in turn based on Arnold’s erroneous belief that new drug spending will drive health plans, families and our economy into bankruptcy. But it is a fact, based on evidence that Arnold ignores and would never fund, that new drug spending overall reduces the total cost of treating disease. New drugs do not just compete with old medicines or similar products. They are substitutes for less effective and more efficient forms of treatment. The trend in cancer and other disease is towards less hospitalization, more productivity, better health as we spend more on medicines. As I have noted before, nearly 90 percent of spending on childhood infectious diseases is on medicines. Would we want to turn back to a time when we didn’t? Societies have avoided financial and existential catastrophes by using new medicines to stem the progression and incidence of disease.
This is a calculus that Arnold, with his billions, has purposely rejected. Instead, he has funded sloppy and misleading research about the cost of drug development and the value of medicines. And he spent millions funding a network of groups that are using this twisted evidence to take control over drug coverage decisions
Across the country, ICER and other Arnold funded organizations are packing health technology assessment panels, which are often funded by Arnold or supported by Arnold funded entities to restrict access to new medicines and diagnostics. And they are doing so by justifying these decisions using the same sloppy and misleading research Arnold funds.
In Oregon, a panel tasked by the state’s Medicaid program initially rejected coverage for Foundation One genetic testing to determine which drugs work in treating cancer. The panel was run by the Center for Evidence-Based Decision Making funded by the Arnold Foundation and chaired by Vinay Prasad who is also funded by Arnold. The Center relied on upon input from ICER, Cochrane Library (Wiley Online Library, Medicaid Evidence-based Decisions Project (MED), and the Washington State Health Technology Assessment Program which contracts with ICER to determine the value of new technologies. All of these experts receive Arnold funding.
The Prasad chaired HERC voted against paying for the genetic test and reversed itself only after Brian Druker, who discovered the first truly targeted cancer drug, accused the panel of discriminating against poor people with cancer. The Center has conducted similar evaluations for 23 state health programs.
Last year’s National Academy of Science study on making medicines affordable was underwritten in large part by the Arnold Foundation. In addition, 3 members of the NAS committee guiding the recommendations receive funding from the Arnold Foundation. The key proposals: limiting patient access to new medicines and forcing them to try cheaper drugs first to save insurers money.
And all these efforts, as well as the Arnold funded researchers that sustain them, are reported in Kaiser Health News, ProPublica and HealthNewsReview.org, all with Arnold funding. In addition, all these outlets ensure Arnold funded articles are widely syndicated.
Finally, Arnold is spending nearly $10 million on negative, misleading political ads in New Jersey attacking the Republican candidate for US Senate, former Celgene CEO Bob Hugin. The actual ad buys are being made by Patients for Affordable Drugs Now, a group fully funded by the Arnold Foundation and, when it is not running malicious ads, attacks real patient organizations as pharma mouthpieces in an effort to reduce their influence.
For all the talk about lowering drug prices, the Arnold program focuses on reducing incentives for innovation to reduce the number of new medicines, reducing prices by enriching insurers and PBMs by jacking up rebates and most important, deny the poor, minority communities and people with the deadliest and debilitating illnesses states access to the kind of advances wealthier and more entitled groups will get. Ultimately, the guiding impulse of the Arnold enterpise is that the sickest and most vulnerable people in society aren’t worth spending money on because it comes at the expense of healthier and wealthier people.
In this regard, the Arnold project is similar in approach and purpose used by earlier philanthropic efforts to address the financial burden of spending more and more money on individuals with hard to treat or intractable conditions. In 1930, well-intentioned billionaires supported eugenics to solve the rising cost of health care and social services, arguing that reducing the number of such ‘defectives’ was a better strategy.
Today, the Arnold Foundation, without malice and with the same sense of noblesse oblige, supports reducing the development of, access to and spending on new medicines for people with the greatest health risks. The Arnold Foundation is hell-bent on giving a handful of well-paid elites in academia, business, politics and the media control over technologies that not only determine if we live or die but how we live or die to ensure the economic sustainability of society. This enterprise, like the eugenics movement it has replaced, is more dangerous precisely because it is well-intentioned.
From the Regulatory Focus online publication comes this bit of good news for pharma companies worrying about ICER:
ICER Plots Early Scientific Advice Program for Biopharma
The Institute for Clinical and Economic Review (ICER) is looking to help the biopharma industry with earlier reviews of clinical work, adding to their current independent evaluations of the clinical and economic value of prescription drugs, medical tests and other health innovations.
“For some time, ICER has been receiving requests from life sciences companies to help them rethink clinical trial design, so that the trials more adequately measure the types of outcomes that matter most to patients and their families,” David Whitrap, ICER VP of Communications and Outreach told Focus.
