Pharma's Not Off the Hook for High Drug Prices

  • Drugmakers, insurers hold talks to come up with solutions
  • Cummings, McCain will continue to push for legislation

The Hidden Cost of Cheaper Drug Prices

Even with a presumably business-friendly president-elect in Donald Trump, drugmakers that have been battered by criticism over high prices in the past year are bracing for Republican and Democratic lawmakers to take aim at the industry.

Although Trump’s brief health plan released last week on his transition’s website doesn’t mention drug prices, he has previously voiced support for having the government negotiate prices in Medicare, and allowing the re-importation of cheaper treatments from other countries -- two proposals the pharmaceutical industry has long opposed.

“We need to work with the Trump administration and Congress to ensure that any solutions they devise don’t cut off our collective noses to spite our faces,” said Ron Cohen, chairman of the Biotechnology Innovation Organization, or BIO, a Washington lobbying group. “There are still fundamental issues that remain with respect to the intense concern, and even anger, in the population at large with their access to health care, including drugs, at a price they can afford.”

Pharma stocks surged in the days following Trump’s surprise win last week. There was a sense of relief after his Democratic opponent Hillary Clinton, who had vowed to go after what she called “gouging” with penalties for unjustified hikes and the creation of a federal group charged with overseeing drug prices, didn’t make it to the White House.

Read more: Outrage over skyrocketing drug prices in the U.S. -- a QuickTake

Yet members of both parties have been laying the groundwork for bills that could go after the industry. Senator John McCain, an Arizona Republican, said he will push his proposal to force drugmakers to report any price increase of more than 10 percent. And Representative Elijah Cummings from Maryland, who has led the charge against high drug prices from his perch as the highest-ranking Democrat on the House Committee on Oversight and Government Reform, said lawmakers would be remiss not to take up the issue.

“Congress would be committing serious legislative malpractice and political malpractice if they failed to do something about these drug prices,” Cummings said in an interview.

Medicine costs remain under scrutiny -- a Senate hearing on Mylan NV’s EpiPen, the $600 life-saving allergy shots at the center of the most recent uproar, is set for Nov. 30 -- and the industry isn’t standing still. Drugmakers, health insurers and firms that handle employer benefit plans known as pharmacy benefit managers, or PBMs, are holding discussions about new ways to pay for medicines that could keep expenses under control while maintaining their sources of profit. The talks are reuniting groups that have been at odds in recent months, blaming each other as criticism over prices heated up.

“We’re actively looking to forge a consensus,” said BIO’s Cohen, who’s also chief executive officer of biotech firm Acorda Therapeutics Inc.

Steven Miller, chief medical officer at PBM Express Scripts Holding Co., confirmed: “We’re having better discussions with the pharmaceutical manufacturers than we have in years.”

Pay for Performance

Unlike other nations, the U.S. doesn’t directly regulate medicine prices. The pricing system is opaque, with list prices set by drugmakers and rebates negotiated in private with intermediaries like PBMs.

The industry wants the government to tweak the law so that companies can reach more value-based payment agreements, whereby reimbursements are based on a drug’s results. Swiss pharma giant Novartis AG has such a “pay-for-performance” plan in place for heart failure treatment Entresto, in which insurers pay more if the drug keeps patients out of the hospital and lowers associated costs.

Another idea discussed by the industry would allow insurers to pay by increments for very expensive drugs that essentially cure diseases -- such as Gilead Sciences Inc.’s Solvadi and Harvoni for hepatitis C, which have a list price of $84,000 and $94,500, respectively.

McCain’s Proposal

Senator McCain’s proposed bill, the FAIR Drug Pricing Act, would require companies to justify big price hikes and disclose spending on research, development and advertising. McCain will also continue to push the Safe and Affordable Drugs from Canada Act, a bill that would allow the import of prescription drugs bought from approved Canadian pharmacies.

“Far too many Americans are being unfairly burdened by the skyrocketing cost of prescription medication,” McCain said in an e-mailed statement. “I will continue working to pass the FAIR Drug Pricing Act, which would bring much-needed transparency to prescription drug prices. ”

Populist Wave

That proposal, more modest than some of the ideas that even Trump has supported, has a chance of becoming law, said Dean Rosen, the former chief health-care adviser to then-Senate Majority Leader Bill Frist, a Tennessee Republican. However, giving Medicare, the health-care program for the elderly and disabled, the power to negotiate prices generally goes “against the orthodoxy” of the Republican party, said Rosen, a partner at the lobbying firm Mehlman Castagnetti Rosen & Thomas in Washington.

Of course, as with many topics, Trump is a bit of a wild card in Washington.

“There’s a real populist wave in America and there’s a lot of anger expressed about a variety of things and one of those is drug prices,” said David Bowen, global head of Hill & Knowlton Strategies’ health-care practice in Washington. “I have so little sense of how President Trump would govern.”

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