by Robert King
| Sep 10, 2019 4:17pm
A leaked summary of a proposal bill from House
Speaker Nancy Pelosi to combat drug prices brought some good news for insurers
and hospitals struggling with exorbitant drug costs, experts say.
The proposal, a draft of which was published by
Bloomberg Business, would allow the Department of Health and
Human Services (HHS) each year to pick 250 brand-name drugs that lack at least
two generic or biosimilar competitors. Medicare would have the power to
negotiate with the drugmaker on a rate for these products.
While the proposal hasn’t been officially
released, it provides an outlook into how the speaker’s office is handling the
issue of drug prices this year.
Here is a look at how some sectors of the
healthcare industry would fare if the plan becomes law:
Insurers
Insurance companies have been pleading with
Congress to take action to rein in drug prices, and there are some things to
like in this proposal from their perspective.
For one, the negotiated price would apply to
Medicare Advantage and Medicare Part D plans. Such insurers would also be able
to negotiate with manufacturers for a price that is lower than the negotiated
price. But the draft goes a step further by saying that a manufacturer must
offer the negotiated Medicare price to commercial health plans alongside the
Department of Veterans Affairs.
This would be a “game changer,” one expert
said.
“The concern from the private side is that
their prices would somehow go up if the prices under Medicare were more
constrained,” said Tricia Neuman, senior vice president with the Kaiser Family
Foundation. “This draft acknowledges that is a concern and aims to address
it." There is also a penalty if a manufacturer doesn't participate.
A manufacturer cannot increase the price of
the drug in the program beyond inflation and will remain in the program until
more competition enters the market, according to the leaked summary. Drug
companies that don’t agree to enter negotiations will face an excise tax of 75%
of the gross sales for the product they are negotiating the price on.
While drug companies could still decide to not
participate in Medicare, that move is unlikely, because “Medicare is a good
payer and will still be a good payer even through negotiation compared to other
industrialized countries,” said Gerard Anderson, a professor at the Johns
Hopkins Bloomberg School of Public Health.
Insurers have complained in recent years over
the high cost of specialty drugs that treat conditions such as cancer and
autoimmune disorders such as arthritis. A recent analysis
found that high-cost specialty drugs made up 40% of a major
purchasing group’s drug spending in 2018, despite making up only 1% of prescriptions.
Hospitals
Hospital systems have strained to deal with
rising drug costs for the past couple of years. A study released
in January (PDF) by the American Hospital Association found that
average total drug spending per hospital admission increased by 18.5% from 2015
to 2017.
While hospitals would benefit from lower drug
costs, there are some unanswered questions.
For instance, hospitals and doctors' offices
are reimbursed for the average sales price for a physician-administered drug
under Medicare Part B, plus an add-on payment of 6% of that price to cover
storage and handling costs.
While hospitals would be reimbursed for the
new negotiated price under the proposal, it doesn’t delve into whether the
add-on payment will stay intact. Hospitals have pushed back against previous efforts
by the Trump and Obama administrations to curtail the add-on.
The Trump administration has proposed
doing away with the add-on payment and replacing it with a flat fee.
Pharmacy benefit
managers
Pharmacy benefit managers (PBMs) may not be
happy that the proposal would do away with drug rebates for Part D products.
The summary would sunset the current drug discount
program where manufacturers pay 70% of the drug costs in the catastrophic phase
of Part D coverage, commonly known as the “donut hole.” Manufacturers would
instead provide a discount off of the negotiated Medicare price “during the
initial and during catastrophic coverage, including for (low-income subsidy)
beneficiaries,” the proposal said.
Coverage discounts would be provided at the
point of sale at a pharmacy or mail-order service, disregarding the current
Part D rebate system managed largely by PBMs.
HHS tried to get rid of the rebate system for
Part D drugs earlier this year with a proposal that would have replaced drug
rebates with a discount offered at the point of sale and got stiff pushback
from both the PBM and insurance industries. The proposal was scrapped by the
White House after concerns over raising seniors’ premiums.
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