The idea floated is that biopharma companies pay a fee for such a pre-market or pre-clinical review, though it’s unclear at this stage what that fee would be or how such a review would be conducted.
“Some international health technology organizations, such as NICE and CADTH, have offered this ‘early scientific advice’ to industry for many years with general success. We are therefore evaluating the options to provide a similar service but have not made any definitive plans,” Whitrap said.
Translation: Nice drug you got there, it would be a shame if something happened to it.
This is a protection racket plain and simple. Moreover, as Regeneron found out, working with ICER only guarantees deeper rebates, not broader uptake of products.
Any company that plays ball with ICER deserves what they will get.
ICER Plots Early Scientific Advice Program for Biopharma
The Institute for Clinical and Economic Review (ICER) is looking to help the biopharma industry with earlier reviews of clinical work, adding to their current independent evaluations of the clinical and economic value of prescription drugs, medical tests and other health innovations.
“For some time, ICER has been receiving requests from life sciences companies to help them rethink clinical trial design, so that the trials more adequately measure the types of outcomes that matter most to patients and their families,” David Whitrap, ICER VP of Communications and Outreach told Focus.
The idea floated is that biopharma companies pay a fee for such a pre-market or pre-clinical review, though it’s unclear at this stage what that fee would be or how such a review would be conducted.
“Some international health technology organizations, such as NICE and CADTH, have offered this ‘early scientific advice’ to industry for many years with general success. We are therefore evaluating the options to provide a similar service but have not made any definitive plans,” Whitrap said.
Translation: Nice drug you got there, it would be a shame if something happened to it.
This is a protection racket plain and simple. Moreover, as Regeneron found out, working with ICER only guarantees deeper rebates, not broader uptake of products.
Any company that plays ball with ICER deserves what they will get.
In their recent op-ed, Drug Rebates Aren’t Kickbacks, Joe Antos and Jim Capretta claim that rebates are incentives because drug companies charge less when more of their drugs are sold to patients. The facts speak otherwise. Rebates create an environment where higher list prices drugs are favored providing zero incentives for pharma companies to introduce lower priced medicines in competitive therapeutic classes.
Over the last five years, according to the Department of Health and Human Services, pharmaceutical spending has increased by 38% while the average individual health insurance premium has increased by 107%. During the same time period, rebates, discounts and fees paid by the biopharmaceutical industry to insurers and PBMs have risen from $74 billion to $153 billion - an increase of 107%. Not only are rebates, discounts and fees outpacing the increase in spending on drugs but they haven’t slowed precipitous premium increases.
Because PBMs retain a portion of negotiated rebates and other price concessions as compensation for their services, list prices are rising rapidly even as net prices have held steady. A key unintended consequence of this dynamic is that patients do not directly benefit from significant price negotiations in the market today. Unsurprisingly, manufacturers are willing to raise prices and transfer the greatest list-price-based rebate value to middlemen to secure preferred formulary position at the expense of real free-market competition while also limiting the therapeutic options of physicians and patients.
Over the last five years, according to the Department of Health and Human Services, pharmaceutical spending has increased by 38% while the average individual health insurance premium has increased by 107%. During the same time period, rebates, discounts and fees paid by the biopharmaceutical industry to insurers and PBMs have risen from $74 billion to $153 billion - an increase of 107%. Not only are rebates, discounts and fees outpacing the increase in spending on drugs but they haven’t slowed precipitous premium increases.
Because PBMs retain a portion of negotiated rebates and other price concessions as compensation for their services, list prices are rising rapidly even as net prices have held steady. A key unintended consequence of this dynamic is that patients do not directly benefit from significant price negotiations in the market today. Unsurprisingly, manufacturers are willing to raise prices and transfer the greatest list-price-based rebate value to middlemen to secure preferred formulary position at the expense of real free-market competition while also limiting the therapeutic options of physicians and patients.
Yesterday the Partnership to Improve Patient Care along with nearly 100 other patient organizations sent a letter to CVS demanding that it abandon the plan to deny patients access to drugs that a private organization has deemed not worth it.
CVS is using the Institute for Clinical and Economic Review’s estimate of the value of life ($100K) to determine whether to cover all existing drugs. Those that are priced above the $100K threshold will not be covered by CVS because, according to ICER, at that price the drugs are not cost effective.
The letter notes: ”This type of cost-effectiveness analysis discriminates against people with disabilities and other vulnerable groups like the elderly because it assigns higher value to people in “perfect health” than people in less-than-perfect health. As the letter states, "policy decisions based on cost-effectiveness ignore important differences among patients and instead rely on a single, one-size-fits-all assessment. Further, cost-effectiveness analysis discriminates against the chronically ill, the elderly and people with disabilities, using algorithms that calculate their lives as 'worth less' than people who are younger or non-disabled."
