Drugs

Can Lawmakers Pass Comprehensive Drug Pricing Reform This Year?

by Matt Gontarchick

The White House is not giving up hope on Congress passing legislation this year to allow Medicare to negotiate on drug prices, according to a White House domestic policy advisor who spoke at  AHIP’s National Conference on Health Policy and Government Health Programs in March.  But if a recent Senate Finance Committee hearing is any indication, the odds of this proposal passing in Congress this year are slim to none.

A Brief History of Recent Drug Pricing Proposals

Allowing Medicare to negotiate with drug manufacturers on prices has been a cornerstone of Democrats’ drug pricing proposals for some time now.  Negotiation was a major health care provision of the Build Back Better Act and President Biden reiterated the need for negotiation in his State of the Union on March 1.

Republicans have never been receptive to negotiation over fears that it would amount to price controls and leave pharmaceutical companies with fewer resources to develop new drugs.  However, in 2019, there was a sense of cautious optimism that a bipartisan compromise on drug pricing policy could be reached. That year, Sens. Ron Wyden (D-OR) and Chuck Grassley (R-IA) introduced a sweeping bipartisan measure that would cap out-of-pocket drug costs under Part D once a beneficiary hits a certain threshold.  But this legislation fell apart after then-Senate Majority Leader Mitch McConnell (R-KY) said he had no interest in bringing the bill up for a vote in the Senate, prompting Wyden to withdraw his support.

The Drug Pricing Debate in 2022

As the 2022 midterm elections approach, many Democrats believe their window of opportunity to pass comprehensive drug pricing reform is rapidly closing.  Despite this, Democrats don’t seem to be in any mood to compromise.  During the March 16 hearing of the Senate Finance Committee, Democrats were unanimous in their support for lowering drug prices through negotiation, which the committee’s Republican members continually opposed. 

Instead, committee Republicans including Ranking Member Mike Crapo (R-ID) voiced support for the Lower Costs, More Cures Act, which would establish an annual out-of-pocket cap of $3,100 for Medicare Part D enrollees – similar to the Grassley-Wyden bill – and allow certain patients to pay in monthly installments.  But Democrats on the Finance Committee didn’t seem interested in half-measures.  For instance, Wyden said out-of-pocket caps would simply “pass higher prices to someone else, like taxpayers.” 

It’s not as if Democrats are completely opposed to the idea of price caps.  During the hearing, Sen. Raphael Warnock (D-GA) touted his bill to cap copayments for insulin at $35 a month – a proposal Biden endorsed in his State of the Union.  However, Republicans seem opposed to this stand-alone measure, even though it’s similar to the Lower Costs, More Cures Act provision that would make permanent the Center for Medicare and Medicaid Innovation model that enables Part D enrollees who take insulin to limit out-of-pocket costs to $35.  During the hearing, Sen. Pat Toomey (R-PA) suggested rising insulin costs over the years have contributed to “tremendous innovation” of insulin products.

What happens next? Warnock said he wants to get his insulin pricing cap bill to the Senate floor by Easter.  The chances of this bill passing don’t look good at the moment and barring a break in the logjam between Democrats and Republicans on negotiation, progress on overall drug pricing reform doesn’t seem likely, either.  Both parties seem entrenched on their preferred legislative solutions to tackle high drug prices to the point that relatively bipartisan proposals like the Grassley-Wyden bill of 2019 wouldn’t stand a chance in passing.

But if Congress can’t do it, maybe the administration can, according to some Democrats.  Seemingly having lost hope in Congress to deliver on major Democratic policy proposals, many Democratic lawmakers are urging President Biden to sidestep Congress and take whatever executive actions necessary to lower the cost of prescription drugs.  On March 17, the Congressional Progressive Caucus issued a list of recommendations for executive action that includes drug pricing, among other issues. 

However, the Biden administration has yet to comment on which specific actions it could take, and any new executive orders on drug pricing could be subject to change – either in the courts or by the next administration.   Therefore, any serious attempt at drug pricing reform this year may still only be through Congress, no matter how slim the odds may be.

Drugs

ICER’s Growing Influence on Drug Value

by Matt Gontarchick

The Institute for Clinical and Economic Review (ICER) has grown to become a leading voice on drug pricing in the US.  As the emphasis on value in the US health care system and concern over high drug prices continues to grow, more stakeholders are likely to look to ICER for guidance on whether a drug is appropriately priced. 

ICER was founded in 2006 by Dr. Steve Pearson, an ethicist from Harvard Medical School, with the goal of improving value in health care.  One of the main ways ICER seeks to carry out this mission is by publishing reports on whether new drugs are cost-effective.  Using both economic and clinical evidence, ICER determines a “value-based price benchmark” for each drug it studies based on the based on how much a patient’s quality of life improves.   While ICER does take some membership-based funding from companies including CVS-Caremark and Pfizer, the organization does not accept funding to perform research on specific drugs or therapies. 

ICER’s influence began to grow in 2015 thanks to financial support from billionaire John Arnold, who provides the organization over two-thirds of its funding.  Now, the organization plays a critical role in driving the national conversation on drug prices and value.   Only a third of ICER’s reports have found a drug to be cost-effective and appropriately priced, and in response, many drug companies, payers, and providers have adopted some of the organization’s pricing recommendations.  For example:

  • CVS Health allows its commercial plan clients to exclude drugs from their formularies that fail to meet ICER’s cost benchmarks.
  • Novartis set the price of its gene therapy drug Zolgensma in line with ICER’s recommendations.
  • The Department of Veterans Affairs uses ICER drug assessment reports in drug coverage and price negotiations with the pharmaceutical industry.
  • ICER’s cost effectiveness reports on PSCK9 inhibitors, which are used to manage and prevent cardiovascular disease, drove annual list prices down from $14,600-$14,100 to $5,850.
  • A report by ICON plc found over a third of payers surveyed would be likely to request a rebate to match the net ICER cost-effective price.

ICER isn’t without criticism.  As a private organization, ICER has drawn concerns from patient advocates and physicians for its lack of oversight and regulations.  Additionally, the organization has faced pushback over the use of its quality-adjusted life years (QALYs) formula, which estimates a drug’s dollar benefit.  Some patient advocates say QALY determines costs in a discriminatory manner because the formula assigns individuals with a chronic condition or a disability with a lower value.  Notably, the federal government is prohibited from using QALYs to measure cost-effectiveness under the Affordable Care Act. 

In the future, Cost-effectiveness itself is a complicated concept in light of growing trends:  ICER could impact health care based on growing trends:

  • A heightened focus on health disparities could prompt ICER to review how different therapies affect certain demographic groups.
  • In the oft-chance the US adopts a public health insurance option or even a single-payer system, ICER could play a greater role in dictating cost-effectiveness.  For example, the United Kingdom-equivalent of ICER has significantly more clout in the country’s National Health Service. 
  • ICER may be forced to adjust its methodologies to address the growth of personalized medicines such as cell and gene therapies, which benefit a relatively limited number of individuals compared to therapies the organization has traditionally studied.

Furthermore, if the US adopts a public health insurance option or even a single-payer system, ICER could play an even greater role in drug coverage and pricing.  The United Kingdom-equivalent of ICER has direct decision-making authority within the country’s National Health Service.