CHC News

Rawson Shares Short- and Long-term Drug Pricing Fallout at CHC Meeting

May 29, 2018 – As the dust settles on the Trump administration’s drug pricing blueprint, the pharmaceutical industry is facing a mixed bag of potential short- and long-term impacts, according to Kate Rawson, Senior Editor, Prevision Policy and The RPM Report. Rawson, who spoke May 23 at the Coalition for Healthcare Communication Rising Leaders Conference on Healthcare Policy in Washington, D.C., explained how the current leadership at the Food and Drug Administration (FDA), the Department of Health and Human Services (HHS) and the Trump White House are shaping policy that affects the pharma business. (To view Rawson’s slides, go to the CHC Resources tab).

“The president, as we know, has been very vocal on drug pricing; he campaigned on this issue,” supporting direct drug price negotiation on Part D and even reimportation, she said. In President Donald Trump’s January 2017 initial meeting with industry he said that pharma companies had to bring prices down. The next step was an executive order which, “broadly speaking, was pretty pharma-friendly. It addressed consumer costs and regulatory barriers, but posed no threat to pharma innovators,” she said, “so clearly he was talked down from some of his early rhetoric.”

Drug pricing then went on the back burner at the White House, which was “eager to let Congress take the lead on this issue.” Former HHS Secretary Tom Price left a legacy of killing an Obama-era Part B reform measure and proposing an alternative payment model for 340B drugs, Rawson explained.

Alex Azar was chosen to replace Tom Price as HHS Secretary, and he “took on this declared agenda to address drug pricing … using his background as a former pharma CEO to really drive that conversation forward.” Rawson relayed that Azar’s four top priorities for HHS are:

  • Lower drug prices;
  • Address the opioid epidemic;
  • Institute healthcare payment reform; and
  • Implement a value-based transformation of the healthcare system.

“You saw that early policies to address drug pricing came from a kind of a surprising place,” she explained. “They actually came from the FDA, and not from the government payer programs at [the Centers for Medicare & Medicaid Services (CMS)],” Rawson explained. This is one area where FDA Commissioner, Scott Gottlieb, M.D., is not like his predecessors. “He is not afraid to talk about drug pricing, he is not afraid to opine on CMS issues either, and that, I think, reflects his comfort level from his experience at both agencies.”

These initial policies focused on ways to increase generic competition, to make it easier for branded drugs to come to market, to build a business for biosimilars – which has not taken off the way that most hoped it would,” she said, and to discourage REMS gamesmanship. “These were all market-based approaches, coming from a place that you wouldn’t normally expect,” she said.

She noted that the Pharmaceutical Research and Manufacturers of America (PhRMA) launched a “blame the middleman” campaign that turned the pricing attention away from pharma companies and toward rebate programs and pharmacy benefit managers. When President Trump released his drug pricing blueprint in the White House Rose Garden on May 11, it included many of the same themes as the PhRMA campaign.

The main message at this Rose Garden event was “to bash the middlemen. Pharma was largely left off the hook and got off pretty lightly,” she said. Still, there are immediate actions and longer-term actions in the blueprint that could greatly affect the pharmaceutical industry. Near-term drug pricing priorities include: a CMS Drug Price Dashboard (went live on May 15); reversing PBM gag rules on pharmacies; and “name and shame” on REMS reforms (the FDA will publicly identify manufacturers that game the patent system by blocking access to generic samples).

“The biggest immediate-term threat to the pharmaceutical industry is anything that changes the reimbursement models for Part B,” according to Rawson. “There are a series of steps in the [Trump] blueprint … that would make Medicare Part B [the physician-administered drug benefit] work more like Medicare Part D” (prescription drugs picked up at the pharmacy).

The first part of this is to revive the Obama Competitive Acquisition Program for Part B as an alternative to the current buy-and-bill system, she explained. “This has been tried before; it was not successful, but there are a lot of reasons that this administration thinks it will be more successful this time around.”

Longer term, the administration wants to examine ways to move some of the Part B drugs into Part D. “In Part B, the government pays the average sales price plus a 6-percent mark-up. In Part D, it’s more like a 3-percent rebate off the list price,” she told the CHC meeting attendees. “It’s not quite apples and oranges, but for drug makers … this is going to be a big loss. If you think about products that might be included, they could be chemotherapy and drugs under Part B for rheumatoid arthritis and Crohn’s disease.” Another step, she continued, could be a “B to D merger.”

One provision in the drug pricing blueprint called for HHS to ask the FDA to evaluate whether requiring drug companies to include drug prices in direct-to-consumer (DTC) drug ads is feasible. This provision has garnered a great deal of media coverage and industry concern. During the CHC Rising Leaders Conference keynote address on May 22, given by FDA Deputy Commissioner Anna Abram, Abram was asked by Rawson whether HHS had already requested that FDA look into this possibility. Abram responded that the FDA is “actively taking a look at” the prospect of compelling the disclosure of drug prices in DTC ads, although she added “I wouldn’t want to get ahead of any iterative process.”

Rawson’s take? “Tellingly, [this provision] was not in a separate statement issued by the FDA by Commissioner Gottlieb on the pricing plan – that, to me at least, suggests that what makes a great talking point at the White House may not feel like great policy to those who actually have to implement it.” However, although compelling these disclosures could be a policy “that fails internal vetting at the FDA,” Azar “has been talking a lot about this.”