Three considerations for the pharma industry as President Trump focuses on drug pricing

As a presidential candidate, President Donald Trump repeatedly decried drug prices, suggesting that Americans should be allowed to purchase the products from abroad and that Medicare should be allowed to negotiate their prices. As president, he has continued to talk about drug pricing. Addressing Congress on Feb. 28, Trump said he would “work to bring down the artificially high cost of drugs, and bring them down immediately.”

President Trump and Republican lawmakers also have promised to repeal and replace the Affordable Care Act (ACA), which included deep mandatory Medicaid drug rebates and expanded the number of healthcare organizations that could participate in the 340B discount drug program. On March 6, House Republicans introduced a bill, the American Health Care Act, or AHCA, which rolls back the ACA’s Medicaid expansion after 2019 but does not address the law’s drug rebates or 340B program expansion.

Allowing Medicare to negotiate drug prices at the national level, or allowing reimportation of products from other countries, could push prices down. Either of these options would face a difficult legislative path. Other congressional actions—such as changing the FDA’s orphan drug program to narrow product eligibility or cap prices, or requiring companies to justify price increases at public hearings—may lead to new policy proposals, or new pressure on companies to explain the prices of specific products (see figure 1 for a list of policy proposals).

President Trump’s desire to bring private sector tools to bear on public sector programs, such as creating a more competitive environment for healthcare products and increasing corporate transparency, dovetails with state-level transparency proposals. In Maryland, a proposed state law would require a raft of new disclosures for drugs that cost more than $2,500 a year. Sixteen states are considering similar legislation to increase companies’ disclosures.

These state-level efforts can eventually lead to national policy. CMS’ Open Payments law, also known as the “Sunshine Act,” was born on the state level before it was adopted as part of the ACA.

Three considerations for the industry

Make a plan. At least seven major drug companies have taken steps to make drug prices more transparent, or have committed to limiting annual price increases. It’s too early to evaluate whether these initiatives go far enough to counter ongoing criticism of industry pricing practices. Pharmaceutical and life sciences companies are under pressure from all sides—including from investors—to justify pricing decisions. Drugmakers should plan for scenarios that may require new R&D and other financial disclosures related to specific drugs. Limiting sharp price increases, especially for single-source drugs treating high-cost or socially polarizing conditions, can help drugmakers avoid damaging headlines and investigations.

The action is in the states. Last year, Vermont became the first state to enact drug-pricing transparency requirements. New product-specific reporting requirements in states like Maryland or New York could influence legislation in other states, or at the federal level. Conducting internal analyses of pricing patterns across brands can help drugmakers develop narratives to defend pricing decisions and influence new transparency regulations.

Consider novel approaches. Value-based contracting may help protect pricing premiums for products that deliver their intended outcomes. Microfinancing options may improve patient access to high-cost specialty and rare disease drugs.  Overall, shifting the focus from individual drug pricing towards pharmacoeconomic value is in the best interest of all stakeholders.

The Trump administration and new state-level proposals could impact drug prices

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