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CLSA Wire

Trump Administration Advancing Proposals Outlined in “Blueprint” to Address Prescription Drug Pricing

October 24, 2018
By Jenny Nieto

Addressing drug pricing and improving healthcare access and affordability remains a salient topic on Capitol Hill, in the Trump Administration, with industry and the public. Over the summer, the Administration released its American Patients First blueprint, and over the past several weeks, the Administration has announced draft or final proposals intended to lower drug prices and increase access to affordable prescription drugs.

On Oct. 16, Department of Health and Human Services (HHS) Secretary Alex Azar outlined HHS’ “four strategies” for addressing prescription drug pricing issues: (1) enhancing negotiation, (2) reducing consumer out-of-pocket costs, (3) improving competition, and (4) creating incentives for lower list prices.

The Administration’s draft or final proposals in each of these categories to date are summarized below:

Enhance negotiation:

  • Consistent with several high-level proposals included in the American Patients First blueprint released this past summer, HHS recently introduced “new tools to allow Medicare Advantage plans to negotiate discounts for drugs covered by Part B,” including step therapy and the use of consolidated programs for drugs covered under Parts B and D. In the Part D program, HHS will allow the use of indication-based formulary design and management by 2020, in an effort to “[offer] more tailored choices for patients and more power for Part D plans to bring down prices.” In Part B, the Administration proposes to resurrect the Competitive Acquisition Program (CAP) for Part B drugs.

Incentives for Lower List Prices:

  • Drug Spending Dashboards: In May, CMS released a redesigned version of the Drug Spending Dashboards. For the first time, the dashboards include year-over-year information on drug pricing and highlight which manufactures have been increasing their prices.
  • Require manufacturer rebates and price concessions at the point of sale: Secretary Azar asserts that the current rebate system “drives list prices skyward,” and that HHS is considering replacing rebates “with a model driven by fixed-price, upfront discounts.” He notes this concept is reflected in the National Academy of Medicine’s (NAM) call for patients’ out-of-pocket costs to reflect net prices.
  • Direct-to-Consumer (DTC) Ads: The morning of Oct. 15, PhRMA (the trade group for brand-name drug companies) unveiled a transparency initiative in which companies can direct patients to a website for more drug cost information, including the drug’s list price and a range of out-of-pocket costs to patients. The new initiative is voluntary and each company is responsible for policing its own ads, but all PhRMA member companies agreed to participate in the initiative.

Later in the day, however, the Trump administration announced a new proposal to require companies include the manufacturers’ wholesale acquisition cost, or list price, in any television ads. The draft rule is open for vetting under public comment before it’s finalized. In the interim, legitimate questions have been raised as to whether CMS has statutory authority to implement such a rule, and if the proposal would violate First Amendment (protected free speech) rights.

Reduce Out-of-Pocket Costs:

  • CMS recently authorized Medicare Advantage (MA) to impose step therapy requirements on physician-administered drugs covered under the Medicare Part B program. (See HHS memo.)
  • CMS issued a final rule eliminating the “meaningful difference” standard that previously applied to out-of-pocket costs and formulary structures.
  • CMS’s final rule for Contract Year 2019 allows Part D plans to substitute a generic drug in place of a brand-name drug as soon as the generic becomes available, vacating the prior rule which required advance notice.

Congress recently passed, and President Trump signed into law, legislation eliminating “gag clauses” that prevent pharmacists from telling customers when they can save money on prescriptions by paying with cash instead of insurance.

Increasing Competition:

  • The Food and Drug Administration continues efforts to streamline and accelerate generic drug approvals, and in fact reportedly set a record for generic drug approvals in FY 2018.
  • HHS has directed the FDA to develop a workgroup to “determine how to safely import sole-source drugs that face big price spikes and have no patent or exclusivity protections.”
  • Secretary Azar also recently explained that HHS is taking action to “make clear” that it will no longer grant orphan-drug designations to drugs for pediatric subpopulations of otherwise common diseases.

Questions? Please contact Jenny Nieto (Carey), CLSA’s Vice President of Federal Government Relations and Alliance Development (jnieto@califesciences.org).