Moreover, the ICER threshold is used to cap total spending on new drugs at a fixed amount ($940 million) each year If a new drug can cure a disease that’s too bad. You can’t spend more than that $940 million. That’s another form of rationing.
According to a BiopharmaDive article, in response a “CVS Health spokesperson described the QALY-based decision plan as non-discriminatory and said it would help patients get treatments "at a price they and the health care system can afford."
"We like ICER because it's very transparent," CVS Health Chief Medical Officer Troyen Brennan said in a recent interview with STAT News.
"They undertake this activity voluntarily, they're supported largely by philanthropy, and when combined with market pressure, their analysis is every bit as powerful as government regulation might be," Brennan added.
In fact, CVS will use get companies to cut their prices to ICER thereby increasing rebates. CVS will pocket, not pass, those additional rebates based on the ICER price to patients in order to increase access or reduce out of pocket costs. CVS will use ICER guided rationing and cost sharing to ratchet up policies that discriminate against the sickest patients.
And Brennan must have forgotten that CVS funds ICER along with Laura and John Arnold Foundation which by the way has invested $9.7 million in the CVS Pass Through Trusts (“created to finance the purchase of, or refinance existing financing, on drugstores. The Trust's drugstores will be leased, subleased, or sub-subleased.”)
There are not many organizations who did not sign the letter. One notable exception is Patients for Affordable Drugs which is also funded by the Arnold Foundation and has come out in favor of the proposal to use step therapy and cost-sharing tiers to limit access to medicines under Medicare part B. Perhaps the group and its founder, advertising tycoon David Mitchell, were too busy funneling Arnold dough to run attack ads against Bob Hugin in the NJ senate race.
Curiously, the journalists, editorial writers, and news outlets that cover drug cost issues have written nothing. I could only find the BiopharmaDive article I quoted as well as a great article in Biocentury that provides insight into the impact of applying ICER to formulary access: "ICER has found only one of 14 MS drugs and zero of nine rheumatoid arthritis treatments to be cost-effective. Although the two treatments for tardive dyskinesia, a side effect of antipsychotic treatment, that ICER has reviewed were each deemed not cost-effective, both compounds have breakthrough therapy designation from FDA and would not be eligible for exclusion from the formulary."
As of this writing STAT and Kaiser Health News have not reported on this controversy. Ditto, Jayne O’ Donnell at USA Today, Max Nisen at Bloomberg, Carolyn Johnson at the Washington Post, Matt Herper at Forbes or Peter Loftus at WSJ.
I guess the fact that CVS which will soon acquire Aetna and could use the extra cash squeezed out of the sickest patients to boost net revenues and the stock price of the new company is of no interest to these reporters. Neither is the fact that CVS is outsourcing life and death decisions to an unelected and unaccountable private organization which it also funds.
If health journalism has a pulse, I can’t find it.
Finally, you would think that the CVS assault on patients would get the attention of HHS Secretary Azar. Not even a tweet. So much for the administration’s concern about patient access. Something tells me that the blueprint to reduce drug costs is now being written to facilitate the very shenanigans HHS once condemned.
When it comes to healthcare reform, a key goal is to reduce what patients pay for their medicines. And that means what comes out of their pocket. This is particularly important for seniors and timely, since Congress now has the opportunity to address the so-called “donut hole.”
Because of language in the Bipartisan Budget Act of 2018 (BBA), seniors in the Part D donut hole will soon pay five times more than insurers for the brand medicines they rely on. In 2020, the BBA will increase a patient’s cost-sharing costs by $1250, raising out-of-pocket costs for the most vulnerable seniors. Why? Well, among other things, when Congress passed the BBA in February, it made changes to Medicare Part D that threaten the program’s successful competitive structure -- and leaving seniors mired even deeper in the donut hole.
Now is the time to aggressively address this issue. When people say, “my drugs are too expensive,” what they mean is “my out-of-pocket costs are too high.” Congress can help. And they can help now.
Congress has the opportunity to make two small fixes that will protect seniors in the Medicare Part D donut hole and save them money on out-of-pocket costs for their medicines. These fixes would leave seniors with high drug spending better off while stabilizing the program for the long-term. Together these two policy fixes would reduce out-of-pocket costs for seniors with high drug spending them better off and, in 2020, saving them up to 7% on their out-of-pocket costs.
While these changes closed the donut hole a year early, they went much further by lowering insurers’ payment responsibility to just five percent of costs in the donut hole for brand medications. This undermines Part D’s market-based structure by reducing insurance plans’ stake in the program and therefore reducing their incentive to manage program costs, while also creating a significant imbalance in payment responsibility.
