Table of Contents
Editor’s note: This was part of CDR’s 2019 Pharmacy Outlook in the January 7 issue.
Pharmacists are medication experts. Every day, they get to see the remarkable difference innovative treatments can make in their customers’ lives. But like America’s biopharmaceutical companies, they also know those innovative medicines aren’t nearly as meaningful if they are too expensive for patients at the pharmacy counter.
Stephen Ubl
Nearly everyone can agree: the health care system needs to change. Now, the question is how we can make it work better for patients. The biopharmaceutical industry wants to improve patient access and encourage more competition in the marketplace. If we can do that, we will see lower out-of-pocket costs and can get patients the medicines they need to improve their health.
One of the market-based solutions our industry advocates for and that is starting to gain traction is sharing negotiated rebates with patients at the pharmacy. For too long, insurers and other middlemen have charged patients based on a medicine’s list price — not the lower, negotiated price that middlemen receive. For example, patients typically have to pay the full price until they reach their deductible, and their coinsurance is typically tied to the list price rather than the discounted price. We need to ensure patients benefit directly from more of the discounts our biopharmaceutical companies offer — whether it’s from rebates to commercial plans, Medicare Part D, 340B, and the list goes on. Insurers such as UnitedHealth and Aetna have announced they will start sharing some of the rebates they negotiate in the commercial marketplace at the pharmacy. We believe this is a step in the right direction and that savings should also be shared with patients in Medicare Part D. In fact, a recent analysis found sharing a portion of negotiated rebates at the pharmacy counter with seniors with diabetes could reduce total health care spending by $20 billion over the next 10 years.
We also support market-based requirements to prevent pharmacy benefit managers and other entities in the supply chain from being paid off the list price of a medicine and instead be paid a fee based on the value their services provide. Delinking supply chain payments from list prices will be disruptive to our industry and will require companies to adapt, but change is not easy.
Working with insurers
Our companies are also individually working with insurers on contracts where they only get reimbursed if patients respond to their medicine, another bold solution to reduce costs. In a value-based system like this, patients get more options and insurers only pay for what works. We know value-based contracts get results. In one analysis, commercially insured patients ended up with co-pays that were 28% lower when their medicines for diabetes and HIV were tied to results.
We also need to prevent other countries from free-riding on American innovation, which reduces a company’s incentive to invest in research and development. We can do that with stronger, better-enforced trade agreements. Trade deals like the new Korea agreement and the recent Canada and Mexico agreement help level the playing field with other countries that undervalue innovation.
Our industry is ready to support policies that shake up the status quo. But that change doesn’t have to come at the expense of innovation and patient access to medicines. Unfortunately, that’s what some policy makers in our nation’s capital are proposing with ideas like importing foreign medicines and making harmful changes to Medicare.
For years, proponents of importation have said that if we could just import cheaper foreign medicines, it would lower patient costs. The reality, however, is that importation comes with major, negative side effects. For one, the Food and Drug Administration has said repeatedly that it cannot verify the quality or safety of imported medicines. One study found that more than 95% of internet drug outlets did not adhere to U.S. pharmacy laws in 2014. And sadly, imported drugs have caused numerous deaths in the U.S., the U.K. and Canada after people took contaminated or counterfeit drugs they got online. Importation is dangerous for patients.
There is also talk of upending the highly successful Medicare Part D program to allow the government to set prices for seniors’ prescriptions. Under one proposal, if a biopharmaceutical company doesn’t accept the mandated price, the government could confiscate the company’s intellectual property through something known as “compulsory licensing.” Strong IP protections make investing in innovation worthwhile for biopharmaceutical companies. Without those protections, innovation would come to a screeching halt, especially for complex diseases like Alzheimer’s that largely affect seniors.
Another proposal recently introduced would have significant access restrictions for seniors. Letting plans restrict access to the medicines that patients rely on, particularly for those with serious and complex health conditions like HIV/AIDS, cancer and mental illness, reduces adherence to those medicines, jeopardizing their health, increasing their need for inpatient care and resulting in poorer health outcomes for seniors and higher costs for taxpayers.
Yet another Medicare proposal would affect patients who receive physician-administered medicines in a doctor’s office or at a hospital’s outpatient department. Right now, Medicare Part B reimburses for medicines based on a calculation that successfully accounts for market competition, rebates and discounts in the supply chain. The Department of Health and Human Services (HHS) wants to replace this market-based system with one that would set prices based on the average price across 14 foreign countries. This proposal is misguided for many reasons, but one of the biggest is the threat to patients’ access to treatment options. Take France, one of the countries that HHS wants to use to calculate average prices. The French government sets medicine prices and determines the availability of medicines based on their supposed “value,” which is arbitrarily determined by bureaucrats. As a result, patients there wait, on average, two years longer for breakthrough cancer treatments compared to U.S. patients.
A slippery slope
Perhaps the biggest threat looming over these two proposals for Medicare is that they open the door to more government price setting in the future. If that happens, the consequences compound, especially in tamping down the innovation that leads to breakthrough medicines and cures. Eventually, that slippery slope would land in front of pharmacy counters across the country where people need and expect access to safe, innovative treatments so they can live healthier, better lives.
A new Congress will be sworn in this January. With it, there is a renewed chance to avoid the all-too-familiar dialogue on medicine pricing in Washington. Instead, Congress could enact real, market-based solutions. When I talk to lawmakers, they recognize the need to encourage innovation and foster competition, in addition to making sure patients can afford their prescriptions. I am optimistic we can address costs in a thoughtful way, and I’m looking forward to continuing to work with members of Congress on both sides of the aisle.
The journey from the lab to the pharmacy counter is a long one. But until we make sure patients can afford their medicines, our work isn’t done. America’s biopharmaceutical companies are ready to be part of the solution because we know we don’t have to choose between innovation and affordability. We can have both.
Stephen Ubl is the president, chief executive officer of the Pharmaceutical Research and Manufacturers of America
