ACCC Speaker Says Drug Pricing Reform May Gather Momentum

Tony Hagen @oncobiz
Published Online: Friday, Mar 31, 2017

Jessica Turgon, MBA

Jessica Turgon, MBA

President Donald Trump may be more successful at negotiating reduced prices for oncolytic drugs than he has been in achieving a revision of the Affordable Care Act (ACA), said Jessica Turgon, MBA, of ECG Management Consultants, this week at the annual CANCERSCAPE meeting of the Association of Community Cancer Centers. She said that changes in 340B Drug Pricing Program rules 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, MD, 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 8000 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, Turgon noted. One of the MedPAC recommendations includes a change in the current payment formula, which entitles physicians to 100% of a drug’s cost plus a 6% 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% to ASP-plus-2.5%, 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.


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