As the number of cases and lives claimed by the COVID-19 pandemic continue to surge, access to affordable prescription medication remains a leading healthcare priority for Americans. According to the Kaiser Family Foundation, 29% of the estimated 195 million patients taking prescription drugs do not take their medications as directed due to costs. This can lead to negative health outcomes as treatment success is highly dependent on optimal medication adherence. Given the results of the 2020 Presidential Election, it is worth noting how President-elect Joe Biden hopes to ensure affordability of pharmaceutical and biotechnology medications. Pharmaceuticals, also known as traditional or retail medication, account for about 97% of the volume of medications dispensed in 2018. The biotech or specialty drugs, which make up the remaining volume of 3%, drove 43% of the total US drug expenditures in 2019.
This post will review the various proposals that President-elect Biden plans to implement over the coming years to reduce prescription drug costs.
Medicare Part D drug price negotiations
One of the hallmarks of President-elect Biden’s plan is to allow Medicare to negotiate directly with drug manufacturers as a way to lower prescription drug costs. The Medicare Prescription Drug, Improvement, and Modernizations Act of 2003 (MMA) introduced the Medicare Part D Program, which is the voluntary prescription drug benefit for Medicare beneficiaries. To receive drug benefit, beneficiaries have to enroll in one of the two options: as a stand-alone drug plan (PDP) or as an add-on to Medicare Advantage plan (MA-PD). Medicare provides Part D benefits by contracting with private health plan sponsors that offer standard Part D plans and reimbursing sponsors on a per-member-per-month amount. Plan sponsors are able to compete for enrollees based on their benefit designs, formulary inclusions, and drug cost-sharing. This market competition is protected by the noninterference provision of the MMA which states that the Secretary of the US Department of Health and Human Services (HHS) “may not interfere with negotiations between drug manufacturers and pharmacies and PDP sponsors”. By repealing this clause and allowing the Secretary to negotiate with manufacturers for lower drug prices, President-Elect Joe Biden hopes to decrease federal spending on drugs and render medications more affordable for Medicare beneficiaries.
While the incoming administration has not stated any implementation strategy, evidence supporting the success of federal interventions to control patients’ drug costs are well-documented in European countries. Additionally, propositions allowing price negotiations between the federal government and manufacturers have received wide bipartisan public support. Supporters have stated that employing price negotiations and formulary management strategies comparable to those used by the US Veterans Affairs could lead to Medicare cost-savings of about $14.4 billion. On the contrary, opponents have argued that authorizing federal price negotiations can disrupt the market competition among private payers and undermine research and development; potentially diluting treatment pipelines and patient access to life-saving medications.
External Reference Pricing and Independent Review Board for Specialty Medications
IQVIA, a multinational health information and biotechnology consulting company, reports that 27% of patients who were prescribed a specialty drug did not receive treatment due to unaffordable costs. The recent upsurge in biologics delivered novel therapeutics for diseases with significant unmet needs. Unfortunately, their extremely high costs render specialty medications inaccessible to patients who need them the most. Payers often place specialty medications in higher formulary tiers which require greater patient cost-sharing percentage. Specialty medications administered via infusion or by a physician are covered under Medicare Part B, while self-administered drugs are part of the Part D benefit. Because the patient co-share is not based on a set amount (copay), but rather as a percentage of the drug price, the patients’ out-of-pocket (OOP) costs can generate substantial financial burden.
To control for the skyrocketing launch prices of specialty medications, President-Elect Biden proposed the use of External Reference Pricing (ERP) and an Independent Review Board. ERP, a widely used practice in international markets, utilizes drug prices in foreign countries to calculate for the value which will be set as the benchmark drug price in their own country. President-elect Biden anticipates a potential cost-saving of $72.9 billion for Medicare Part D if ERP is employed to determine the reference price for specialty medications covered by Medicare. Unfortunately, despite the cost savings, the use of ERP has been unpopular in the United States. One reason is that newly approved medications often enter the US market first, automatically rendering ERP as inapplicable.
To confront this issue, the Biden administration recommends the formation of an independent review board. The board, led and created by the Secretary of HHS, will be held responsible to conduct health technology assessments (HTA) to calculate and set the most appropriate price for the drug. Similar to ERP, HTAs are commonly used by European governments in order to regulate prices by identifying the cost-effectiveness indices of patented pharmaceuticals, biotechnology drugs, and medical devices.
While there is no mention of who the independent review board will be composed of, it may be modeled after the Institute of Clinical and Economic Review (ICER). ICER is an independent, non-profit organization that reviews the cost-effectiveness of new treatments and/or health technology products by comparing the products in the same medication class or product category. In a similar fashion, the Independent Review Board will evaluate the drug, align its value with cost, then recommend a launch price for Medicare-covered drugs. As an incentive, private health payers can access the same low launch price if those payers offer health plans in the CMS individual marketplace. Successful implementation of such strategies can decrease both the patient’s out-of-pocket costs and the rate of uninsured patients in America.