When Part D was created, it included a catastrophic phase of coverage where seniors’ out-of-pocket costs would be reduced once their total medicine costs reached a certain amount. Each year the amount of spending required to move into the catastrophic phase increases slightly. A measure originally included in the Affordable Care Act temporarily slowed the growth rate of this increase. But now that measure is set to expire at the end of 2019, reverting back to pre-ACA levels overnight. This will result in a sudden increase in out-of-pocket costs for seniors in the donut hole who will have to reach a much higher spending threshold to get into catastrophic coverage.
Congress should take this opportunity to fix the donut hole "cliff" by enacting legislative language that restores balance to payment responsibility. They can act right now to both protect seniors and save them money on out-of-pocket costs.
Because of language in the Bipartisan Budget Act of 2018 (BBA), seniors in the Part D donut hole will soon pay five times more than insurers for the brand medicines they rely on. In 2020, the BBA will increase a patient’s cost-sharing costs by $1250, raising out-of-pocket costs for the most vulnerable seniors. Why? Well, among other things, when Congress passed the BBA in February, it made changes to Medicare Part D that threaten the program’s successful competitive structure -- and leaving seniors mired even deeper in the donut hole.
Now is the time to aggressively address this issue. When people say, “my drugs are too expensive,” what they mean is “my out-of-pocket costs are too high.” Congress can help. And they can help now.
Congress has the opportunity to make two small fixes that will protect seniors in the Medicare Part D donut hole and save them money on out-of-pocket costs for their medicines. These fixes would leave seniors with high drug spending better off while stabilizing the program for the long-term. Together these two policy fixes would reduce out-of-pocket costs for seniors with high drug spending them better off and, in 2020, saving them up to 7% on their out-of-pocket costs.
While these changes closed the donut hole a year early, they went much further by lowering insurers’ payment responsibility to just five percent of costs in the donut hole for brand medications. This undermines Part D’s market-based structure by reducing insurance plans’ stake in the program and therefore reducing their incentive to manage program costs, while also creating a significant imbalance in payment responsibility.
When Part D was created, it included a catastrophic phase of coverage where seniors’ out-of-pocket costs would be reduced once their total medicine costs reached a certain amount. Each year the amount of spending required to move into the catastrophic phase increases slightly. A measure originally included in the Affordable Care Act temporarily slowed the growth rate of this increase. But now that measure is set to expire at the end of 2019, reverting back to pre-ACA levels overnight. This will result in a sudden increase in out-of-pocket costs for seniors in the donut hole who will have to reach a much higher spending threshold to get into catastrophic coverage.
Congress should take this opportunity to fix the donut hole "cliff" by enacting legislative language that restores balance to payment responsibility. They can act right now to both protect seniors and save them money on out-of-pocket costs.
Here's the key phrase in John Arnold's article on how to make PBMs great again: "The Laura and John Arnold Foundation has supported the development of value-based pricing through the Institute for Clinical and Economic Review, which can be used by pharmacy benefit managers to select drugs that maximize patient value rather than the size of the rebate. CVS recently announced it would use ICER pricing in establishing its formulary."
Translation: Let a handful of experts decide for millions of Americans about patient access by setting prices based on some abstract estimate of human worth and then enforcing those prices by excluding drugs, step therapy, prior authorization, clinical pathways and cost sharing (albeit at net prices).
Arnold and his foundation cast his effort as an effort to use the best scientific evidence developed by the most expert experts to achieve the greatest good in an era of scarce resources. Indeed, his investment is part of a long tradition of wealthy individuals funding as Thomas Leonard wrote in "Illiberal Reformers", "scientific experts (who) should be in society’s saddle, determining the “human hierarchy” and appropriate social policies." Indeed, Arnold's entire philanthropic program is based on the belief that a better future would derive from the beneficent activities of expert social engineers (armed with evidence from randomized clinical trials) who would bring to the service of social ideals all the technical resources which research could discover and ingenuity could devise.”
At that time, the progressive solution was eugenics. And in addition to making the case for experts making decisions about selective breeding and whether or not to spend money on helping the sickest based on randomized controlled trial data.
And here is the statement of Margaret Sanger, a eugenics proponent:
"Every single case of inherited defect, every malformed child, every congenitally tainted human being brought into this world is of infinite importance to that poor individual; but it is of scarcely less importance to the rest of us and to all of our children who must pay in one way or another for these biological and racial mistakes."
Here's the Steve Pearson, the President of ICER:
“The opportunity cost of supporting the use of ultra-orphan drugs necessitates that patients with a more common disease, for which a cost-effective treatment is available, are denied treatment.” To reduce that cost we must restrain “society’s desire to help those weakest among us, especially when their small numbers allow us to see them as unique individuals.” In that way, we can “ensure that an undue burden is not placed on others for the sake of a few.”
