Roundtable: Policy and its impact on the pharmaceutical industry
Our experts guide biopharma companies through the latest on the Build Back Better Act, drug pricing reform strategies, value-based payments, access and affordability, and more.
Q: Can you set the background for what's happening is being proposed on the legislative front and a regulatory front?
David Senior, Senior Vice President of Market Economics: Hundreds of proposed drug pricing and affordability bills that have come out in Congress, plus thousands at the state level. These have addressed importing drugs, importing prices, negotiating, or setting drug prices, at least where the government is the buyer. Other drug pricing policy mechanisms includes rebates and point of sale discounts.
Q: What is the latest with the Build Back Better Act?
David Senior: There were significant negotiations inside the Democratic Party through all of 2021, leading to the package that went into the Build Back Better Act (BBB), which then collapsed at the end of 2021 when Sen. Joe Manchin (D-WV) says he will not support BBB, effectively killing the fully expansive BBB bill.
Joel White, President of Horizon Government Affairs: If BBB is a patient, that patient is on life support, but still alive and there's a strong desire, particularly from Democrats, to make sure that the patient lives. There may be an effort in the near future to bring legislation to the floor for a vote.
Aspects of Build Back Better include expanding benefits in Medicare, Affordable Care Act, and Medicaid, but then also redesigning Medicare Part D to include an out-of-patient cap and improving the front end benefit. These would all be paid for through drug price controls, reduced physician reimbursement, and increased taxes.
Because the Senate is evenly divided, Majority Leader Schumer needs all 50 Democrat Senators to vote yes in order to pass the bill. The challenge is competing interests. If taxes are increased on corporations, you get Senator Manchin’s (D-WV) vote, but in the process, you lose Senator Sinema (D-AZ). So, we don't know if Senate Democrats can actually get to a center of gravity to pass the bill.
Q: What could be some consequences of Build Back Better Act for the pharmaceutical industry?
Joel White: The incentive would be to create fewer products because of what happens through the negotiation process and reductions in revenue.
One recent study found that the BBBA would result in 135 fewer new drug approvals, 188 fewer new indications for existing therapies, and a reduction of 331.5 million life years among patients. 1
Remember, this applies in Medicare Parts B and D, not the commercial sector, and so we could expect increased costs via cost shifting to non-price controlled employer markets. I think we'd also see reduced reimbursement in the Part B markets to physicians, particularly oncology and other specialties.
BBB's inflation penalties (applicable to all non-generics with an annual patient cost of $100 or more2) are likely to result in higher launch prices and could drive price increases commensurate with inflation for therapies whose prices would not increase under current law. The combination of price setting by the HHS secretary and inflation penalties would likely reduce generic and biosimilar market entry, putting at risk potential savings and improved treatment options for millions of Americans.
“The ideal is right patient, right drug, timely access. That's what drives you and what drives us."
Q: What other movement do you predict on drug pricing?
Joel White: With the full House of Representatives and one-third of the Senate up for reelection, plus 36 gubernatorial elections, voters will be hearing a lot from Congress about how much they care about drug pricing and how much they want to make things better for them. If you haven't seen a commercial supporting capping out-of-pocket costs for insulin yet, it's coming to a television set near you. It's probably going to be the most run campaign ad this session.
If Congress can't get drug pricing done legislatively, they'll take a regulatory approach and then talk about that on the campaign trail. The administration has ample tools at their disposal to make changes on the drug side, particularly in Medicare and Medicaid, to be able to score points and to go back to voters and say, "We're doing something about this issue."One of the most powerful tools is Centers for Medicare & Medicaid Services (CMS), whose regulatory authority is vast. They can make changes in A, B, C, or D in Medicare, and we're already seeing a willingness to do this. The Center for Medicare and Medicaid Innovation (CMMI) has billions of dollars at their disposal to test theories nationwide that impose price controls in the name of lowering costs and improving outcomes.
Jennifer Snow, Vice President of Reimbursement and Policy Insights: I'm still hopeful that we'll see an out-of-pocket cap in Part D, which in some ways is fantastic for beneficiaries. It does come at the cost of manufacturers, and a significant cost particularly if you are a higher cost product. We've been modeling it left and right for our biopharmaceutical clients.
Q: Pharmacy benefit manager (PBM) reform seems to always be in play. What should we be aware of?
Chris Johnson, Senior Manager of State Government Affairs: This year, we're tracking more than 350 state bills in just about every active jurisdiction, many of which seek increased transparency by requiring PBMs to register with the state and report certain information.3 Many of these bills also place restrictions on PBM contracting and reimbursement practices.
David Senior: On national level it seems like we're back to the Republicans pointing the finger at the PBMs and the Democrats pointing at the biopharma companies. Is that too simplistic a view of what's the politics, of how the politics have played out?
Joel White: Congress has gotten much more sophisticated about some of the issues that are going on in the marketplace, in particular, the gross-to-net issue and how the passing of rebates to consumers might help, what it might do to premiums, and what it might do to access.
Democrats, like I said, are mostly interested in price controls, top-down type things, and Republicans mostly interested in rebates and things like that.
Q: What has been happening on the state level in terms of access?
Chris Johnson: We've seen a renewed attention or interest at the state level in white bagging where at least 18 states have introduced legislation addressing the topic.4 Proponents of white bagging claim that it's safe and that it saves enrollees and patients money, where opponents believe that it can create delays in care and poses patient safety concerns, and at the same time limits patient choice and access.
Q: Any state-level movement on drug affordability?
Chris Johnson: Recently, states have enacted new laws establishing prescription drug affordability board boards, which are essentially regulatory authorities that review drug prices and identify drugs that create affordability challenges for states. Specifically, many of these boards investigate price increases, and, in some cases, may establish upper payment limits (UPLs) on certain drugs.
