Federal Drug Price Plan Rollout and Other Trends to Watch
The FDA recently launched one of its first programs following the release of the Trump administrationâ€™s new drug price plan.
The FDA recently launched one of its first programs following the release of the Trump administration’s new drug price plan. Its website offers more details on the branded medications that makers of generic drugs have trouble accessing and includes retroactive information on approximately 150 inquiries made regarding 50 brand-name medications. This list will be updated on an ongoing basis.
The FDA’s plans are part of the Trump administration’s overall blueprint to lower drug prices, with measures that take aim at branded companies. The website also indicates which drugs require a Risk Evaluation and Mitigation Strategy (REMS) and which product samples could be hard for generic drug companies to acquire for development.
THE DRUG PLAN RATIONALE
For some time, generic drug companies have cited the challenge of developing generics because brand-name drug manufacturers have hindered access to samples. Encouraging generic drug and biosimilar development is a central part of the federal plan to increase market competition and lower drug prices.
In addition to having launched the website, the FDA is planning to release guidance that would allow generic drug companies to apply for waivers to create their own REMS if they can show that the negotiations to acquire samples are overly delayed.
The federal plan also calls for payers and pharmacy benefit managers (PBMs) to move from the current rebate-centric model to a straight discount model for drug pricing, an approach that would allow patients to see the savings more directly. In addition, the administration is reexamining Part B. Drugs such as cancer medications in certain Part B categories will no longer be as novel as they once were.
OTHER KEY POINTS IN THE FEDERAL BLUEPRINT
President Trump’s design to rein in staggering prescription drug prices offers 4 broad strategies: increased competition, better negotiation, incentives for lower list prices, and lower out-of-pocket costs. The plan also includes immediate actions to be carried out by the US Department of Health & Human Services (HHS). These include making drug prices and cost increases more transparent to consumers; approving a greater number of similar but cheaper biologic products; and giving Medicare Part D plans leverage to negotiate prices with manufacturers, by giving them latitude, for example, to remove drugs from their formularies.
Although many regard these federal actions as a step forward, manufacturers continue to face the high and often hidden costs of commercialization, including those related to compliance with clinical trial requirements, rising FDA fees and approval timeframes, as well as costs tied to achieving market access and reimbursement. Collectively, these factors add to the bottom line of bringing drugs to market.
NEW DRUG LAUNCH CHALLENGES
Launching a new therapeutic product is challenging and expensive and leaves no room for error. Therefore, it’s important to enlist resources that reflect deep expertise and experience to ensure that the therapy distribution footprint and reimbursement strategy are optimized for commercial success. This requires a customized but comprehensive approach to managing each phase of the distribution and commercialization process.
Here are some key industry trends to keep in mind while analyzing, planning, and addressing short- and long-term challenges.
Outcomes-based contracting could lower overall costs in certain disease categories. This approach ties potential rebates and discounts for expensive pharmaceutical products to the outcomes observed in the patients who receive them.
For purchasers, such as insurers and health care systems, this approach could improve value. Under such contracts, purchasers often pay more for a drug when it proves to be efficacious and less when it is not. The fundamental question for value- based contracting must be the potential impact on outcomes.
Advantages of J codes for biosimilars
CMS has begun issuing unique Healthcare Common Procedure Coding System codes, also known as J codes, to individual biosimilar products. This change helps to ensure a robust, competitive biosimilar market by increasing the potential for innovation while lowering the risks associated with developing and marketing these complex products.
The coding change may also help reduce concerns among providers who might prescribe biosimilars. This could create the right alignment for those providers to support biosimilars rather than to feel economically pressured to continue prescribing reference drugs.
However, the challenge for biosimilar products will be adoption, particularly when innovator products may immediately provide a discount to the market that effectively matches the biosimilar price and, as a result, maintains market share—albeit at a lower price. The new system could also increase awareness and adoption of biosimilars in general because more manufacturers would contribute to provider and patient education initiatives to drive long-term uptake and adoption of biosimilar products.
Fee-for-services payment model
Fee for service is a payment model in which services are unbundled and paid for separately. In health care, it provides an incentive for entities such as physicians, specialty pharmacies, and others to provide appropriate activities and does not tie physician reimbursement to drug sales.
With effective implementation, this model should provide incentive to an entity to provide the correct services needed for appropri- ate patient care. This model eliminates the potential benefit of pushing more product out the door when other, alternative care models may be a viable alternative. Additionally, having reimbursement effectively tied to product sales may encourage entities to sell more expensive products, allowing those entities to potentially make more money on more expensive products compared with less expensive ones.
Position of 1 versus 2 drugs in Medicare Part D
Those in favor of giving HHS Secretary Alex Azar the authority to negotiate drug prices on behalf of millions of Medicare beneficiaries believe this would provide the leverage needed to lower drug costs, particularly for high-priced medications with no competition. On the other hand, opponents believe that price negotiations would limit the ability of pharmaceutical companies to invest in research and development.
With traditional contracting efforts employed by PBMs and payers, for example, the more competitive a product category is, the more significant the discounts demanded from the manufacturer will be. Although this is not an ideal system because manufacturers need to price products with the anticipation of providing significant discounts, thereby creating a somewhat false list price, this model can benefit Medicare in the short term.
Average sales price (ASP) mandates and 340B mean more reporting requirements
CMS has mandated a significant reduction in 340B reimbursement of hospitals from ASP plus 6% to ASP minus 22.5%. The payment reduction affects the roughly 45% of all US hospitals that participate in the 340B Drug Pricing Program. The results of one study concluded that 85% of 340B hospitals will see overall net payment increases in 2018. Rural hospitals will benefit most because 80% of them are exempt from the 340B cuts yet will receive the increases in nondrug Part B reimbursements.
Going forward: a state of flux
Although the latest drug pricing plan from the White House could help make drugs more affordable for patients, the proposal also could cause disruption to coverage and limit patients’ access to innovative treatments. No matter the impact, the industry is in a state of flux.
The market continues to change rapidly. As such, emerging and established pharmaceutical, biopharmaceutical, and medical device manufacturers should strive to keep pace with trends to better position themselves to develop and execute a successful launch, distribution, and reimbursement strategy.