ICER is part of an enduring feature of progressivism in its prior and current incarnations. As Leonard points out, "this last Progressive belief—that modern conditions of industrial capitalism no longer permitted a quaint liberal individualism, but demanded wise government by expert elites— is what we can call technocratic paternalism. The idea is that benignly motivated experts should interpose themselves, in the name of the greater good, to better represent the interests of the industrial poor, for whom many reformers felt contempt as much as pity. "
ICER’s assault on people with rare diseases is rooted in such technocratic paternalism. As Leonard noted: "Progressives believed that modern conditions required the state to assume control of human reproduction."
Today, as articulated and calculated by ICER, they require expert elites to assume control of the human condition. And instead of eugenics, ICER and John Arnold want to turn an evidence-based approach to Munchausen syndrome by proxy to control drug costs.
History is scarred with the accounts of societies and governments that deployed the solutions of expert technologists to empower to apply their wisdom to improve humankind. We know better and have chosen better. Civilization is enriched when people who are marginalized – or have been eliminated -- because of their medical condition are freed from despair.
Translation: Let a handful of experts decide for millions of Americans about patient access by setting prices based on some abstract estimate of human worth and then enforcing those prices by excluding drugs, step therapy, prior authorization, clinical pathways and cost sharing (albeit at net prices).
Arnold and his foundation cast his effort as an effort to use the best scientific evidence developed by the most expert experts to achieve the greatest good in an era of scarce resources. Indeed, his investment is part of a long tradition of wealthy individuals funding as Thomas Leonard wrote in "Illiberal Reformers", "scientific experts (who) should be in society’s saddle, determining the “human hierarchy” and appropriate social policies." Indeed, Arnold's entire philanthropic program is based on the belief that a better future would derive from the beneficent activities of expert social engineers (armed with evidence from randomized clinical trials) who would bring to the service of social ideals all the technical resources which research could discover and ingenuity could devise.”
At that time, the progressive solution was eugenics. And in addition to making the case for experts making decisions about selective breeding and whether or not to spend money on helping the sickest based on randomized controlled trial data.
And here is the statement of Margaret Sanger, a eugenics proponent:
"Every single case of inherited defect, every malformed child, every congenitally tainted human being brought into this world is of infinite importance to that poor individual; but it is of scarcely less importance to the rest of us and to all of our children who must pay in one way or another for these biological and racial mistakes."
Here's the Steve Pearson, the President of ICER:
“The opportunity cost of supporting the use of ultra-orphan drugs necessitates that patients with a more common disease, for which a cost-effective treatment is available, are denied treatment.” To reduce that cost we must restrain “society’s desire to help those weakest among us, especially when their small numbers allow us to see them as unique individuals.” In that way, we can “ensure that an undue burden is not placed on others for the sake of a few.”
ICER is part of an enduring feature of progressivism in its prior and current incarnations. As Leonard points out, "this last Progressive belief—that modern conditions of industrial capitalism no longer permitted a quaint liberal individualism, but demanded wise government by expert elites— is what we can call technocratic paternalism. The idea is that benignly motivated experts should interpose themselves, in the name of the greater good, to better represent the interests of the industrial poor, for whom many reformers felt contempt as much as pity. "
ICER’s assault on people with rare diseases is rooted in such technocratic paternalism. As Leonard noted: "Progressives believed that modern conditions required the state to assume control of human reproduction."
Today, as articulated and calculated by ICER, they require expert elites to assume control of the human condition. And instead of eugenics, ICER and John Arnold want to turn an evidence-based approach to Munchausen syndrome by proxy to control drug costs.
History is scarred with the accounts of societies and governments that deployed the solutions of expert technologists to empower to apply their wisdom to improve humankind. We know better and have chosen better. Civilization is enriched when people who are marginalized – or have been eliminated -- because of their medical condition are freed from despair.
Bloomberg opinion writer Max Nisen believes that CVS should use ICER’s drug pricing recommendations to exclude
breakthrough drugs, including those for orphan diseases. Would he want his wife or daughter
to have their access limited by CVS and Aetna (who is being acquired by CVS)?
