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Biden Drug Pricing Strategy is Set to Unfold


Dean Celia

What will the new president do with the Most Favored Nation rule he inherits from the departing administration; what other drug price initiatives are in the offing; and how should managed care stakeholders prepare?

In the December 2020 issue of First Report Managed Care, we asked a panel of managed care experts to comment on and analyze the outgoing Trump administration’s decision in November 2020 to issue an Interim Final Rule that ties the price Medicare pays providers to administer certain drugs to the lowest price paid in selected developed nations. The rule—based on a model from the Center for Medicare and Medicaid Innovation (CMMI)—was set to go into force January 1, but on December 23, it was held up by a temporary restraining order which, as of mid-January, remained in effect.

Our panel returns this month to address what they think will happen to the Trump rule once Joe Biden becomes president, how they think CMMI should be used ideally, and what else the country’s new chief executive will do once he takes over. Our experts include:

  • Melissa Andel, principal, Common Health Solutions, Washington, DC
  • Larry Hsu, MD, medical director, Hawaii Medical Service Association, Honolulu, HI
  • Charles Karnack, PharmD, BCNSP, assistant professor of clinical pharmacy at Duquesne University in Pittsburgh, PA
  • David Marcus, director of employee benefits, National Railway Labor Conference, Washington, DC
  • Gary Owens, MD, president of Gary Owens Associates, Ocean View, DE
  • Edmund J Pezalla, founder and CEO at Enlightenment Bioconsult in Hartford, CT
  • Arthur Shinn, PharmD, president, Managed Pharmacy Consultants, Lake Worth, FL
  • F Randy Vogenberg, PhD, RPh, principal, Institute for Integrated Healthcare, Greenville, SC

What do you think will happen to the rule once Joe Biden becomes president in January?

Ms Andel: The Biden administration is in an interesting spot because drug pricing reform is a high priority for Democrats and the American people. If you have a court case that fundamentally looks at the question of whether CMMI can implement a nationwide mandatory model, I can see the new administration wanting to see how that plays out before moving forward. That might give the Biden team space to work towards a different solution that attempts to thread the needle between the public that wants to see price control and the industry that most certainly does not.

Dr Pezalla: Biden proposes implementing a drug review board that would examine the issues as opposed to making purely financial decisions. It is unlikely that he will have support in the Senate and may need to create an actual demonstration project.

Dr Vogenberg:  The pandemic has focused more attention on altering drug price initiatives and related policies that have kept the status quo intact. Look for more change in 2021.

Dr Owens: Perhaps, but I doubt this proposed rule change will ever see the light of day. It won’t be incorporated into Biden’s drug price strategy.

Dr Hsu:  A delay will allow more time and importantly, dialogue, so that other options are made available.

Mr Marcus: Meanwhile, there will be efforts by the pharmaceutical industry to keep reimbursement rules consistent with the status quo. Health care providers have no incentive to consider cost when developing treatment plans that involve administered medications.

What, in your opinion, is the best use of CMMI? How might Biden use the Center differently than Trump? 

Ms Andel: The best use is through its intended use, which is to support and test models, evaluate the results, and scale up to nationwide policy if and when those models are successful. I don’t think it’s best used as an end-run around Congress. The Biden administration is likely to use CMMI in a similar manner as the Obama administration.

Dr Pezalla: CMMI is a vehicle for testing care strategies that are encouraged and enabled by payment changes but I suspect that Biden will use it more as intended with multiple smaller projects testing specific approaches as opposed to broad initiatives with multiple parts that will be difficult to assess. For example, the most favored nation rule includes a flat fee for providers as opposed to the percentage of average sale price. This by itself is worth studying to see if it will impact drug choices.

Dr Owens: The innovation center should stick to new reimbursement models, quality incentives, and initiatives and other programs to improve net health outcomes.   Biden will need to rely on experts to tell him how best to accomplish this, using well thought-out programs and rational implementation timelines.

Mr Marcus: Exactly. The best use of CMMI is to independently develop evidence-based solutions to health care cost and quality issues. Hopefully President Biden will allow the Center to operate independently and without a political agenda.

