Recently, the Centers for Medicare and Medicaid Services (CMS) issued draft guidance for the second cycle of negotiations for the Medicare Drug Price Negotiation Program. The draft guidance covers initial price applicability year 2027 and the manufacturer effectuation of negotiated maximum fair prices in initial price applicability years 2026 and 2027.
In response to the draft guidance, PhRMA submitted comments reiterating five concerns about the price setting: (1) the price setting process is arbitrary and highly susceptible to politicization; (2) patient access to medicines in Medicare Part D is at risk; (3) the competitive marketplace is undermined; (4) government price setting will do irreparable harm to innovation; and (5) the views of patients and clinicians are notably absent from CMS’ approach.
In the comments, PhRMA cites its “substantial and longstanding experience with price setting policies in foreign countries, where patients go without or face significant delays before accessing many important treatments.” PhRMA further expresses frustration in the comments that “after more than a year of hearing concerns and feedback from stakeholders, CMS has largely stayed its course in the Guidance.”
Arbitrary and Susceptible to Politicization
PhRMA states that the Inflation Reduction Act (IRA) allows CMS “nearly unconstrained authority” to determine the price and to impose severe penalties on manufacturers that do not agree to the price, which is not a negotiation. Specifically, the Secretary of Health and Human Services (HHS) is a political appointee and has “broad decision-making authority to set the final price,” which opens up the possibility that a current or future HHS Secretary may use that authority to make “predominantly political decisions regarding prices of selected medicines.”
Medicare Part D
PhRMA further notes that the IRA made significant changes to Medicare Part D, including government price setting, and that these changes “are likely to intensify insurers’ use of utilization management and coverage exclusions” based on pressures created under the law. This is likely to result in access disruption for medicines that are selected for price setting (and their non-selected competitors in the same therapeutic class).
Undermining Competition
PhRMA states that the competitive marketplace has historically driven down costs and allowed for greater patient access to medication. However, under the IRA, the government can impose such low prices on brand medicine that biosimilar and generic manufacturers may not be able to compete with, discouraging them from bringing products to market and eliminating the competition that has long controlled costs in the marketplace.
Harm to Innovation
The IRA also shifts research and development incentives and puts in jeopardy the future development of medicines in certain therapeutic areas, with possibly very real consequences for patients. Biopharmaceutical companies are having to make tough decisions around the feasibility of R&D projects, based on the timeline for when medicines can be selected to price setting. The price setting program discourages post-approval innovation, small molecule development, and orphan drug development, in part because CMS uses an overly broad definition of medicine subject to price setting.
Patients and Clinicians’ Views Discarded
Finally, PhRMA notes that CMS is not explicitly considering the perspectives of patients, clinicians, and caregivers in setting the prices of the selected medicines. In fact, PhRMA notes that “the process to solicit feedback from patients, clinicians and caregivers has been riddled with fundamental substantive, as well as operational, issues.”
Will it Make a Difference?
PhRMA notes that this is the second year providing feedback along these lines, and that last year, “many patient, provider and other stakeholder groups” did as well, which CMS “largely ignored.” PhRMA believes that “CMS must course correct before it is too late.”