He may not know that ICER is funded by CVS. He may not know that ICER never talks about
sharing the increased rebates or fees that CVS would pocket if their lower prices are used. He
may not know that even with the price cuts he thinks ICER should set, patients will still pay
retail or be forced to try other treatments. He may not know that breakthroughs are
breakthroughs because they are first in class. And he may not know that the step therapy or
exclusions ICER also recommends are also based on containing costs, not increasing
affordability. And he may not know that limiting access to drugs to generate rebates and fees
comes at the expense of the sickest 2 percent of patients or that limiting access to drugs
considered by ICER as cost effective is associated with worse outcomes and more spending
But now he knows and now he should ask himself if G-d forbid he, his wife or children had their
access to treatment denied by CVS and ICER would he embrace it. If he does, that͛s fine. But
leave me and everyone else out of an approach that in my opinion violates the spirit of
Nuremberg code on human experimentation.
breakthrough drugs, including those for orphan diseases. Would he want his wife or daughter
to have their access limited by CVS and Aetna (who is being acquired by CVS)?
He may not know that ICER is funded by CVS. He may not know that ICER never talks about
sharing the increased rebates or fees that CVS would pocket if their lower prices are used. He
may not know that even with the price cuts he thinks ICER should set, patients will still pay
retail or be forced to try other treatments. He may not know that breakthroughs are
breakthroughs because they are first in class. And he may not know that the step therapy or
exclusions ICER also recommends are also based on containing costs, not increasing
affordability. And he may not know that limiting access to drugs to generate rebates and fees
comes at the expense of the sickest 2 percent of patients or that limiting access to drugs
considered by ICER as cost effective is associated with worse outcomes and more spending
But now he knows and now he should ask himself if G-d forbid he, his wife or children had their
access to treatment denied by CVS and ICER would he embrace it. If he does, that͛s fine. But
leave me and everyone else out of an approach that in my opinion violates the spirit of
Nuremberg code on human experimentation.
Peter Bach recently published an article claiming that PBM rebates are only 4 percent of the total share of list price drug spending. The fact that he even acknowledges rebates and what Drug Channels calls the gross to net bubble is to be commended since for so long he and others ignore them.
Bach’s claim that PBMs only extract 4 percent while pharmacies and doctors pocket more — was bought hook, line and sinker by Politico’s Sarah Carlin-Smith. But his analysis is laughable for two reasons:
1. Bach uses PBM gross profit margins to estimate the industry’s share of the pie revenues. PBMs count the list price cost of drugs as expenses in calculating their gross profits. The 3 largest PBMs only had an operating-profit margin of 4% to 7%, which is 16% below average among S&P 500 companies, according to an article in Bloomberg. But PBMs never take title or own the drugs.. they make money on the pass-through income such as rebates, fees, etc. Had the PBMs calculated their revenue in the same way other companies do, their margins would dramatically increase, the article alleged. While this tactic may not attract new investors, it can, however, reduce criticism related to the companies’ practices. “It hides a lot. It’s as simple as that,” Ravi Mehrotra, a partner at the MTS Health Partners investment bank, told Bloomberg.
2. Moreover, unlike other parts of Bach’ supply chain, PBMs — unlike drug companies -invest litte in fixed assets or R and D. So the better benchmark is, as AllianceBernstein concluded EBITDA (earnings before interest, taxes, depreciation and amortization) and the rate at which gross profit converts to EBITDA. While drug distributors convert 45% of their gross profit to EBITDA, and insurers and pharmacies around 30%, PBMs convert 85%. And the reason for that is the relative lack of fixed assets, which in turn keeps depreciation and amortization low. PBMs, are middlemen without the warehouses or stores of pharmacies and wholesalers.
The release of the article coincides with growing skepticism of the PBM business model and the proposed merger of Cigna and Express Scripts(ESI). Both companies claim this is a merger to make health care more cost-effective and personalized. The share price Cigna paid to acquire ESI —$96 — reflects the huge impact the cash PBMs generate and which Bach’s article tries to hide. But as the PBM model is threatened, it behooves ESI and thepro-PBMM Bach to downplay margins.
Carl Icahn is publicly urging Cigna shareholders to reject the ESI acquisition because the PBM business model — built on the spread between list price and what PBMs pocket — is going to be dead:
“(We believe that Express Scripts is a company with major problems whose business could well fall off a cliff. Given the significant worsening of several major risks since the deal announcement, we are confident in saying that Express Scripts on a standalone basis would likely be worth less than $60. Though there is a not another standalone PBM to compare Express Scripts to, we note that drug distributors McKesson and Amerisource Bergen are down 17% and 16% respectively since the announcement of the Cigna/Express Scripts deal and that the risks are likely greater in the case of Express Scripts. Applying the 9x P/E multiple that pharmacies and drug distributors currently trade at to Express Scripts’ 2019E ex-Anthem earnings of $6.50 would result in a $58.50 standalone stock price. We find it unconscionable to pay over $90 for a company that today would likely be worth less than $60.”
If you had to take investment advice from Bach or Carl, who would you choose?
It’s the self-inflicted wounds that hurt the most.
