Drug Pricing Policy Update – Election Uncertainty & Questions about Pricing COVID-19 Remedies
As the current pandemic continues to dominate the current news cycle, the high costs of drugs remains an important issue for the public, legislators, and the industry. In June, the drug makers of 42 brand-name medicines raised their prices by an average of 3.5% . These price increases were in addition to the the average 6.8% price hikes that companies took on 857 brand-name and generic drugs between January and June.[1] Now that treatments and vaccines for COVID-19 are becoming real, there is a growing debate on how to price these products. While there is little definitive progress on containing drug prices at the federal level, the states again are taking the lead.
Federal Action – Stalemate & Standoff
Despite a flurry of bills in both houses of Congress, it appears that legislation addressing prescription drug pricing will not move forward until after the November election. The House drug-pricing bill (H.R 3) passed last December still has not been taken up by the Senate.[2]
Furthermore, the bipartisan bill drafted in the Senate Finance Committee never made it to the Senate floor. Sen. Charles Grassley (R-IA), the Finance Committee Chairman and one of the authors of the bill, expressed tentative optimism in late July that some movement might happen.[3] More recently, however, he conceded that negotiations had broken down and progress was unlikely before November.[4] Both parties are blaming the other for the lack of progress.[5]
Executive Orders Do Not Equal Action
Facing reelection, and frustrated by the lack of progress in Congress, President Trump signed a series of executive orders on drug pricing policies and is claiming his unilateral actions are a success as he hits the campaign trail.
The four executive orders signed on July 24th are mixture of past proposals and older promises. [6] These orders include:
- The revival of the White House proposal allowing certain drugs to be imported from Canada, including insulin.[7]
- Allowing federally qualified community health centers, clinics that treat low-income patients to acquire discounted insulin and EpiPens to buy other drugs at a discount.[8]
- An order to Department of Health and Human Services to finalize rules removing the legal protections for rebates paid by drug makers to Pharmacy Benefit Managers (“PBMs”) and requiring those discounts be passed along to Medicare Part D consumers at the pharmacy counter.[9]
- The renewal of a long-promised component of his prescription drug pricing policy that ties the price that Medicare pays for drugs administered by doctors to prices negotiated by foreign governments.[10]
Although these executive orders may signal forward movement on the issue, they are far from being ready to implement tomorrow. For example, the first three proposals will require a lengthy rule making process before they can be implemented.[11]
The fourth executive order, described by the President as “the granddaddy of them all” or the “most favored nation” pricing rule, was not released at the time of signing.[12] Instead the President Trump promised to release the order on “August 24th at 12 o’clock” if the drug companies did not act on their own.[13]
Not unexpectedly, the “most favored nation” rule ignited a round of heavy strategizing by the pharmaceutical industry. It is reported that attempts by the predominant industry association, the Pharmaceutical Research and Manufacturers of America (PhRMA) to coordinate a response have been difficult.[14]
According to reports, the association’s members reportedly could not agree on a slate of policies to propose. Other manufacturers that nothing should be submitted, arguing that it did not make sense to negotiate just before an election.[15]
Nonetheless, there are also reports that industry may propose two voluntary pilot projects to the Trump administration to meet the president’s challenge. The first would create “market-based” discounts for high-cost injectable drugs and capped patient copays under Medicare Part B.[16] The second would cap what patients would pay for drugs under Medicare Part D at 5%.[17] However, as of this date, it is unclear if these proposals were actually presented to the White House and if so, how they were received.
Still an Election Issue
Thus, neither Congress nor the White House can point to any tangible achievements to combat the high price of prescription drugs.[18] However, drug prices remain an issue in the upcoming Presidential election. For example, the Trump campaign has reportedly spent at least $668,000 on advertisements touting his executive orders as accomplishments combating drug prices and suggesting that former Vice President Biden is the favored candidate of the drug industry.[19]
A recent poll funded by the insurance industry found that 87% of the voters surveyed in important swing states support indexing domestic drug prices to foreign prices and 82% supported allowing patients to import drugs from Canada, though the support for banning PBM rebates under Part D (with the consequent increase in premiums for some seniors) was substantially less.[20]
The Fight Against COVID-19 Raise Pricing Concerns
In the last review of drug pricing in Policy & Medicince Compliance Update, we discussed how COVID-19 therapies and vaccines present new challenges for drug pricing policies.[21] Gilead’s Remdesivir provided the first test of how COVID-19 therapies and vaccines might be priced.
Gilead ultimately set the U.S. price for Remdesivir at $3,120 for a five-day inpatient course of treatment and a lower price of $2,340 for government purchasers.[22] The announcement brought a range of responses and criticism.
