On May 11, 2018, the White House announced its American Patients First Blueprint aimed at reducing drug prices. Following the release of the Blueprint, the Administration released a report that touted its efforts under the plans. Since the plan was announced, the Department of Health and Human Services (HHS) stated it has seen 60% fewer price increases on branded drugs than during the same window (May 11 through August 15) in 2017. Additionally, the report found 54% more decreases on generic and brand-name drugs in that same period when compared to 2017.
The report notes that in the 100 days since the release of the Blueprint, HHS has taken “dozens of actions” on the four strategies found in the Blueprint: increased competition, better negotiation, incentives for lower list prices, and reducing out-of-pocket costs, and that together, these actions have helped bring into focus a vision for a more competitive pharmaceutical marketplace.
With respect to increased competition, the report notes that the Food and Drug Administration (FDA) had already made it a priority to speed approval of generic drugs, resulting in a record number of generic approvals in 2017. Approval accelerated even more after issuance of the Blueprint, with the FDA approving more generic drugs than in any single month in history in July 2018.
When it comes to better negotiation, the report notes that the Centers for Medicare & Medicaid Services has now given Medicare Advantage new tools to negotiate lower prices for expensive Part B drugs, a $12 billion drug market. It is expected that the savings from these lower prices could be passed on to the 20 million seniors enrolled in Medicare Advantage plans as soon as next year.
When it comes to incentives for list prices, the Trump Administration is examining the avenues by which market actors are paid as a share of list price and considering alternative methods of compensation. In fact, n umbers released since the launch of the blueprint by two of the largest pharmacy benefit managers indicate that their business models could be modified to work in a new system with fixed-price compensation, rather than one based on share of list prices.
Last, the fourth prong focuses on lower out-of-pocket costs, which has been addressed by proposed changes to Medicare and the fact that CMS put health insurers on notice that it is unacceptable to impose “gag clauses,” which can cause seniors to pay more for drugs by prohibiting pharmacists from discussing cheaper options.
On a call with reporters, HHS Secretary Alex Azar was quoted as saying these changes are just “the tip of the iceberg” and that these changes were not made out of altruism, but because the industry knows major changes are coming down the pipeline. Dan Best, senior advisor to the Secretary for drug pricing reform, noted that he has never seen behavior like this before, alluding to the idea that the decreases are due, at least in large part, to the Blueprint.
On that same call, Azar discussed the topic of whether he is working with pharmaceutical companies to attack pharmacy benefit managers (as alleged by several Democrat senators), stating that he believes the current drug pricing system actually offers incentives for all parties – including PBMs and pharmaceutical companies – to raise prices. He noted, “I make it a practice not to blame any individual part of the drug channel but to blame all parts of the drug channel.”
The report also flies in the face of critics who have pointed to trends of drug increases since the Blueprint announcement. Supposedly, in July, a Wells Fargo report said drug manufacturers actually raised prices on more than 100 drugs in June and the first two days of July alone. Other reports of companies such as Pfizer deferred planned increases, but only until the end of the year.