President Trump Sets His Sights on Reforming Drug Prices

Can President Donald Trump be more successful in lowering drug prices than he was in repealing and replacing the Affordable Care Act? 
BY Tony Hagen
PUBLISHED April 06, 2017
President Donald Trump may be able to use his business background to negotiate reduced prices for cancer drugs. Jessica Turgon, MBA, of ECG Management Consultants said that he might be more successful in this realm than he was repealing and replacing the Affordable Care Act (ACA). Turgon discussed the issue at the CANCERSCAPE meeting of the Association of Community Cancer.
 
She said that changes in 340B Drug Pricing Program, which requires the makers of drugs to provide medications at a reduced rate to eligible health care organizations and entities, and the CMS physician payment formula are very possible.

Trump has made it one of his goals to win concessions from the pharmaceutical industry on pricing, and his background as a negotiator may be useful to him, Turgon said. In his Twitter posts, Trump has expressed a strong desire to establish bidding procedures for drugs, although Medicare is prohibited from negotiating drug prices, and Trump is passionate about the issue, potentially more so than he has been about repealing the ACA, Turgon said.

“It may be an easier area for the president to focus on given his background in negotiation,” she said. “How he does it is going to be interesting.”

The president will face a number of challenges on the way to meeting this goal, however. The pharmaceutical industry is opposed to drug price negotiations, Trump will need bipartisan support, and the president is often at odds with the GOP and “flip-flops” on issues, Turgon said.

In his corner, Trump has Thomas Price, M.D., serving as secretary of the Department of Health and Human Services (HHS), who may also be effective in bring about drug pricing reform, Turgon speculated.

Finding some way to allow Medicare to begin negotiating drug prices with manufacturers would enable Medicare to exploit its leverage as the largest payer, but there are differing views on the magnitude of federal savings that could be achieved. The Congressional Budget Office has said the effect would be negligible, Turgon said.

Trump has shown interest in raising imports of drugs from countries where costs of medicine are lower. However, pharmaceutical companies are opposed and they could potentially react to such a policy by raising prices and limiting supplies worldwide, potentially harming populations that rely on lower-cost access. “What would the impact of those price changes be globally?” Turgon said.

Generic competition offers promise for countering the cost of brand-name drugs, Turgon added. It has been suggested that the FDA speed generic approvals to bring about more pricing competition, although Turgon said the FDA is already moving drugs through the review process speedily and it’s not clear whether the agency can move faster. Another tactic would be to make it illegal for pharmaceutical manufacturers to contract with makers of competing drugs to stall the market entry of rival drugs, a practice known as “pay-for-delay.” Pay-for-delay costs American consumers as much as $14 billion annually, Turgon said.

The 340B program is a huge potential target for reducing drug expense, but this idea, too, is fraught with potential difficulty. Many participating entities in the medical establishment are financing operations with the sizeable savings and rebates available through 340B. They would be very opposed to having this support pulled away from them, Turgon said. “How would you run your health systems without those revenues coming in?”

To illustrate the scale of the potential opposition, Turgon noted that 340B-covered entities in 2013 numbered 16,500, up from 8,000 in 2008. Even so, she said, it’s almost a certainty that some rules will be put in place to limit the growth of 340B.

In March 2017, the Medicare Payment Advisory Commission (MedPAC) released a set of recommendations for improved management of Medicare Part B drug spending. Part B covers infused and injectable drugs. The tab for this spending reached $26 billion in 2016, up 9 percent from 2009, Turgon noted. One of the MedPAC recommendations includes a change in the current payment formula, which entitles physicians to 100 percent of a drug’s cost plus a 6 percent markup. CMS’ efforts to reduce that rate of payment last year were unsuccessful. The recommendations from MedPAC include requiring drugmakers to report average sales price (ASP) data and to pay a rebate to Medicare when ASP reaches a benchmark level.

The ill-fated CMS drug payment model, which would have experimented with cutting ASP-plus-6 percent to ASP-plus-2.5 percent, was contested by physicians partly on grounds that the payment formula would not have been adequate to cover their costs. Despite that, MedPAC is an official advisory agency whose recommendations are frequently accepted by CMS, and this latest guidance is not likely to be treated lightly, Turgon said.
 
An additional recommendation from MedPAC is to establish a single billing code, or payment, for reference biologic drugs and their biosimilar equivalents. Such a policy could cause practices to swing toward use of the cheapest obtainable drug under the single code, while also creating problems for practices whose physicians prescribe drugs that are priced higher than the corresponding payment under the code, Turgon said. Under Price at HHS, such a policy could conceivably come about, she said.

With much uncertainty about the drug pricing policies that will emerge as the Trump tenure unfolds and Price and others, including Seema Verma, newly confirmed head of CMS, begin to exercise their mandate to control spending, it’s incumbent upon practices to protect themselves the best way they can. Turgon said this means adhering to clinical pathways, using evidence-based treatment alternatives, educating prescribing doctors about the costs of drugs, and having cost-of-care discussions with patients. She also recommended reducing wasteful drug use—in particular by choosing infusion bag sizes carefully, and practicing just-in-time delivery by keeping inventory supplies of high-priced drugs as low as possible.

In addition, practices need to develop defensive readiness for what seem to be rising and often arbitrary claims rejections by payers, Turgon said. “What we were seeing at some cancer centers at the turn of the year was one in four claims were being denied. It takes time, it takes, energy, but making sure that your denial process and your authorization process are fine-tuned would be part and parcel of helping your cancer center run effectively.”
 
 
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