The Institute for Clinical and Economic Review (“ICER”)—a nonprofit well-known for analyzing the cost effectiveness of drugs[23]–estimated that a price of $1,600 would have recouped Gilead’s costs.[24] However, the ICER noted that the price could have been much higher:
Gilead has the power to price Remdesivir at will in the U.S., and no governmental or private insurer could even entertain the idea of walking away from the negotiating table. [M]any Wall Street analysts were urging and citing probable figures around $5,000 per treatment course. Given these factors, today’s announced price can be viewed as a responsible decision from Gilead and a promising sign for pricing decisions of other treatments for COVID-19 on the horizon”[25]
The public advocacy organization, Public Citizen, declared the price to be “offensive” based on, among other factors, the organization’s estimate that public financial support for development of the drug totals at least $70.5 million.[26] Trade publications serving the private payor community had mixed reactions, citing sources that found the price reasonable given its benefits and others that found it overpriced.[27] In a follow-up statement, Gilead announced that it would reduce the price if the drug did not live up to its early, and still preliminary, promise.[28]
A Ground-Breaking Proposal from the States
State governments, however, took a more innovative and aggressive stance on Remdesivir’s pricing. On August 4th, thirty-four state and territory attorneys general sent a letter to federal health agencies asking the federal government to exercise its “march-in” rights for Remdesivir.[29]
“March in rights” are a provision of the 1980 Bayh-Dole Act.[30] The Act amended U.S. patent law to allow government contractors, including universities and other organizations receiving federal research funding, to retain ownership of the resulting intellectual property.[31] Bayh-Dole also allowed universities and other research institutions to reap the financial gains of government funded research, and is widely heralded as igniting the university-industry partnerships which turn basic life science research into marketable drugs and other therapies.[32] However, Bayh-Dole reserved the government’s “march-in rights,” that is, its right to force the recipients of government support to grant a compulsory license when “action is necessary to alleviate health or safety needs.”[33] To date, this right has never been exercised.[34]
Use of the government’s march-in right to grant a compulsory license has been mentioned as a potential remedy for high drug prices.[35] However, the idea is highly controversial, and opponents argue that its use ultimately would discourage innovation.[36]
The controversy over Remdisivir’s price is a prelude to future questions over the price of any COVID-19 vaccine. Complaints have already been raised about rumors that Moderna intends to price the vaccine it is developing and is still in clinical trial at $30 a shot despite receiving federal funds for its development.[37] Under these circumstances, the debate over how to price COVID-19 therapies and preventatives and whether to employ extreme measures like march-in rights are likely to continue.
Conclusion
While legislation to address drug pricing may be stymied between now and the election, the issue is unlikely to disappear before November. Public interest in the issue is likely make it part of the current campaign debate, as President Trump attempts to use his power to issue executive orders to impose) change. Meanwhile, as new products emerge to prevent or treat COVID-19, the public interest in ensuring access to these drugs will exert additional pressure on drug makers to keep the prices affordable.
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By: Gwendolyn A. Ball, JD Staff Writer Policy and Medicine Compliance Update
[1] Ed Silverman, Despite the pandemic, prices for many drugs keep rising, Stat (Jul. 9, 2020) 05https://www.statnews.com/pharmalot/2020/07/09/drug-pricing-pandemic-goodrx/.
[2] Lev Facher, Trouble in paradise: The Senate’s bipartisan accord on drug prices is broken, says Grassley, Stat, (Jun. 29, 2020) https://www.statnews.com/2020/06/29/grassley-bipartisan-accord-drug-prices-broken/.
[3] Margot Sanger-Katz, et al., As He Woos Drugmakers on Virus, Trump Demands Drug Price Controls, The New York Times (Jul.24, 2020) https://www.nytimes.com/2020/07/24/us/politics/trump-drug-prices-coronavirus.html.
[4] Facher, supra n. 2.
[5] Id.
[6] Sanger-Katz, et al., supra no. 3.
[7] Id.
[8] Id.
[9] Id. However, the proposal includes a caveat that the plan cannot be implemented if it will raise premiums, a condition unlikely to be met given government estimates that the rebate rule would increase premiums by up to 25 percent. See Nicholas Florko and Lev Facher, Trump administration unveils executive orders to curb drug prices — but they come with caveats, Stat (Jul. 24, 2020) https://www.statnews.com/2020/07/24/trump-executive-orders-drug-pricing-election/; see also, The White House, Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen (Jul. 24, 2020) https://www.whitehouse.gov/presidential-actions/executive-order-lowering-prices-patients-eliminating-kickbacks-middlemen/.
[10] See, e.g., Robert Pear, Trump Proposes to Lower Drug Prices by Basing Them on Other Countries’ Costs, The New York Times, (Oct. 25, 2018) https://www.nytimes.com/2018/10/25/us/politics/medicare-prescription-drug-costs-trump.html.
[11] Sanger-Katz, et al., supra no. 3.
[12] Nor has it been published in the Federal Register, as required by law. See Sheryl Gay Stolberg and Margot Sanger-Katz, Trump Keeps Promoting a Drug Order That No One Has Seen, The New York Times (Aug.24, 2020) https://www.nytimes.com/2020/08/24/us/politics/trump-drug-prices.html?searchResultPosition=3.
[13] Id.
[14] Nicholas Florko and Lev Facher, PhRMA scrambles to respond to Trump’s drug pricing ultimatum, as Monday deadline looms, Stat (Aug. 21, 2020) https://www.statnews.com/2020/08/21/phrma-scrambles-drug-pricing-ultimatum/.
