Reining in Drug Prices: Easier Said than Done
Some of the so-called solutions for reducing the price of prescription drugs are not as easy as they seem, experts said at a panel here hosted by the Alliance for Health Policy.

WASHINGTON -- Some of the so-called solutions for reducing the price of prescription drugs are not as easy as they seem, experts said at a panel here hosted by the Alliance for Health Policy.

Ideas such as having the federal government negotiate drug prices or allowing importation of prescription drugs from other countries "sound good, but they're probably not going to work, or get through Congress," former House member Henry Waxman (D-Calif.) said at the event on Friday. "So we need to look at the problem in a more narrow way in order to get bipartisan support."

Although no "silver bullet" exists for lowering drug costs, there are some ideas worth considering, said Waxman, chairman of Waxman Strategies, a consulting firm here. For instance, in markets where no generic version exists for a particular drug, "Maybe we can look at policies that might provide targeted incentives FDA can implement to generate competition. The FDA can reach out and try to get a generic to come in and compete, or provide proactive government monitoring and oversight of pharmaceutical markets so it will be aware of the fact we're getting into a single-source drug that would drive up the price."

The FDA also could help by getting rid of the generic applications backlog, said Joel White, president of the Council for Affordable Health Coverage. "We've got a backlog of 4,000 generics at FDA so we need to do a better job of getting these products on market quicker." Passing the FDA Reauthorization Act would be a good first step, and [FDA commissioner Scott] Gottlieb indicated he's going to aggressively work to eliminate that backlog."

Another barrier to the creation of generic drugs is risk evaluation and mitigation strategies (REMS) -- the special prescribing requirements used to limit distribution of certain drugs, such as those that include a risk of birth defects. "Drugmakers hide behind REMS to say they won't make samples available to generic manufacturers so they can make a bioequivalent drug," said David Mitchell, president and founder of Patients for Affordable Drugs. He noted that the CREATES Act introduced by Sen. Patrick Leahy (D-Vt.) would make such behavior illegal.

Reducing Anticompetitive Behavior

Another problem to be fixed is anticompetitive behavior that undermines competition, such as "pay for delay" deals in which a brand-name drugmaker pays a generic firm to delay entering the market after the brand-name drug's patent expires, Waxman said. "There's no reason to have pay for delay -- I don't see a value in allowing [it]."

And the pharmaceutical distribution system "doesn't make central pricing information available to patients or providers and payers at the point of care," which could help patients choose which drug to take, he added. "Furthermore, patients, providers, and payers lack information about the effectiveness of drugs at the critical point when decisions are made. So perhaps we could look at greater transparency policies for drug pricing information, or invest in comparative effectiveness research."

Finally, "We could change federal law, which imposes limitations on states' authority to negotiate prices for Medicaid, or implement other price-related measures, like letting states operate pharmacy benefit management (PBM) organizations to leverage their negotiation powers," said Waxman. "These are just some ideas -- we're not recommending them, but putting them out there for consideration."

Encouraging Value-Based Payment

Payers are interested in value-based payment for drugs, but to do that, existing laws such as "best price" laws, anti-kickback laws, and the Stark self-referral law would need to be changed, White said. "And to make those arrangements more fruitful, we need more infrastructure and data investment."

Steve Miller, MD, chief medical officer of Express Scripts, a pharmacy benefit manager, gave an example of his company's use of paying for value. "We started the price war for hepatitis C drugs; we were able to get the price down to an [incredible] extent," he said (The hepatitis C treatment Solvadi cost close to $100,000 in 2014). "The old treatment for hepatitis C was ribavirin and interferon; that used to be $35,000. We now have the price of the current crop of hepatitis C treatments at $35,000, which is cheaper than they are in Europe."

To get that price, "we guaranteed that patients would be adherent to the drug or we'd refund anything that the plan sponsor had paid toward the drug," Miller explained. "We had to innovate; we had to develop predictive models to tell which patients would take the drugs, we had to develop cellphone apps and letter campaigns. To be very frank, I got the price down so low I could send a nurse to your house and shove the pills down your throat if I had to. And we were able to achieve adherence of 92%, better than in the clinical trial."

Miller urged more use of electronic systems. "We need to be compelling doctors to electronically prescribe, because they often can see the benefit design and see what's on the formulary," he said. "We also need controlled substances to be electronically prescribed. Electronic banking drove fraud and waste out of the banking industry -- electronic prescribing of controlled substances can do the same."

Consider the Overall Picture

Robert Zirkelbach, executive vice president of public affairs for the Pharmaceutical Research and Manufacturers of America (PhRMA), urged the audience to consider the overall picture when it comes to drug costs. "In 2014, we did have a spike in drug costs -- there were a record number of new approvals, including a hepatitis C drug, and fewer medications went off patient that year than is typical," he said. "But what people often forget is that in the 3 years prior to that, prescription drug spending was essentially flat, and since then, prescription drug cost trends have moderated significantly."

"Our system does a really good job of holding down costs for payers and the system as a whole, but it's not doing enough to make sure we're holding down costs for patients," he said. "Our own study found that brand-name companies only retained 63% of the list price of a medication -- that means 40% is going back to insurance companies, PBMs, the government, or other parts of the supply chain."

When it comes to the government's involvement, it's interesting that although Medicare can negotiate with many types of providers, "there's only one place where they can't negotiate -- drug benefits," Waxman said. Even with the advent of Medicare's Part D drug benefit, "it's quite amazing when suddenly Medicare is buying drugs for beneficiaries and bringing in millions of new patients, but it can't get a discount for all the patients that are there." Instead, Medicare has contracted with health plans to run the drug benefit programs, "and each plan [runs] a PBM system, and ... nobody knows what happens when a PBM gets a discount."

But there are drawbacks to having Medicare negotiate prices, Zirkelbach argued. "We know what happens when governments get into the business of setting formularies and setting prices. In every situation where that happens around the world, patients have less access to the newest, most innovative treatments."

Waxman disagreed. "I don't think we're at that point, but to say that it never can be done effectively, and you can't get access to breakthrough medications, I don't think is an accurate statement."

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