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Now that Medicare can negotiate
the price of prescription drugs it purchases, the Biden administration needs
to figure out how it will hash out deals with drugmakers. Experts tell AIS
Health that implementation of the long-sought negotiation program will come
with plenty of challenges and pitfalls.
How will CMS select which
drugs to negotiate?
- “I see three
major decisions, in the short term, related to negotiation,” Matt Kazan,
managing director at Avalere Health, tells AIS Health. “There is the
definition of drugs that will be eligible for negotiation. The actual
selection of the [first] 10, and then the rules of the road of the
negotiation process itself. All three of those major decisions have to
happen basically before this October 1, 2023, deadline — and maybe even
sooner.”
- Those decisions
could even have a meaningful impact on the bottom lines of drugmakers
that don’t have drugs up for negotiation. That’s because the Inflation
Reduction Act (IRA), the legislation that created the bargaining
process, requires HHS to negotiate the most
expensive drugs first. But that’s not as simple as it
sounds, according to Ryan Urgo, managing director at Avalere.
- “There has been
confusion about how top spending by drug will be calculated….If you’re
basing it off of gross [price], that would produce one list,” Urgo says.
“If you’re calculating it off of net spending after rebates, that would
create a different-looking list.”
- “Manufacturers
are wondering what this [negotiation] process is going to look like,”
Urgo explains. “Because maximum fair price appears to just be table
stakes to start the negotiation. The key question is, how far down will
that price go during this negotiation process? All we know is that HHS
is going to be requesting R&D data and other market data to inform
the negotiation.”
Rulemaking will happen
quickly
- Urgo adds HHS
needs to balance savings with the possibility that drugmakers could
“chill research and development….or these manufacturers contemplate not
selling in the Medicare program any longer.”
- Kazan says
that, unusually, “Congress in various places throughout the IRA provided
the flexibility for the administration to not go through normal notice
and comment [periods]. That’s in recognition of the very tight effective
dates and deadlines that the legislation establishes. So I think it’s an
open question as to 1) how CMS is going to solicit and take in feedback,
and 2) how are stakeholders going to engage with the agency about the
various decisions that CMS needs to make.”
- Kazan adds that
HHS will also have to hire specialized staff to negotiate drug pricing
deals with manufacturers.
- “A lot of this
is subjective,” he says. “The price that they land at is not just a math
equation. The expertise and ideology and vantage point of those people
will be tremendously important.”
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