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In the second of a two-part series, leaders of industry associations present their expectations for pharmacy operators for this year.
2023 was a pivotal year for health policy, to say the least. The swift implementation of the IRA’s Medicare Drug Price Negotiation Program (DPNP) by the Centers for Medicare and Medicaid Services (CMS), the growing legislative momentum for pharmacy benefit manager reform, and increased scrutiny of 340B program meant there was no shortage of items to study on the health care agenda.
John O’Brien
Now, as we enter a presidential election year, the noise surrounding how the various parts of the health care system contribute to the cost of and access to care will be even greater. And sadly, what is good in politics is not the same as sound, evidence-driven policy.
As a pharmacist, I know that a patient filling a prescription values the medicine their provider has prescribed and that what they are asked to pay is a function of the insurance card in their wallet. We need innovation in how we pay for medications to match the innovative new medicines that scientists are discovering.
In 2024, I will be watching to see if we finally see moves toward paying for medicine based on the value it provides rather than on the amount of margin some other part of the value chain can extract. The IRA’s DPNP isn’t the first cut into the companies that bring innovative medicines to life, and while there are opportunities to advance affordability and access, in 2024 there are real risks of hitting an artery that will impact access to innovation in the future.
IRA DPNP implementation continues despite lack of clarity
CMS has moved quickly in standing up its provisions of the Inflation Reduction Act, most notably, the Medicare DPNP. Already we are starting to see how the agency’s combination of speed and lack of clarity is impacting the drug development ecosystem in the United States.
A potential unintended consequence of the law is how it threatens research and investment into subsequent indications of approved drugs. Clinical development programs for new indications of an approved drug play a vital role in expanding treatment options for patients.
A recent National Pharmaceutical Council (NPC) analysis found that because the IRA changes the economic incentives surrounding clinical development in the United States, the result may lead to delays in single-indication drug launches, reduced investments in post-approval research for new indications, and a negative impact on long-term health outcomes data.
In addition to the potential harmful economic impacts to biopharmaceutical development enshrined in the law, CMS has faced challenges in weighing input from patients and other stakeholders as it builds its drug negotiation program. It is so critical that CMS weigh perspectives from all stakeholders and take measured, gradual and well-communicated steps in implementation.
Among the most important details for which there is uncertainty is how pharmacies will be made whole for making drugs available to patients at the set price under the DPNP. The existing chargeback payments and rebate mechanisms are currently inadequate, leaving pharmacies currently in the dark about the mechanism and timing for which they will be paid the difference between their acquisition cost and the negotiated price.
Additionally, manufacturers of the first 10 drugs selected for negotiation are still in the dark on what CMS “values” in their evaluation of these drugs. Manufacturers won’t receive clarity until after another round of negotiation begins. Preparing for the next selection of drugs slated for negotiation, many in the pharmaceutical industry are left scratching their heads as they prepare for the uncertain road ahead.
States must avoid perils of price controls
Patient Drug Affordability Boards (PDABs) are popping up all over the country as governments reach for cost control measures. However, advocates in Colorado and Maryland have been blowing the whistle about the potential harm these measures have on patient access.
In parallel to the IRA conversation at the national level, health policy stakeholders at the state level are grappling with the unintended consequences of PDABs, as state governments have few answers to alleviate fears of reduced patient access. This is particularly so for patients with rare diseases who fear PDABs will disrupt well-established drug supply systems, resulting in these important medicines no longer being available.
A myopic view of prices — rather than addressing high out-of-pocket costs and expanding access overall — doesn’t address the real issues facing patients. To add a finer point, according to IQVIA, patient out-of-pocket costs increased more than $2 billion last year, exceeding the peak levels seen in 2018. As the report details, drug prices have been flat for the past several years. In fact, net prices — the ones insurers and PBMs pay after rebates and other fees — are projected to fall even more steeply over the next five years, according to the report.
In the face of this data, decision makers must do more to address the root causes of high patient out-of-pocket costs and access problems.
Federal reforms to PBM practices appear imminent
Several versions of PBM reform bills have been proposed in multiple congressional committees recently. Late last year, legislation advanced out of committee, and Congress is starting to coalesce around a bipartisan consensus on reforms to this area of the drug supply chain.
In addition, the 2023 CMS proposed rule on PBM drug price transparency represents a major opportunity to bring public transparency into a notoriously opaque system. Recent legal victories are also beating back the rising tide of co-pay accumulators and maximizers, mechanisms used by PBMs to capture a portion of the co-pay assistance patients receive rather than allowing patients to access the maximum benefits of these programs implemented to help patients.
The fact is, eliminating barriers erected by insurers makes drugs more affordable and helps patients stay on their medicine regimen, leading to better outcomes for the individual patient and the system. Still, too few policy makers realize what’s often called “drug spending” is actually money that goes elsewhere in our opaque system. The amount that is a part of the gap between a drug’s list price and its net price often goes not to patients, but to subsidize other lines of business and increase profits — profits that, according to recent research from Nephron, are increasing for PBMs. In some cases, the PBM, insurer and pharmacy are all part of the same company and counting the same money as both revenue and expense, raising important questions about health care consolidation and vertical integration.
Reforms that benefit patients and relieve OOP costs are welcome. However, we must be careful to watch for new tactics deployed from PBMs and insurers, including levying new administrative fees that are less likely to be shared with plan sponsors — our nation’s employers and governments.
Further scrutiny is needed on the rapid increase in other patient obstacles such as step therapy, prior authorization and prescriber requirements. Last year, NPC research found commercial health plans’ use of prescriber requirements doubled, and the use of step therapy increased by more than 31% for specialty drugs from 2017 to 2021. For these important specialty drugs, which are typically complex, high-cost medications, commercial health plans often impose criteria that restrict coverage beyond the FDA’s label indications. This important analysis points toward increased use of coverage restrictions by health plans that results in limited patient access to this class of medicines.
While we see innovation in the biopharmaceutical sector, we certainly aren’t seeing it in our health care reimbursement system. Our major insurers seem to be creating new ways of moving money around and new roadblocks that patients and providers must navigate to access the medicine that they need.
340B discourse is finally elevated (with potential congressional action)
Rounding out the last health policy issue I see getting particular attention in 2024 is 340B. This program continues to step out from the shadows and is finally receiving scrutiny from Congress and the wider health policy community. The Genesis Healthcare v. Becerra case has stakeholders thinking about the very definition of an eligible patient and what it means to participate in a program that has absolutely ballooned in size.
Media continue to report on the discrepancies in charity care in some 340B eligible hospitals, and senators are pressing for more insight on exactly where these 340B funds go in our nation’s largest hospital systems. The visibility may pay off in the name of reform that returns the program back to its original, patient-centered intent.
Keep focus on patients in 2024
I started my career as a pharmacist because I know how important the care our nation’s patients receive in pharmacies is for patient outcomes and a thriving health care ecosystem. Whatever policies and programs impact the health care landscape and discussion in 2024, I know the proven and most important way to find solutions is through clear, transparent dialogue informed by solid research and open data. At NPC, we will continue to provide trusted evidence and research to help inform decisions that will benefit patients now and in the future.
John O’Brien is a pharmacist, president and CEO of the National Pharmaceutical Council and a senior fellow at the USC-Schaeffer Center for Health Policy and Economics.
