US President Donald Trump wants to peg US in-patient drug prices to an international drug price index, comprising mostly European countries. He is calling for an end to other countries’ “freeloading” off the US, which has the highest drug prices in the world.
Trump is proposing one of the most draconian changes to US drug pricing, and one which looks, for a Republican President, oddly socialist. The plan would cap the amount that the US government payer, the Centers for Medicare & Medicaid Services (CMS), would reimburse so-called “Part B” (out-patient) drugs at a yet-to-be-determined indexed rate of international drug prices. And it would pay physicians a flat-fee for administering these drugs, rather than, as under the current system, a proportion of a drug’s average sales price. This often incentivizes them to use pricier treatments.
Trump’s proposal, as laid out, is unlikely to come into effect, according to policy analysts at Capital Alpha in Washington. Apart from likely resistance from those Republicans opposed to price controls and the potentially negative impact on innovation, there’s a huge risk to patient access, if manufacturers play hard ball and don’t sell at the mandated price. There is no law forcing them to make their products available. Such a scenario would be disastrous, politically and socially.
Something needs to be done, though. The US spends twice as much per capita on prescription drugs than the UK, and the bill continues to rise. Drug firms see the risk: many of the largest players have voluntarily agreed to rein in price rises (a couple have actually decreased prices). They are trying to look socially responsible, as news headlines have highlighted the most egregious cases of drug price inflation, stoking public anger.
The problem is not just manufacturers’ price-setting, though. It is also the complex, contorted US drug supply chain and reimbursement system, which involves multiple middlemen, each shaving off a slice of the drug price as rebates or discounts. Pharmacy benefit managers (PBMs), which purchase prescription drugs on behalf of health plans, have come under increasing fire for lining their pockets. Some physicians, too, have benefited from high drug costs.
Yet PBMs, especially the larger ones, can also help negotiate lower prices for certain drugs – and have done so in the past. There is no single villain in– or simple solution to – the thorny US drug pricing debacle.
Meanwhile, Pfizer in November 2018 announced that 41 of its drugs will become more expensive in 2019, with one product’s price rising by 9%. This is still a far cry from wholesale price increases of previous years, though, and still within the voluntary 10% limit agreed by most of the biggest players, following Allergan’s 2016 lead. 90% of Pfizer’s portfolio will not see price increases at all. And drug-makers are more proactive about outcomes-linked pricing: Bayer offered payers a deal on its $32,000-per-month brand new cancer drug, Vitrakvi (larotrectinib) the moment it launched in the US on November 26. If patients don’t respond within 90 days, the drug cost is refunded.
Still, Pfizer’s announcement has stoked the flames of a debate that will continue through 2019 and beyond. Bernstein analyst Ronny Gal suggests that, with unpleasant pricing plans like Trump’s on the table, drug firms have little to lose and may have something to gain by increasing prices. It gives them a bargaining chip in forthcoming negotiations around some kind of price-curbing arrangement, even if it is not internationally-indexed prices.