US President-elect Joe Biden’s efforts to lower prescription drug pricing will be limited with Republicans’ continued majority in the Senate, which means the industry will avoid the most disruptive changes that could result from legislative reform.
But Biden is also expected to have higher priorities than drug pricing as he begins his presidency. Because of the economic recession caused by the pandemic, front burner issues will include an additional COVID relief package and Biden’s ambitious Build Back Better infrastructure plan. To what extent any of those can get through a Republican Senate will be the essential question of Biden’s presidency.
Control of the Senate will still technically be determined by two runoff elections in Georgia, but it seems more than likely that Mitch McConnell, R-Ky., will return as Senate majority leader. The presidential race, too, isn’t completely over. Major news outlets called it for Biden on 7 November, and PhRMA and BIO put out congratulatory press releases, but President Trump has vowed to press on with recounts and legal challenges.
Health care issues may resurface as legislative issue with the Supreme Court’s decision on the future of the Affordable Care Act, expected in the spring, he noted. But it’s unclear when drug pricing reform will be taken up again in a major way. Democrats retain control of the House, but suffered surprising losses in the election and will likely pursue a much more modest agenda compare to the expansive price control efforts manifest in HR 3 this term.
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What Biden Can And Can’t Do
If and when Biden turns his attention to drug pricing reform, he will face the same challenge as the Trump Administration in enacting legislative solutions: a Republican-dominated Senate mostly friendly to biopharma’s interests.
Biden’s drug pricing agenda includes a collection of policies long-supported by Democrats, such as empowering Medicare to negotiate prices, international reference pricing, price inflation penalties, elimination of “anti-competitive” patent protection and removing tax breaks for direct-to-consumer drug advertising.
He has endorsed a plan in which Medicare reimbursement for new specialty biologics with no competition would be based on a value assessment conducted by an independent review board and the average price paid in other countries. If a drug is launched first in the US, which is frequently the case, reimbursement would reflect the board’s value assessment alone.
And he also recently expressed interest in adapting Germany’s approach to drug pricing. (Also see "Biden, Germany And Bringing A National Drug Pricing Negotiation Process To US" - Pink Sheet, 22 Oct, 2020.)
Germany uses national price negotiation based on comparative effectiveness studies and the strength of evidence, with the government using assessments of that data to either negotiate prices on new drugs that are significantly better than what’s already on the market, or cap the prices of me-too drugs to what’s already being charged.
Most of these actions would need legislative action. But the Biden Administration might use the Center for Medicare and Medicaid Innovation to implement by regulation something on a more narrow scale, in the form of a Medicare demonstration project.
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Medicare Demonstrations, ‘March In’ Rights And Importation
A recent policy paper from the Center for American Progress suggests two types of Medicare demonstrations testing new payment models that could lower drug costs. One would revive a demonstration proposed by the Obama Administration that sought to realign prescribing incentives for Part B drugs by changing the statutory reimbursement formula from average sales price plus 6% to ASP plus 2.5%, with an additional flat fee for administration.
If it goes that route, the Biden Administration will need to look at ways of making the policy more palatable to stakeholders than before. The proposed demonstration provoked a firestorm of protests from physicians, patients and Republicans in Congress when it was introduced in 2016, leading to its withdrawal later that year. (Also see "Part B Demo Comments Overwhelmingly Negative, Uniform In Content" - Pink Sheet, 23 May, 2016.)
The CAP paper recommends a demonstration using reference pricing to lower spending for Part D drugs, such as by “establishing a single price across a group of drugs with similar characteristics.” Reference pricing could also involve use of an “external benchmark” for pricing, it says.
Another administrative avenue that Biden could take is to exercise “march in rights” on government patents under the Bayh-Dole Act, according to the paper. The law allows the federal government to obtain control of a drug patent and license it to a third party if such action is “necessary to alleviate health or safety needs.” (Also see "‘March In’ Plan Unveiled By Democratic Think Tank: A Battle Biopharma Would Welcome?" - Pink Sheet, 23 Sep, 2020.)
The Specter of Reimportation
Biden’s Administration also will inherit a Trump-era final rule allowing states to import lower-priced drugs from Canada. It is an idea that Biden has expressed support for, though his campaign platform talked about consumers, not states, importing drugs from abroad.
The importation rule has been considered largely unworkable because it requires a complicated and expensive process to ensure drug safety. But the Biden Administration could revise it to allow the US Food and Drug Administration more flexibility in certifying state importation plans. The Administration could also try to expand the rule to allow for importation from other countries besides Canada.
To what extent the Republican bulkhead in the Senate will create more pressure for executive actions on drug pricing remains unclear, but if creating a more expansive Rx importation scheme is the release valve, pharma might come to regret the divided government engine design which has kept things humming for industry so far.