President Biden Announces Plan for Drug-Pricing Reform

By Patricia Van Arnum - DCAT Editorial Director

September 14, 2021

President Joe Biden has released a plan for drug-pricing reform in the US. One of the key measures is to allow the federal government to negotiate drug prices under Medicare, the healthcare program for those 65 and older, directly with bio/pharma companies and make those prices available to other purchasers. What else is in the plan?

Inside the Biden Administration’s plan for drug-pricing reforms

Last week (September 9, 2021), President Joe Biden, through the US Health and Human Services' (HHS) Secretary Xavier Becerra, released a detailed plan to address prescription drug pricing. The Drug Pricing Plan is part of a broader initiative stemming from President Biden’s Executive Order on Promoting Competition in the American Economy, issued in July (July 2021), which also created the White House Competition Council tasked with coordinating, promoting, and advancing the US federal government's efforts overall in ensuring competitive practices.

The Drug Pricing Plan responds to the request in President Biden’s executive order for a plan to continue the effort to address the cost of prescription drugs, enhance domestic pharmaceutical supply chains, reduce the prices paid by the federal government for such drugs, and to address other components of price pricing. The plan, says the HHS, presents principles for equitable drug-pricing reform through competition, innovation, and transparency; describes promising legislative approaches; and summarizes actions already underway or under consideration across the HHS. The plan outlines both legislative and administrative actions to achieve these policy goals. 

One of the key policies in this effort is a call for legislation that would allow the HHS Secretary to negotiate drug prices under Medicare Part B and Part D  directly with bio/pharmaceutical companies and to make those prices available to other purchasers. Medicare is the US federal government healthcare program for individuals 65 and older. Medicare B applies to prescription drugs administered in a clinical setting, and Medicare D applies to all other prescription drugs (i.e., retail drugs). The plan calls for negotiation in Medicare Parts B and D, with those negotiated prices also available to commercial plans (including the marketplace) and employers who want to participate.

The plan also calls for other key measures requiring legilsative actions as outlined below. 

  • Medicare Part D reform, including a cap on catastrophic spending to protect beneficiaries from high out-of-pocket costs;
  • Legislation to slow price increases over time on existing drugs; 
  • Legislation to speed the entry of biosimilar and generic drugs, including shortening the period of exclusivity, and policies in Medicare Part B to increase the prescribing of biosimilars by clinicians;
  • Prohibition on so-called "pay-for-delay” agreements and other such practices deemed to reduce competition; and 
  • Investment in basic and translational research to foster innovation, including President Biden’s proposal to create the Advanced Research Projects Agency for Health (ARPA-H).

The plan also outlines administrative tools that the HHS can use to promote competition and reduce drug prices to advance the Administration’s policy goals, including:

  • Testing models using value-based payments in Medicare Part B, in which payment for drugs is directly linked to the clinical value they provide patients;
  • Testing models providing additional cost-sharing support to Medicare Part D low-income subsidy beneficiaries for using biosimilars and generics;
  • Testing total cost of care models in Medicare to determine whether they produce changes in drug utilization, reductions in total spending, and improvements in patient outcomes; 
  • Data collection from insurers and pharmacy benefit managers to improve transparency about prices, rebates, and out-of-pocket spending on prescription medications;
  • Continuing to implement the US Food and Drug Administration’s Biosimilars Action Plan and Drug Competition Action Plan and clarifying the approval framework for generic drugs to improve transparency and efficiency in the process
  • Working with states and Indian tribes to develop drug-importation programs as a means to increase drug competition.  

Industry feedback

The bio/pharmaceutical industry, as represented by innovator, research-based organizations, the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Industry Organization (BIO), criticized the plan for not adequately addressing the causes behind drug-pricing issues and creating barriers to innovation.

The plan is “…not a serious plan to address what patients pay out of pocket for prescription drugs,” said Stephen J. Ubl, President and CEO of PhRMA in a September 9, 2021 statement. “What it leaves out is any attempt to fix a broken insurance system that discriminates against sick patients and does nothing to hold insurers and middlemen accountable for pocketing savings from our companies that should go to patients to lower their costs.”