[15] Id.
[16] Nicholas Florko, Drug industry lobbyists circulate two drug pricing proposals in hopes of warding off a Trump executive order, Stat (Aug. 25, 2020) https://www.statnews.com/2020/08/25/drug-pricing-proposals-circulate/.
[17] Id.
[18] The Department of Justice, however, has been actively pursuing charges of price fixing in the generic drug market. See, e.g., U.S. Dep’t of Justice Press Release, Seventh Generic Drug Manufacturer Is Charged In Ongoing Criminal Antitrust Investigation (Aug.25, 2020) https://www.justice.gov/opa/pr/seventh-generic-drug-manufacturer-charged-ongoing-criminal-antitrust-investigation.
[19] Sheryl Gay Stolberg and Margot Sanger-Katz, supra n. 12.
[20] Nicholas Florko, New poll shows wide support for several Trump drug pricing reforms, but not rebate changes, Stat (Aug. 28, 2020) https://www.statnews.com/2020/08/28/poll-drug-pricing-trump/.
[21] G. Ball, A Mid-Year Update on Prescription Drug Pricing Policy – New Pandemic Dimensions for an Old Issue, 6.7 Policy & Medicine Compliance Update 10 (2020).
[22]Juliette Cubanski, et al., How Could the Price of Remdesivir Impact Medicare Spending for COVID-19 Patients?, Kaiser Family Foundation (Jul.14, 2020) https://www.kff.org/coronavirus-COVID-19/issue-brief/how-could-the-price-of-remdesivir-impact-medicare-spending-for-COVID-19-patients/.
[23] Joshua Cohen, ICER’s Growing Impact On Drug Pricing And Reimbursement, Forbes (Apr. 17, 2019) https://www.forbes.com/sites/joshuacohen/2019/04/17/icers-growing-impact-on-drug-pricing-and-reimbursement/#32a6970c6b53.
[24] ICER Comments on Gilead’s Pricing for Remdesivir (Jun. 29, 2020) https://icer-review.org/blog/icer-comments-on-gileads-pricing-for-remdesivir/.
[25] Id.
[26] Peter Maybarduk, Gilead’s Remdesivir Price Is Offensive, Public Citizen (Jun. 29, 2020) https://www.citizen.org/news/gileads-remdesivir-price-is-offensive/.
[27] See, Marilynn Marchione, COVID-19 Treatment Remdesivir to Cost Private Insurers $3,120, Insurance Journal (July 6, 2020) https://www.insurancejournal.com/news/national/2020/07/06/574449.htm.
[28] Sara Hansard, Gilead Urged to Cut Virus Drug’s Price if It Fails to Save Lives, Bloomberg Law (Jul. 1, 2020) https://news.bloomberglaw.com/health-law-and-business/gilead-urged-to-cut-virus-drugs-price-if-it-fails-to-save-lives.
[29] Bob Herman, Attorneys general ask feds to use march-in rights for remdesivir, Axios (Aug.4, 2020) https://www.axios.com/attorneys-general-remdesivir-march-in-rights-gilead-9ec05ed5-440b-46c0-8da0-17e2966c409b.html.
[30] Pub. L. 96-517, December 12, 1980.
[31] Linlin Tian, Keep an Eye on the Bayh-Dole Act in Regard to COVID-19-Relevant Patents JDSUPRA (Mar. 30, 2020) https://www.jdsupra.com/legalnews/keep-an-eye-on-the-bayh-dole-act-in-61764/.
[32] See, e.g., Stephen Ezell, The Bayh-Dole Act’s Vital Importance to the U.S. Life-Sciences Innovation System, The Information Technology and Innovation Foundation (Mar. 4, 2019) https://itif.org/publications/2019/03/04/bayh-dole-acts-vital-importance-us-life-sciences-innovation-system.
[33] Tian, supra n. 31.
[34] Ezell, supra n. 32.
[35] Shefali Luthra and Victoria Knight, Warren Is Right. Presidents Have The Power To Bypass Congress On Drug Pricing, Kaiser Health New (Jan. 31, 2020) https://khn.org/news/march-in-rights-elizabeth-warren-presidential-power-to-bypass-congress-on-drug-pricing/.
[36]See, Fred Reinhart, Exercising Bayh-Dole march-in rights would handicap COVID-19 innovation, Stat (May 4, 2020) (giving the perspective of a former president of the Association of University Technology Managers) https://www.statnews.com/2020/05/04/bayh-dole-march-in-rights-handicap-COVID-19-innovation/.
[37] Arlene Weintraub, Moderna’s rumored $50-plus price on COVID-19 vaccine draws ire as company touts new animal data, FiercePharma (Jul. 29, 2020) https://www.fiercepharma.com/pharma/moderna-s-rumored-50-plus-price-COVID-19-vaccine-draws-ire-as-company-touts-new-animal-data; see also Varoon Mathur, Invoking Bayh-Dole may be needed to get affordable COVID-19 treatments, Stat (Apr. 2, 2020), https://www.statnews.com/2020/04/02/invoking-bayh-dole-may-be-needed-to-get-affordable-COVID-19-treatments/.