I think there are lawmakers that view UPLs as a way to reduce drug costs. However, many people who have looked closely at this model seem to think it could end up being disruptive to channel economics and is unlikely to achieve the intended goal of saving consumers money. To date, I think eight states that have passed some sort of prescription drug affordability board legislation.
One factor that has led to the recent proliferation of state drug pricing legislation is the fact that the federal government has been unable to pass a comprehensive drug pricing package. That has really allowed states to step in and fill the void, taking much more active roles in regulating drug costs.
States are important because they really are the laboratories for experimentation and they can be important indicators of future trends. Once model state legislation starts to be adopted in multiple jurisdictions, especially if Republican and Democratically led states start to adopt similar models, that can really begin to move the needle in terms broader healthcare policy.
A really good example of this is insulin copay caps. I think to date, about 20 states have passed some form of insulin copay cap legislation and the issue has finally matriculated up to the federal government. Right now, Congress is considering its own approach to insulin affordability and recently introduced federal legislation could potentially move forward.5
Q: Both the Trump and Biden administrations expressed interest in drug importation from Canada to reduce costs. Where does that stand?
Chris Johnson: Both federal and state laws require that these programs demonstrate not only that they can achieve significant cost savings for consumers, but at the same time will ensure the safety and security of the drug supply chain—abiding by the DSCSA and following track and trace requirements, among other things. I don't know that anyone has convincingly showed that these two things—savings and safety— can be achieved at the same time.
Another existing hurdle is the fact that most of these state programs will rely on partnerships with Canada, yet Canada has not signaled an interest or willingness to supply the U.S. market with drugs.
Even still, several states continue to march forward with importation plans. Florida, for example, has really been on the vanguard of this issue and I believe there is a bill sitting on the Governor's desk right now that will allocate funds toward Florida’s Canadian importation program.
“States are important because they really are the laboratories for experimentation and they can be important indicators of future trends."
Q: We've been hearing more about value-based payments. What has been the government's role and where do we see that headed?
Joel White: I'm not sure the pay-when-it-works, don't-pay-when-it-doesn't-work model is going to be sufficient to handle the pipeline of innovative products. With cell and gene therapies that are in development and about to be launched, how are we going to handle that from a cost perspective?
A lot of what CMMI has done has not been effective at lowering costs or improving outcomes. I think part of that is this micromanagement. They make these programs very complicated.
One solution is eliminating the administrative friction in those value-based payment contracts. It's making sure that people have information and can report it easily. It's a data and technology solution, not a government solution.
Q: How are payers managing spending on pharmaceuticals?
Jennifer Snow: It's been amazing the products that have come out into the marketplace, but nobody wants to spend more as a percentage. Pharmaceuticals have traditionally been, and I'm rounding here, let's say it's been 14 percent or 15 percent of total healthcare spend.6
There have been two ways payers have managed their pharma spend. First, a shift to value, to make sure that funds are better used. That shift could be outcomes-based contracting. It could be indication-based pricing.
Second, instituting barriers to treatment—not being on formulary or utilization management or prior authorization, or step therapy.
David Senior: Ultimately benefit design is what drives adherence and outcomes and the overall expenditures and outcomes of the patients.
Q: What barriers to affordability is the pharmaceutical industry experiencing?
Jennifer Snow: Unfortunately, if you build it, they might not be able to come. I've been working with my clients to address both systemic and payer barriers. From a health equity perspective, are your clinical trials reflecting a real-world population?
In the policy world, we're looking at medically underserved areas in 340B and how to work through that. There's just a lot of work going on in that space.
I think there's a wrong perception that the ASP plus 6 percent is incentivizing behavior towards certain drugs. There's this notion that the physician administrative environment and reimbursement has to change.
We're talking about some drugs that cost hundreds of thousands of dollars and the paradigm we currently have is just not built for it. We are seeing everyone chipping away at different solutions.
Health Policy Weekly
1. Philipson, T and Durie, T. Issue brief: The impact of HR5376 on Biopharmaceutical Innovation and Patient Health. The University of Chicago. 29 November 2021. Accessed 14 June 2022. Available at: https://cpb-us-w2.wpmucdn.com/voices.uchicago.edu/dist/d/3128/files/2021/08/Issue-Brief-Drug-Pricing-in-HR-5376-11.30.pdf2. Klaisner, J., et, al. Build Back Better Act: Detailed summary of Medicare Parts B & D changes. 30 Nov 2021.Accessed 14 June 2022. Available at:https://us.milliman.com/en/insight/the-build-back-better-act-medicare-parts-b-and-d-key-changes
3. State policy options and pharmacy benefit managers. National Conference of State Legislatures. 23 March 2022. Accessed 14 June 2022. Available at: https://www.ncsl.org/research/health/state-policy-options-and-pharmacy-benefit-managers.aspx
4. White bagging legislation gains popularity in state legislatures. Avalere. 25 April 2022. Accessed 14 June 2022. Available at: https://avalere.com/insights/white-bagging-legislation-gains-popularity-in-state-legislatures
5. Newtown, W. An uphill battle for insulin pricing reform as copay cap bill enters U.S. Senate. Pharmaceutical Technology. 18 April 2022. Accessed 14 June 2022. Available at: https://www.pharmaceutical-technology.com/analysis/insulin-pricing-reform-senate/
6. Drug expenditure dynamics 1995-202: Understanding medicine spending in context. IQVIA. 14 Oct 2021. Accessed 14 June 2022. Available at: https://www.iqvia.com/insights/the-iqvia-institute/reports/drug-expenditure-dynamics