“While we respect and share the President’s desire to make drugs more affordable and accessible for the patients who need them, this plan is the wrong approach,” said Rich Masters, BIO’s Chief Public Affairs and Advocacy Officer, in an August 12, 2021 statement following earlier statements by the White House on policy preferences for drug-pricing reform. “It would upend a popular program, restrict access to critical medicines, and make it more difficult for small, innovative biotech companies to attract the investment they need to discover new medicines that our seniors are waiting for to live more productive, healthier lives. “

The Association for Accessible Medicines (AAM), which represents generic-drug and biosimilars developers and manufacturers, was largely supportive of the plan due to measures that called for increasing access to generic drugs and biosimilars.

“As the HHS plan recommends, Congressional action is needed to modernize the Medicare Part D benefit to incentivize drugs that offer the most value at the lowest cost and to increase Medicare Part B reimbursement for biosimilars,” said Dan Leonard, President and CEO, AAM, in a September 9, 2021 statement. “We also appreciate the Administration’s consideration of a CMMI [Center for Medicare and Medicaid Innovation] shared savings demo for biosimilars, commitment to ensuring the ‘skinny label’ pathway remains available, and continued efforts by FDA to facilitate generic and biosimilar approvals."

The Center for Medicare and Medicaid Innovation (CMMI) is an organization with the US Centers for “It Medicare and Medicaid Services that is responsible for the development and testing of innovative healthcare payment and service delivery models. One such proposal would establish a shared savings program that would allow prescribers selecting biosimilars to share in the program savings generated from that choice. Such a program could be established legislatively or under CMMI’s existing statutory authority, according to the AAM.

So-called “skinny labels” allow generic drugs to be approved for non-patented indications to allow their market entry before patents for other indications expire, a practice supported by generic-drug companies but opposed by innovator-based bio/pharmaceutical companies and which has become the subject of recent litigation.

Legislative battles begin

The President’s plan is engendering debate within Congress. One of the major legislative proposals on the table is a bill passed by the US House of Representatives in late 2019, the Elijah E. Cummings Lower Drug Costs Now Act (H.R. 3), but which has not yet moved in the US Senate. The key measures in the bill would require the HHS to negotiate drug prices directly with manufacturers, subject to a cap based on international reference pricing. Debate on the bill is ongoing as the US Congress considers it and other legislative proposals.

As part of that process, The Reduced Costs and Continued Cures Act, was introduced this week (September 14, 2021) into the House of Representatives that proposes an alternative to H.R. 3. The bill is sponsored by Representatives Scott Peterson (D-CA), Kurt Schrader (D-OR), Kathleen Rice (D-NY), Stephanie Murphy (D-FL) and Lou Correa (D-CA). While retaining certain key provisions of H.R. 3 and the President’s plan, such as allowing the HHS to negotiate drug prices under Medicare and capping out-of-pocket drug costs, it scales back or modifies those provisions. Key highlights of the bill are outlined below:

  • Allows the HHS Secretary to enter negotiations with manufacturers of products deemed to be “extraordinarily expensive” over the last decade to secure price concessions of between 25% and 35%;
  • Allows price negotiation of products under Medicare B (prescription drugs administered in a clinical setting) that no longer have exclusivity and for which there is no competition on the market;
  • Bases beneficiary cost-sharing at the pharmacy level on the post-rebate price of a drug rather than the original list price;
  • Includes a mechanism that minimizes the impact of prescription drug costs on seniors with fixed incomes to allow their out-of-pocket expenses be paid throughout the calendar year via monthly installments instead of all at once;
  • Provides a yearly out-of-pocket cap in Medicare for the expense of prescription drugs based on income levels in reference to the federal poverty levels: (1) $1,200 annual out-of-pocket cap for those at 300% or less of the federal poverty level; (2) $1,800 annual out-of-pocket cap for those at 300% to 400% of the federal poverty level; and (3) $3,100 annual out-of-pocket cap for those at above 400% of the federal poverty level;  
  • Establishes a $50-per-month out-of-pocket maximum for insulin;
  • Requires greater transparency and increases insurer responsibility; and
  • Promotes more low-cost options by increasing competition in the marketplace.

The House bills join other bills introduced in Congress, including three bills introduced in the US Senate earlier this year (March 2021). These include: (1) The Prescription Drug Price Relief Act that would tie the price of prescription drugs in the US to the median price in Canada, the UK, France, Germany, and Japan; (2) The Medicare Drug Price Negotiation Act that would authorize the HHS to negotiate lower drug prices under Medicare Part D, (the prescription drug benefit); and (3) The Affordable and Safe Prescription Drug Importation Act that would allow patients, pharmacists, and wholesalers to import drugs from Canada and other countries.