Drug Pricing: Congress, President, Industry Heat Up Debate

By Patricia Van Arnum - DCAT Editorial Director

February 13, 2019

The policy debate on drug pricing is heating up as the US Senate is scheduled to hold hearings with pharmaceutical industry CEOs later this month. Meanwhile, the Trump Administration has stressed its interest for more drug-pricing transparency and other initiatives to lower the cost of prescription drugs, including the elimination of drug rebates.

Congress moves on hearings and legislation on drug pricing

The new Congress is addressing the issue of drug pricing. In late January (2019), the US Senate Finance Committee held the first of a series of hearings on drug pricing, an issue that the chairman of that committee, Sen. Chuck Grassley (R-IA) has said is a priority for the committee. “…[T]ackling high prescription drug costs is one of my first priorities as Chairman of the Senate Finance Committee,” said Sen. Grassley in a January 29, 2019 statement. “The reasons for these high prices are complex. I plan to hold a series of hearings in order to identify and address these reasons.”

Among the proposals he suggested were increased transparency for drug pricing, including requiring drug pricing to be disclosed in direct-to-consumer television advertising. “The President’s blueprint to lower drug prices includes a provision to include the list price on TV ads,” he said in the January 29 statement. “The [A]dministration has a proposed rule to do just that. Senator Durbin [Sen. Richard Durbin (D-IL)] and I have been vocal in our support of this proposal.”

Last year (May 2018), President Donald Trump and US Department of Health and Human Services (HHS) Secretary Alex Azar introduced their plan for addressing ways in which to improve the affordability and reduce the costs of prescriptions drugs. That plan, called the American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs, laid out four strategies for: increasing drug competition, enhancing negotiation, creating incentives for lower list prices, and bringing down out-of-pocket costs. To create better incentives for list prices, the blueprint called for the HHS to consider requiring the inclusion of list prices in direct-to-consumer advertising. Currently, drug companies are required to disclose the major side effects of a drug but are not now required to disclose pricing. HHS is now proposing to require that television ads for prescription drugs include their list price. The HHS proposal would require direct-to-consumer television advertisements for prescription drug and biological products paid for by Medicare or Medicaid to include the list price if the list price—the wholesale acquisition cost—is greater than $35 for a month’s supply or the usual course of therapy, with the prices updated quarterly. An HHS analysis says that the 10 most commonly advertised drugs have list prices ranging from $535 to $11,000 per month of usual course of therapy. Many patients either pay list price or pay prices calculated based on list price.

Sen. Grassley also pointed to the introduction of a Senate bill, the Right Rebate Act of 2018, which would give the US Secretary of Health and Human Services (HHS) more authorities and tools to monitor drug manufacturers who participate in the Medicaid Drug Rebate Program (MDRP) and would allow the HHS Secretary to require drug manufacturers to reclassify their drugs and impose civil monetary penalties when drugs are knowingly misclassified. The bill, a bipartisan measure, is sponsored by Grassley and Sen. Ron Wyden (D-OR), the Ranking Member on the Senate Finance Committee.

Sens. Grassley and Wyden also stated that they have invited several major pharmaceutical companies to testify before a Senate Finance Committee hearing on February 26, 2019, on drug pricing in the US, the second in a series of hearings examining prescription drug costs.The companies invited include AbbVie, AstraZeneca, Bristol-Myers Squibb, Johnson & Johnson, Merck & Co., Pfizer and Sanofi.

Sen. Grassley, along with other members of the Senate, introduced further legislation to address drug pricing. The Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act , is co-sponsored by Grassley, Sen. Patrick Leahy (D-VT), Sen. Amy Klobuchar (D-MN).) and Mike Lee (R-UT) and leaders of the Subcommittee on Antitrust, Competition Policy and Consumer Rights. In the US House of Representatives, Reps. David Cicilline (D-RI) and Jim Sensenbrenner (R-WI.), Chairman and Ranking Member, respectively, of the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law, joined by House Judiciary Committee Chairman Jerrold Nadler (D-NY), Ranking Member Doug Collins (R-GA and Representatives Peter Welch (D-VT and David McKinley (R-WV) introduced an identical version of the bill in the House. The bills address ways to improve the generic-drug development and review process by improving access to samples of branded drugs by generic-drug companies and eliminating barriers faced by generic-drug companies with regard to compliance to the Risk Evaluation Mitigation Strategy with Elements to Assure Safe Use (REMS with ETASU) to allow biosimilar and generic competitors to participate in the safety protocol under REMS.

Administration, HHS address drug pricing

Another topic being addressed are rebates. In late January 2019, HHS Secretary Azar and Inspector General Daniel Levinson proposed a rule to lower prescription drug prices and out-of-pocket costs by encouraging manufacturers to pass discounts directly to patients and to have greater drug-pricing transparency. The HHS proposal would expressly exclude from safe-harbor protection under the Anti-Kickback Statute rebates on prescription drugs paid by manufacturers to pharmacy benefit managers (PBMs), Part D plans and Medicaid managed-care organizations. "It would create a new safe harbor for prescription drug discounts offered directly to patients, as well as fixed fee service arrangements between drug manufacturers and PBMs," said the HHS in a January 31, 2019 statement. "The proposal would also provide a historic new level of transparency to a system that has been shrouded in secrecy for decades."

Under the proposed rule, prescription drug rebates that today amount to, on average, 26 to 30% of a drug’s list price may be passed on directly to patients and reflected in what they pay at the pharmacy counter. "By encouraging negotiated discounts that are reflected in cost-sharing methods like co-insurance, used for many expensive drugs in Medicare Part D, the proposal is projected to provide the greatest benefits to seniors with high drug costs," according to the HHS.

The proposal would also address the most significant incentive drug manufacturers cite in raising their list prices every year, the pressure to provide larger and larger rebates. “This rule provides a clear pathway for drug companies instead to compete to have the lower price and out-of-pocket cost to the patient,” said the HHS in the January 31, 2019 statement.

The HHS says this proposal complements efforts in progress laid out in the President’s plan to lower prescription-drug costs, including requiring the disclosure of list prices in television ads, increasing negotiated discounts in Medicare, banning pharmacy gag clauses, adopting real-time prescription benefit tools, and boosting low-cost generic and biosimilar competition.