Panel hears how drug price reform efforts could work – or not

Joseph Burns

About Joseph Burns

Joseph Burns (@jburns18), a Massachusetts-based independent journalist, is AHCJ’s topic leader on health insurance. He welcomes questions and suggestions on insurance resources and tip sheets at joseph@healthjournalism.org.

Photo: Frankieleon via Flickr

One question Julie Appleby posed to a panel she moderated on the high cost of prescription drugs was simple enough: Do drug pricing reform efforts promise consumer relief?

The answer from three experts Appleby assembled for a panel discussion at Health Journalism 2019 this month in Baltimore was that, yes, efforts in Congress could provide some relief and those efforts have bipartisan support. But, as with any pending legislation, the details in the final bills will matter. Also, of course, any bill needs to pass both houses and then President Trump would need to sign it.

In other words, there are no guarantees that consumers will see relief from high prices in the coming months or years. Nonetheless, the panel members offered plenty of ideas for journalists writing about this complex topic.

Alice Ollstein, a health care reporter who covers Capitol Hill for Politico, set the stage by explaining that the cost of prescription medications is of great importance to the public. “There’s a lot of energy across party lines,” she said. “Lots of members want to have their names on bills right now.” She grouped the bills in congress into three broad categories: some would encourage competition, some would strengthen enforcement of current laws, and others would promote transparency.

In particular, she mentioned the Creating and Restoring Equal Access to Equivalent Samples Act of 2019, also known as the CREATES Act, which would facilitate the entry of lower-cost generic and biosimilar versions into the market to increase competition.

Since the conference ended, two big developments rocked the generic drug industry. First, on May 10, Connecticut Attorney General William Tong filed a 35-count lawsuit in federal court in Hartford against 20 corporate defendants and 15 individuals alleging that they agreed to inflate the prices of more than 100 generic drugs, some by as much as 2,000%, according to reporting by Josh Kovner and Dave Altimari in The Hartford Courant.

“Tong’s office is leading a group of 43 other states, each with a separate lawsuit but helping one another,” they wrote. The federal Department of Justice has filed a separate criminal investigation into generic drug pricing.

Second, on May 14, Harper Collins released published Katherine Eban’s book, “Bottle of Lies. The Inside Story of the Generic Drug Boom.” In her book, Eban, an investigative journalist, exposes the dangerous, dark side of some generics, as Jonathan Lambert wrote for NPR. Her reporting shows how the intense demand for generics created an opening between what regulations required and how drug companies behaved, he explained. One of the themes of her book is the pursuit of profit over patient safety.

Some members of Congress recognize that the pursuit of profit may require legislation to increase taxes on some drug companies. For example, Ollstein explained that Democratic members of Congress favor taxing drug companies that raise prices by a certain percentage.

Democrats also support efforts to allow the federal government to negotiate drug prices with pharmaceutical manufacturers, which is currently not allowed. As Mark Miller has explained for Reuters, that restriction makes Medicare unusual because other federal health programs have ways to reduce drug costs. Medicaid requires mandatory drug price rebates and the Department of Veterans Affairs requires that drug companies charge no more than the lowest price that any private-sector buyer pays, Miller wrote.

In moderating the discussion, Appleby, a senior correspondent for Kaiser Health News, asked Gerard Anderson, Ph.D., a professor in the Department of Health Policy and Management at the Johns Hopkins Bloomberg School of Public Health, to explain why there is so much debate about whether drug prices are rising or not. A PDF of his story-idea handout is available with the conference presentations.

“The simple answer is, yes, prices are going up,” Anderson said. “Patients, physicians and hospitals are paying more this week than they were last month.”

But it’s less clear whether insurers and self-insured employers are paying more because health insurers and employers get rebates from pharmaceutical manufacturers in exchange for putting those companies’ drugs on their formularies. Both parties in those contracts have non-disclosure agreements so that what drug companies pay in rebates to health insurers and employers is unknown. “Everything is not transparent,” he added.

Anderson referred to an article he and colleagues at Hopkins wrote for the Annals of Internal Medicine last year in which he reported that the combined profit of the nation’s three largest pharmacy benefit managers (PBMs) rose from $3.4 billion in 2007 to $12.4 billion in 2016. The article, “Pharmacy Benefit Managers, Brand-Name Drug Prices, and Patient Cost Sharing,” is behind the paywall at the American College of Physicians. AHCJ members interested in a brief history of the PBM industry and an excellent explanation of how they work can request a copy from Anderson’s co-author, Ge Bai, PhD, CPA (gbai@jhu.edu).

Anderson also addressed other efforts that might rein in drug prices, such as a bill in Maryland that would call for drug-price transparency, and an initiative by the Pacific Business Group on Health to develop what it calls a waste-free formulary, a tool PBGH encourages employers to adopt.

Another idea is reference pricing, he said. In the May issue of Health Affairs Anderson and other contributors estimated that the Medicare Part D program could have saved $73 billion if it used reference pricing to adopt the average price of drugs in other countries and thus improve affordability for patients. The article is, “Using External Reference Pricing In Medicare Part D To Reduce Drug Price Differentials With Other Countries.”

Following Anderson’s remarks, Appleby asked Steven Knievel, an access to medicines advocate for Public Citizen, if for consumers, there is a downside to such efforts.

“Our primary worry is that congress will not get the job done to meet the needs of patients,” he said. Drug prices are so high that one third of patients are either not taking their medications or cutting their pills in half, he added. A PDF of his story-idea handout is available with the conference presentations.

“That’s a problem that needs to be solved, and a lot of what’s happening in congress is nibbling around the edges,” he commented. “The reason for that is that pharma is one of—if not the most powerful of—lobbies in congress.” He called what congress does about drug prices, “small ball.”

One change that could make a difference is to allow the Medicare Part D program to negotiate prices with pharmaceutical companies, he said. “Fixing that is important and would have a bigger impact in orders of magnitude compared with these small ball measures,” he added.

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