Tax penalties for medications priced above the general inflation rate
The President-Elect plans to impose tax penalties on manufacturers who increase prices of pharmaceuticals (both brand and generic) and biologics above the general inflation rate. Though it was not explicitly stated, this proposal resembles a section of the House passed bill: H.R. 3 Elijah E. Cummings Lower Drug Costs Now Act. Under H.R.3, drug manufacturers are required to pay the inflation-based rebates to the federal government if their set medication price demonstrates a trend increase that is faster than the inflation rate. The objective of enforcing tax penalties is to discourage manufacturers from setting immensely high drug prices to maximize product profitability.
A report conducted by the United States House Committee on Ways and Means confirmed that US patients have been paying for medication at a significantly higher rate compared to other consumers from other countries, including American-made drugs. Manufacturers’ narrow revenues in international governments, due to cost-containing strategies, drive the price hikes in the US market. Manufacturers are able to compensate for marginal profits by subjecting US consumers with high-cost medications. Therefore, it is no surprise that such unfair pricing strategies instigated drug importation considerations.
Similar to President Trump, President Elect-Biden intends to permit consumers to import drugs as a means to reduce drug costs. Importation is limited to products that were considered safe by the Secretary of HHS. However, this proposal is widely unsupported and criticized by national pharmacy associations and government leaders of foreign countries, as it compromises patient safety and drug supply without substantial cost-savings.
End Taxpayer Subsidies for Drug Ads Act
In 2016, pharmaceutical and biotechnology companies expended $6.4 billion on Direct-to-Consumer Pharmaceutical Advertising (DTCPA). While there are regulatory requirements employed by the United States Food and Drug Administration (FDA), DTCPA spending continues to increase each year with minimal incentive for manufacturers to control costs. This is because of the Internal Revenue Code of 1986 which grants tax deductions for ordinary and necessary products, including DTCPA. Critics of DTCPA emphasize that advertisements have only consistently benefitted manufacturers by inducing the growth of the pharmaceutical industry, while patient outcomes have been erratic. Initiatives recommending the prohibition of DTC drug advertisements were quickly dismantled as it was deemed a threat to free speech.
New Hampshire (D) Senator Jeanne Shaheen introduced a bipartisan-supported legislation that would eliminate tax breaks for DTCPA expenditures. Supporters of the bill End Taxpayer Subsidies for Drug Ads Act, including President-Elect Biden, argue that DTCPA are not necessary and do not qualify for subsidy as it is impossible to learn all of the necessary information of prescription medications in the time duration allotted for DTC advertisements. If passed, the bill will drive down the DTCPA expenditures of manufacturers and (hopefully) discourage its use. However, whether its passage will directly impact prescription drug pricing is uncertain.
Endorse proposals that will increase the supply of generic medications
Lastly, President-elect Biden supports and hopes to advance policies and arrangements that prioritizes patient health and ensures access to affordable medication prices. For example, President-elect Biden has supported for The Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, introduced by Vermont Senator Leahy and signed into law on December 20, 2019.
The law expands access to affordable generic medications by preventing manufacturers from conducting tactics that delay the market entry of generic equivalents. For example, manufacturers may apply for, and are subsequently granted, secondary patent exclusivity for minor formulation modifications, an application that is often completed prior to patent expiration. These damaging tactics can deprive patients of critical life-saving medications since they keep drug prices high. By endorsing proposals spearheaded by other lawmakers, President-elect Biden acknowledges that prescription drug pricing reform requires collaboration and agreement with legislators.
As patient advocates, pharmacy professionals are in a prime position to assist patients and facilitate access to essential medication. Although we can do our best to help patients navigate their prescription benefits, utilize coupons for savings, and apply for patient assistance grants when able, ultimately, the health care system needs drastic reform to reduce drug pricing and ensure adequate access to medications. Knowledge of drug pricing reform and health policy proposals enhances our ability to successfully connect our patients to affordable medication and advocate on their behalf.
Guest Writers Profile
Grace Singson (they/them) is a 3rd year student pharmacist at the University of Southern California, where they are pursuing a dual-degree Doctor of Pharmacy and Master of Science in Healthcare Decision Analysis (HCDA) program. Grace is currently serving as the Vice-President of Professional Conferences, an Affinity Group Liaison, and for the USC School of Pharmacy Student Government Board and the Rx Pride LGBTQ+ Affinity Group, respectively. They are also involved with California Society of Health-System Pharmacists (CSHP), AMCP, ISPOR, CPNP, and Student Committee for Diversity, Equity, and Inclusion (SC-DEI). In addition to health policy, Grace has professional interests in managed care and health economics and outcomes research. They are passionate about optimizing pharmacy practice and medication access to reduce health disparities in marginalized communities.