Dr Hsu: The key is to rely on peer-reviewed literature and well-respected experts in the fields of medicine and economics. That could lead to effective, versus haphazard attempts to control drug costs.

Dr Karnack: CMMI should be used to improve existing programs that work instead of reinventing the wheel and forcing poorly planned pilot programs on providers. I would look for the Biden administration to tie CMMI initiatives to improving the ACA.

Dr Vogenberg: Let’s not forget that CMMI is a government entity that is primarily focused on Medicare and Medicaid innovations, so almost half of the US population may not benefit from anything it does. When CMMI was established, one of the criticisms was the limited area of focus and government rules that slow innovation. Having a more functional public-private joint innovation arrangement could benefit the entire population.

Ms Andel: The traditional Medicare benefit needs to be incentivized to be modernized. It is happening to some extent through the migration of beneficiaries to Medicare Advantage, which a lot like a commercial plan to consumers. Medicare Advantage enrollment growth portends that we are approaching a turning point. If traditional Medicare doesn’t modernize, or Congress doesn’t reform it, it may eventually wither away. The question is, is slowly transitioning to Medicare Advantage the most efficient way to modernize and provide a benefit that beneficiaries want and need, or is there something else? CMMI could be in a position to shed light on that.

Given that Democrats now have a slim majority in both the House and Senate, what do you think Biden can realistically accomplish with regards to drug pricing? He campaigned on pushing to allow Medicare to negotiate drug prices across the board. This appears DOA unless it is somehow included in the budget reconciliation process. Is there a realistic chance at compromise?

Dr Owens: One of Biden’s expressed initiatives is to better attempt to gain bipartisan support for things that improve access to health care for the public. A modest proposal to cap drug price increases could potentially gain such support from both sides if it is done in a rational way.

Dr Karnack: The concept of the government negotiating drug pricing with pharma will come back in the Biden administration. Moreover, giving Medicare the power to negotiate will have a more direct positive impact on the actual consumers of medications, not necessarily improving the bottom lines of health care organizations, pharmacy benefit managers, and drug companies. It makes sense. The VA already does it, why not CMS?

Ms Andel: The problem with drug price negotiation in Medicare is that it falls apart under close scrutiny. To answer a question with a question: If Democrats truly believed that drug price negotiation in Medicare was so important, why didn’t they enact it when they previously occupied the White House and both chambers of Congress? I think Biden has the opportunity to pass something. In the last Congress there was bipartisan, bicameral support, at least in theory, for inflation price caps. But I don’t think the Democrats will be able to do anything too dramatic. The Senate Democratic Caucus is fairly-to-very moderate and unless they use reconciliation, they will have to peel off some moderate Republican support to break a filibuster.

Mr Marcus: It is unlikely that Senate Republicans will be cooperative or sympathetic. And, as mentioned, the health care provider community has a vested interest in maintaining the status quo. Pharma will push back on price controls in any form, arguing that such methods will stifle innovation.

Dr Vogenberg: There seems to be a common interest in addressing drug pricing. What specifics are allowed to emerge or be incorporated into legislation or regulation is part of the sausage making in Washington.

Dr Karnack: There may be a realistic compromise when the split Senate looks at the cost of the current pandemic on consumers and the accumulating debt. Trying to keep drug price increases at the rate of inflation may seem like a lofty goal, but there is nothing wrong with shaming drug companies that increase the prices of medically necessary medications unreasonably.

Mr Marcus: There are other options to stem the tide of rising drug prices, including outcome-based reimbursement. While complicated, it is a rational approach to paying for prescription drugs as well as allowing CMS to negotiate with pharma.

What should payers and providers be thinking about and doing as Biden takes over?

Mr Marcus: As Biden takes over, consensus among all concerned parties needs to be focused on approaches that will address the cost inefficiencies in administered medications.

Dr Karnack: Look for more suggestions to improve the ACA, especially in light of the pandemic. He will have to deal with the pandemic first, though, and the economic fallout from it.

Dr Shinn: That’s an excellent point. And keep in mind that medication will be the most impactful thing that enables us to defeat COVID-19. Look how the Trump administration’s Operation Warp Speed hastened vaccine development. A partnership between the private sector and government is facilitating vaccine development faster than we have seen before. That should serve the Biden administration well.

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