From the savvy pen of BioCentury’s Washington Editor, Steve Usdin.
Azar’s political play with drug importation
The drug importation policy announced by Alex Azar last week is a political stunt, aimed at generating headlines at a time when the HHS secretary seems desperate to demonstrate to Donald Trump and the media that he’s fulfilling the president’s pledges to lower drug prices. In fact, as Azar knows, importation will have a negligible effect on access to drugs.
Opening the door to importation as a price control tactic will, however, create precedents that will damage FDA, and consequently hurt biomedical innovators and patients.
The new policy would allow importation of drugs that lack patent protection or exclusivity, and that are produced by one manufacturer.
Azar indicated in a July 19 interview with Fox News that the move was his idea, and that he expects FDA to fall into line behind it. The HHS secretary said he called FDA Commissioner Scott Gottlieb to demand establishment of a working group on importation, telling him: “I insist that you find a pathway to make this happen.”
The record shows both Azar and Gottlieb know that importation won’t move the needle when it comes to drug prices.
Speaking to reporters in May, Azar dismissed drug importation as a “gimmick,” arguing that even if it could be done safely, drug companies would respond by limiting supplies to countries that were exporting to the U.S.
In March 2016, Gottlieb wrote that presidential candidate Trump’s endorsement of importation was “good politics” but that it would “offer consumers little relief.” The cost of ensuring the safety of imported drugs would eat up any savings, he wrote.
During his FDA confirmation hearing in April 2017, Gottlieb reiterated his belief that importation isn’t a feasible tool for lowering drug prices.
Azar’s politically motivated plan will undermine FDA’s well-earned reputation as a non-partisan, science-based regulator.
Azar and Gottlieb didn’t issue any caveats. They never suggested importation could be used to target price hikes taken on off-patent drugs by unscrupulous pharma companies.
The issue isn’t whether FDA can ensure the safety of imported drugs. History shows it can do so to address public health emergencies, on a limited scale and at great cost.
For example, in 2012 the agency facilitated the importation of an unapproved vaccine to combat meningitis outbreaks on college campuses. The next year, FDA found and arranged importation of foreign supplies of injectable drugs used to make total parenteral nutrition after a U.S. manufacturer voluntarily shut down to resolve quality issues. In a blog posting, the agency described the resource-intensive process it went through to ensure the safety of the imported products.
There’s a big difference, however, between taking extraordinary steps to secure drugs needed to combat a public health emergency and claiming importation should be used to puncture a pricing bubble.
Azar’s politically motivated plan will undermine FDA’s well-earned reputation as a non-partisan, science-based regulator by putting it at the center of political and economic controversies it is ill-equipped to navigate.
Across multiple presidencies, the agency has consistently said it has no authority over prices. But Azar would force FDA to develop a methodology to determine which prices are egregious - inevitably leading it to steer regulatory policy on the basis of public outrage, media attention, or political expediency.
The alternative is for HHS to tell FDA which drugs would be subject to importation. This would set a precedent at odds with FDA's mandate to operate as an independent agency.
What’s going to happen when President Trump or a future occupant of the White House sees TV programs about a lifesaving new drug with an eye-popping price in the U.S. that is available for less in Italy or Indonesia? How long will it take for the president to pick up the phone and order HHS to arrange for imports from a country with price controls? And in the heat of the moment, will either the White House or HHS stop to ensure that the supply chain is safe, to consider the disincentive to innovation caused by intemperate importation of price controls, or to consider other ways to ensure that American patients have access?
Azar and Gottlieb have described a circumscribed program in their public statements, and reiterated their opposition to large-scale importation. Nuance doesn’t get far in Washington.
No matter how targeted the program is, it will fuel the enthusiasm of activists who are demanding the broad importation practices that Gottlieb and his predecessors have condemned as infeasible and dangerous.
It already has.
Within hours of Azar’s announcement of the importation policy, Sen. Chuck Grassley (R-Iowa) praised the action as the first step toward opening the borders to prescription drugs from Canada and other countries.
While it will be politically attractive, whacking a pharma bro or two wouldn’t fundamentally change the drug pricing environment.
Given his prior opposition to importation, it seems Azar is motivated by a desire to placate Trump by generating favorable publicity. In fact, his department has been prodding and cajoling reporters for weeks as part of an organized effort to get more favorable coverage of its drug pricing blueprint.
Although he talks about market forces and promoting competition, Azar also has displayed an enthusiasm for intimidating individual companies and vilifying CEOs. He has amplified Trump’s tweeted threats to pharma companies and celebrated their demonstrations of contrition.
Tweets and headlines fade quickly. In their relentless search for publicity, Azar and the Trump administration will be reaching for more quick fixes.
