Drug Pricing Under the Trump Administration

Meg Barbor, MPH

July 2017, Vol 7, No 7 - Health Policy


Washington, DC—A change in leadership brings with it healthcare reform and potential changes in drug pricing in the United States, said Jessica Turgon, MBA, Principal, ECG Management Consultants, Washington, DC, at the 2017 Association of Community Cancer Centers meeting. Ms Turgon discussed what this transition of power means for cancer centers, and what oncology providers can realistically expect under the Trump administration.

President Donald J. Trump’s “Two for One” regulation reduction mandates that agencies control costs at a federal level. The executive order prohibits agencies from imposing any new costs in finalizing or repealing a rule for the remainder of the year, unless that cost is offset by the repeal of 2 existing regulations.

“This means that healthcare regulations could be targeted if someone else is trying to move another regulation forward,” said Ms Turgon. “There’s a significant amount of change going on in DC as we get ready for new policies and procedures—no matter whose side you’re on,” she explained.

New leadership at the Centers for Medicare & Medicaid Services (CMS) and the US Food and Drug Administration (FDA) will also lead to changes in healthcare. Seema Verma, MPH, the new CMS Administrator, is not supportive of a Medicare voucher plan, is critical of a Medicaid status quo, and may support “personal responsibility” approaches, such as copayments, time limits on healthy enrollees, and work requirements.

The new FDA Commissioner, Scott Gottlieb, MD, could seek to increase generic drug competition and speed up the drug approval process. In addition, many top-layer positions in the administration have yet to be filled, “creating a potential lag within agencies that may impact the ability to deliver on true policy changes that will affect our cancer care programs,” said Ms Turgon.

The Future of Payment Innovation

President Trump has shown interest in drug policy changes, “but we’ve gotten a sense that it’s very hard, even with our Republican-controlled legislature and Republican president, to manage large-scale reform,” she noted. Other locations of power could be used to affect healthcare reform, she said.

Department of Health & Human Services (HHS) Secretary Thomas E. Price, MD, has expressed general uncertainty about payment innovation reform and has criticized the Center for Medicare & Medicaid Innovation for limiting physicians’ discretion. The Affordable Care Act provided the HHS secretary broad powers to implement reforms, and many reforms may come through direct agency action.

Increased scrutiny of pharmaceutical companies and an increase in drug costs have led President Trump to vocalize his intent to negotiate a better deal, but Medicare is prohibited from negotiating drug prices. This dichotomy will continue to be a focus in the media.

Despite President Trump’s outreach to industry leaders and declaration of support for lower drug prices, any attempt at price reform will be hard fought because of a lack of bipartisan support and opposition from the pharmaceutical industry. And even if these hurdles were overcome, there is considerable speculation about the actual impact any reforms would have on drug pricing.

Potential Solutions to High Drug Prices

Importing cheaper drugs from other countries could reduce average domestic drug prices by forcing drug manufacturers to lower prices for the same drugs that are being imported. Conversely, drug manufacturers could decide to raise drug prices and limit worldwide drug supplies.

“Another potential area of focus is the availability of generic drugs. For patients with cancer in particular, this has a direct impact on our cancer programs’ bottom line,” said Ms Turgon.

Increasing the availability of generic drugs by speeding up the FDA drug approval process would likely have a minimal impact on drug prices, because FDA approvals are already targeted at 8 months. Hampering or making the practice of “pay to delay” illegal is another potential area of reform, and one study estimated that this practice has cost US consumers $14 billion by keeping brand-name drugs, not generics, as the sole drugs available to patients.

“There’s good buy-in to this from all sides of the political sphere, but the question is how fast could this reform be executed, and how it could come to fruition,” she said.

Allowing Medicare to negotiate drug prices and exploit its leverage as the largest healthcare payer could also lead to lower prices. This would require new legislation, but the Congressional Budget Office said that the reform would have “a negligible effect on federal spending.”

Because of the increased focus on fee-for-value reimbursement, another proposed solution is payment for drugs based on their effectiveness, but the issue of measuring financial outcomes comes to bear, particularly with regard to patients with cancer.

“It’s not clear how the financial results would be quantified, and how risk would be shared,” said Ms Turgon. And as the proposed-but-canceled Medicare Part B experiment demonstrated, the impact could be significant to providers.

Other drug pricing reform solutions include limiting the patentability of minor changes in brand-name drugs, requiring drug makers to provide Medicaid-level rebates for dual-­eligible beneficiaries in Medicare Part D, and requiring drug makers to report and justify significant planned increases in drug prices.

Still others have proposed easing generic companies’ access to brand-name drug samples to increase alternative therapies, encouraging the FDA to approve generic drugs that are approved in other advanced countries, reviewing standards for determining bioequivalence for biologic drugs, and allowing state Medicaid programs to test value-based pricing and restrictive formularies.

In early March 2017, the Medicare Payment Advisory Commission released a draft set of recommendations aimed at reducing spending on Medicare Part B drugs by improving the average sales price system, and by establishing a Drug Value Program, but these recommendations are still in the early stages of development.

Impact on Cancer Centers

Despite the uncertainty around meaningful drug pricing reform, cancer centers can take steps to address the rising cost of drugs. Ms Turgon recommends developing and adhering to clinical pathways, and determining whether cheaper evidence-based alternatives to high-priced drugs are available.

“Protocols and pathways are crucial in understanding how your practice is managing adherence to evidence-based protocols,” she said.

Cancer centers should also deploy clinical pharmacists to educate providers about high drug prices, and initiate conversations with patients about the cost of care.

“We’ve seen a lot of great evidence around clinical pharmacists helping patients navigate some of these conversations. Talk to your colleagues who have invested in a clinical pharmacist, as this seems to be a way to help your providers navigate these issues in real time,” said Ms Turgon.

In addition, Ms Turgon recommends “tightening up” from a waste perspective, by keeping low inventory of high-priced drugs and reducing the waste associated with them (eg, implement dose rounding).

Furthermore, cancer centers should continue to negotiate improved contracts with group purchasing organizations and wholesalers, and identify spikes in drug prices as close to real time as possible to avoid delays in taking action to minimize the financial impact.

“Making sure the denial and authorization process is fine-tuned is part and parcel to helping your cancer center run effectively,” Ms Turgon said. “Finally, keep open lines of communication with senior administrators in order to understand the mechanics of what’s actually going on.”