Republicans and Democrats may not agree on much, but there is cross-party consensus that drug prices are too high. With Democrats in control of the House of Representatives, that could mean an even closer microscope on the pharmaceutical industry.
One week in January confirmed just that, as both the House and Republican-led Senate held nearly identical, but separate, hearings on drug prices. One day later, House Democrats initiated an investigation of skyrocketing insulin prices.
Legislators’ takeaways from both hearings were similar: Drug prices have been rising unchecked for too long, lawmakers want to save money for government-backed insurance such as Medicare, and reforms are needed in the complex rebate system between pharmacy benefit managers and drug companies.
Some policy changes that address those issues have been proposed. Last year, the Trump administration brought forward both a model that would base Medicare drug prices on an international standard and a rule to require drugmakers to put list prices in direct-to-consumer drug ads.
But not all efforts are focused on pharma. The Department of Health and Human Services also proposed a rule that would end the practice of rebates between drugmakers and PBMs, a move that would affect the PBMs more than pharma.
While many of these proposals are in their early stages, the increased scrutiny seems to have had an effect pushing down price increases. According to an IQVIA report, net prices increased at an estimated 1.5% in 2018, compared to an average of 6.0% annually over the past five years. From now until 2023, the annual increases are predicted to be between 0% and 3%, the report predicts.
No sweeping changes
Now that Democrats have new power to sway the drug price issue, will there be drastic policy changes? Experts say the Democrats will have to move cautiously.
“The Democratic House will have opportunities to introduce bills near and dear to their heart,” said Kirsten Mayer, partner at law firm Ropes & Gray, whose experience includes advising healthcare and life sciences companies as well as FDA regulatory and digital health issues. “But these extremely progressive bills don’t stand much of a chance of passing the 60 votes [needed] in the Senate.”
Those proposals include a bill from Rep. Peter Welch (D-VT) that would allow all of Medicare to negotiate drug prices with pharma companies and a bill introduced by Rep. Elijah Cummings (D-MD) to allow patients, pharmacists, and wholesalers to import medicine from other countries.
Because Republicans view these bills and other proposals as too progressive, legislative changes may come from smaller efforts and low-hanging fruit, experts say.
“Things where there is common ground include smaller pieces of legislation that will have some impact, but not cause big, dramatic changes,” explained Rebecca Adams, health editor at CQ Roll Call. “When you look at individual pieces [of legislation], there are some things that might move forward, but they are more like rifle-shot approaches.”
Efforts that have a chance of gaining bipartisan support are the CREATES Act, which makes it easier for generic makers to get a hold of brand-name product samples and bills targeting price transparency and drugmakers who misclassify products to qualify for Medicaid rebates.
The gap between Democratic and Republican proposals comes down to how big of an effect legislation would have on the industry. Congress is walking a tightrope to address the prices and the decades-old pricing system without creating unintended consequences, Mayer said.
Things where there is common ground include smaller pieces of legislation that will have some impact, but not cause big, dramatic changesRebecca Adams, CQ Roll Call
That means companies shouldn’t expect sweeping changes to address high drug costs and should look instead for incremental changes.
“If I were a drug company executive, I would be concerned but not terribly alarmed,” Adams noted. “Concerned because there is some potential for bipartisan action, but it’s not going to upend the drug pricing system and patent system.”
Experts also say government agencies such as HHS and the Centers for Medicare and Medicaid Services may continue to lead the charge if congressional action on drug prices stalls.
The Trump administration has already extensively used HHS, CMS, and other agencies to implement drug pricing efforts. The challenge here is working within an agency’s legal authority.
Pharma does have the legal power to try to stall unwanted regulations. If an agency implements a rule the industry doesn’t agree with, pharma companies can sue, claiming the agency overstepped its authority, and ask for an injunction, essentially stopping it from going into effect for a period, explained Tom Bulleit, partner at Ropes & Gray.
While pharma has been fighting many of these proposals, Bulleit said companies may want to compromise with Congress on the lower-impact bills to prevent the more impactful proposals.
For example, proposals that require list prices and price changes to be reported to government agencies and posted online are less intrusive than the requirement to put list prices in TV drug ads. Pharma companies could give on the first proposal in an effort to show they are transparent and avoid the latter.
Advertising spend skyrockets
As the industry has battled some of these unfavorable proposals, its spending on advertising and lobbying has skyrocketed. In 2017, PhRMA’s advertising spending jumped to $68.5 million, a 10-fold increase from 2016. In 2018, the group reported spending $27.5 million on lobbying, its highest ever. Another group representing the industry, the Biotechnology Innovation Organization, also hit a record high on lobbying in 2018, spending $9.9 million.
“Maybe you’re going to see some willingness to compromise on one of the more bipartisan ideas,” Bulleit continued. “If pharma thinks it can avoid some more drastic changes, I can see it not pounding on the table quite as loudly about things such as the CREATES Act.”
When you look at polls, the public tends to give greater credence to Democrats than Republicans on healthcare in generalRebecca Adams, CQ Roll Call
Democrats taking up the drug pricing mantle is a natural fit. Democrats have historically been associated with healthcare issues and the 2020 Democratic presidential hopefuls have already begun campaigning on lowering drug prices. With President Donald Trump’s continued focus on the issue, experts predict it will remain a talking point through the 2020 election.
“When you look at polls, the public tends to give greater credence to Democrats than Republicans on healthcare in general,” Adams said. “In part because of the big debates we had in 2017 about the future of healthcare, protections for coverage of pre-existing conditions, and the Affordable Care Act. Democrats feel they have an advantage on healthcare issues and try to use that for their advantage.”
The attention to drug prices is not new. Recent criticism of drug prices goes back to 2015, when then-Turing Pharmaceuticals CEO Martin Shkreli raised the price of an HIV drug by more than 50 times overnight. What’s different this time around is how long Congress and the administration have kept drug prices top of mind.
“Never have we seen this much attention focused on this issue for such a long period of time,” Bulleit said. “It’s often talked about in presidential campaigns, but you never hear much about it after the campaign ends. You have to give the Trump administration credit for keeping this conversation going in a way that past administrations have not been able to do.”