From the savvy pen of BioCentury’s Washington Editor, Steve Usdin.
Azar’s political play with drug importation
The drug importation policy announced by Alex Azar last week is a political stunt, aimed at generating headlines at a time when the HHS secretary seems desperate to demonstrate to Donald Trump and the media that he’s fulfilling the president’s pledges to lower drug prices. In fact, as Azar knows, importation will have a negligible effect on access to drugs.
Opening the door to importation as a price control tactic will, however, create precedents that will damage FDA, and consequently hurt biomedical innovators and patients.
The new policy would allow importation of drugs that lack patent protection or exclusivity, and that are produced by one manufacturer.
Azar indicated in a July 19 interview with Fox News that the move was his idea, and that he expects FDA to fall into line behind it. The HHS secretary said he called FDA Commissioner Scott Gottlieb to demand establishment of a working group on importation, telling him: “I insist that you find a pathway to make this happen.”
The record shows both Azar and Gottlieb know that importation won’t move the needle when it comes to drug prices.
Speaking to reporters in May, Azar dismissed drug importation as a “gimmick,” arguing that even if it could be done safely, drug companies would respond by limiting supplies to countries that were exporting to the U.S.
In March 2016, Gottlieb wrote that presidential candidate Trump’s endorsement of importation was “good politics” but that it would “offer consumers little relief.” The cost of ensuring the safety of imported drugs would eat up any savings, he wrote.
During his FDA confirmation hearing in April 2017, Gottlieb reiterated his belief that importation isn’t a feasible tool for lowering drug prices.
Azar’s politically motivated plan will undermine FDA’s well-earned reputation as a non-partisan, science-based regulator.
Azar and Gottlieb didn’t issue any caveats. They never suggested importation could be used to target price hikes taken on off-patent drugs by unscrupulous pharma companies.
The issue isn’t whether FDA can ensure the safety of imported drugs. History shows it can do so to address public health emergencies, on a limited scale and at great cost.
For example, in 2012 the agency facilitated the importation of an unapproved vaccine to combat meningitis outbreaks on college campuses. The next year, FDA found and arranged importation of foreign supplies of injectable drugs used to make total parenteral nutrition after a U.S. manufacturer voluntarily shut down to resolve quality issues. In a blog posting, the agency described the resource-intensive process it went through to ensure the safety of the imported products.
There’s a big difference, however, between taking extraordinary steps to secure drugs needed to combat a public health emergency and claiming importation should be used to puncture a pricing bubble.
Azar’s politically motivated plan will undermine FDA’s well-earned reputation as a non-partisan, science-based regulator by putting it at the center of political and economic controversies it is ill-equipped to navigate.
Across multiple presidencies, the agency has consistently said it has no authority over prices. But Azar would force FDA to develop a methodology to determine which prices are egregious - inevitably leading it to steer regulatory policy on the basis of public outrage, media attention, or political expediency.
The alternative is for HHS to tell FDA which drugs would be subject to importation. This would set a precedent at odds with FDA's mandate to operate as an independent agency.
What’s going to happen when President Trump or a future occupant of the White House sees TV programs about a lifesaving new drug with an eye-popping price in the U.S. that is available for less in Italy or Indonesia? How long will it take for the president to pick up the phone and order HHS to arrange for imports from a country with price controls? And in the heat of the moment, will either the White House or HHS stop to ensure that the supply chain is safe, to consider the disincentive to innovation caused by intemperate importation of price controls, or to consider other ways to ensure that American patients have access?
Azar and Gottlieb have described a circumscribed program in their public statements, and reiterated their opposition to large-scale importation. Nuance doesn’t get far in Washington.
No matter how targeted the program is, it will fuel the enthusiasm of activists who are demanding the broad importation practices that Gottlieb and his predecessors have condemned as infeasible and dangerous.
It already has.
Within hours of Azar’s announcement of the importation policy, Sen. Chuck Grassley (R-Iowa) praised the action as the first step toward opening the borders to prescription drugs from Canada and other countries.
While it will be politically attractive, whacking a pharma bro or two wouldn’t fundamentally change the drug pricing environment.
Given his prior opposition to importation, it seems Azar is motivated by a desire to placate Trump by generating favorable publicity. In fact, his department has been prodding and cajoling reporters for weeks as part of an organized effort to get more favorable coverage of its drug pricing blueprint.
Although he talks about market forces and promoting competition, Azar also has displayed an enthusiasm for intimidating individual companies and vilifying CEOs. He has amplified Trump’s tweeted threats to pharma companies and celebrated their demonstrations of contrition.
Tweets and headlines fade quickly. In their relentless search for publicity, Azar and the Trump administration will be reaching for more quick fixes.
Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.
