The drug pricing conversation never stops, but that doesn’t mean there will be action behind those words.
Although pharmaceutical companies are more in the spotlight than ever due to COVID-19 and many policymakers are calling for affordable prices for coronavirus drugs and vaccines, the odds of seeing moves to regulate drug prices are slim.
Two major events of 2020, the COVID-19 pandemic and presidential election, have sucked the air out of any potential drug pricing legislation this year, experts say.
But the discussion about drug prices isn’t going to slow down. As more coronavirus vaccines and treatments progress through clinical trials, more pharma companies will be deciding their prices.
“The pricing of such drugs will be another information point in the national dialogue about drug price reform, but it’s too soon to say whether it will represent a tipping point in the drug pricing reform debate,” says Ken Choe, partner at law firm Hogan Lovells. “Another wild card is the outcome of the upcoming election. That, in many ways, will be a more significant factor in the extent to which drug pricing reforms are ultimately enacted.”
That means the public and political pressure on pharma will continue for the next several months, setting up a potential drug pricing battle in early 2021, when a new Congress and, possibly, a new president will coincide with many COVID-19 drugs and vaccines hitting the market.
Government pricing action
COVID-19 relief has consumed Congress and the Trump administration this year. The biggest move on drug prices has been three executive orders issued by President Trump in July. These orders built on some of Trump’s previous drug price proposals, but experts say the proposals may not have a meaningful effect on drug costs.
One executive order would modify drug rebate safe harbors so that the rebates offered to pharmacy benefit managers (PBMs) are passed through to the patient at the point of sale.
The second order would allow drug importation from other countries. Experts say there’s a version of this rule already in progress at the Food and Drug Administration (FDA) that makes it unclear what this importation executive order adds to the rulemaking already underway.
The third order aims to lower the price of insulin and injectable epinephrine. This order directs Federally Qualified Health Centers to pass on the 340b discount intended for uninsured or low-income patients to all patients buying these drugs.
These three executive orders are trying to implement drug price regulation ahead of the elections. But if these rules don’t proceed as expected, the drug pricing debate may be pushed to 2021, says Meg Alexander, head of the reputation and risk management practice at Syneos Health.
“COVID-19 will accelerate the conversation and keep it very relevant for 2021,” she explains. “How individual companies communicate about the price of their therapies could accelerate the pointed discussions and make drug pricing persist as part of the 2021 agenda.”
In Congress, the ongoing stalemate on drug price legislation comes down to the many ways lawmakers can go about lowering drug prices.
Proposals range from regulating drug manufacturers to focusing on PBMs.
Some politicians want to rely on market forces to control prices while others are pushing for government intervention. These vastly different proposals have hampered the divided Congress’ ability to pass a drug price package, despite some bipartisan agreement.
“That isn’t to say there aren’t any areas of commonality,” Choe says. “One example is enabling more value-based drug pricing. There’s some degree of support for enabling manufacturers to price their products based on their value; on whether their products perform as intended. There are barriers to such pricing in existing law and there’s some consensus that it makes sense to clear away those barriers.”
The impasse over a second coronavirus relief bill shows how stalled discussions are in Congress. Jon Bigelow, executive director of the Coalition for Healthcare Communication, says there’s a very small chance drug price regulation could appear in a second COVID-19 relief package.
“That has probably been reduced by the general stalemate to get anything through Congress,” Bigelow noted. “A lot of these issues are extraneous to the immediate need to extend unemployment and other aid. That probably has relieved the pressure for immediate action on drug prices before the elections.”
The continuing pressure on drug prices may also present an opportunity for the pharma industry, Bigelow says.
The industry has built up goodwill as it races to develop COVID-19 treatments and vaccines. It could use that goodwill to change the pricing conversation.
“Unfortunately the pharma industry has fed into this rising anger [about drug prices] by continuing to raise wholesale prices above the rate of inflation and because of the opaque nature of pricing,” Bigelow says. “Long-term success for pharma would mean to be both responsible and transparent on pricing COVID-19 products.”
As the industry navigates these turbulent times, experts say being open could help the pharma industry going forward.
Bigelow says pharma’s usual response to potential regulation may not be the best option for the current situation. One common refrain he mentioned was the industry trade group PhRMA’s claims that drug price regulation would stifle innovation.
“That’s not convincing to the public and I don’t think it’s helping the industry,” Bigelow says. “It’s valid to want to head off government controls on pricing, but there also are opportunities for pharma to better position itself. Instead of just saying no about everything, try to position pharma as being a responsible player to work for solutions. That would go a long way toward helping the public image and may stave off the worst types of legislation.”
Pharma companies aren’t the only ones vulnerable to regulation. PBMs, hospitals and insurers have also come under scrutiny for their role in drug prices and patients’ out-of-pocket costs. Health insurers are also in a tricky spot after earning twice their usual profit during the pandemic.
“Political pressure not to have these products on formularies seems insurmountable in the face of double or triple profits,” says Jeff Stewart, managing director at Syneos Health Consulting. “As much as there’s a pricing pressure on manufacturers, keeping a COVID-19 treatment or vaccine off of a formulary seems inconceivable for an insurance company.”
Stewart suggests that pharma companies could offer copay programs for COVID-19 products. That would help alleviate some of that pricing pressure no matter how much insurers charge individual patients for these treatments.
Alexander says the pharma industry has several messaging opportunities. It could highlight the story of American innovation or come together with other parts of the healthcare industry to show a collaborative effort to ensure access to COVID-19 products, she says.
“For the pharma industry, insurers and large providers to come together to show they are not operating in fear, but leading in the midst of this challenge is a huge opportunity,” Alexander says. “I see a high degree of collaboration across life science leaders today. Individuals who would normally be fierce competition are coming together. In the world before COVID, that would not have happened. But it may be setting the stage for what happens after COVID.”