PM360 asked experts within market access strategies whether pricing regulation will impact 2020 and what other barriers to be aware of that might impact access to their brands. Specifically, we wanted to know:
- Both the House (H.R. 3, the “Elijah Cummings Lower Drug Costs Now Act”) and the Senate (Prescription Drug Pricing Reduction Act of 2019) are working on legislation that would impact drug pricing. While neither may end up becoming law, what factors, proposed changes, or other legislation should the industry pay the most attention to as both parties work to try to lower drug prices? What changes that impact drug pricing, if any, do you actually expect to occur sometime this year?
- Besides efforts to lower drug prices and increase transparency, what market access challenge/barrier (copay accumulators, PBMs, payer mergers, formulary contracting, etc.) do you believe will cause pharma companies the most stress this year? How can companies overcome this challenge/barrier?
In 2020, major drug pricing legislation is unlikely to move forward until after the presidential election. If legislation does pass, however, the most likely provision would be the establishment of an out-of-pocket (OOP) maximum for Medicare Part D beneficiaries. Both H.R. 3 and PDPRA included OOP maximum provisions and incumbent politicians could tout the passage of this popular policy to voters in the fall elections.
Less likely—though still possible—would be legislation that imposes financial penalties on pharmaceutical manufacturers that increase prices faster than inflation. Although voters may support this provision, in response, manufacturers would be incentivized to increase their price at launch.
More radical proposals—such those mandating centralized drug price negotiation or importing drugs from other countries—are unlikely to pass. Legislation that would broadly implement centralized price setting—such as President Trump’s international pricing index (IPI) pilot—is unlikely with Republicans holding the majority in the Senate. Importing drugs from other countries may be politically popular, but is infeasible as most other markets do not have sufficient supply to meet U.S. demand. In short, this year looks to be in a holding pattern for drug price reforms with major policy changes expected in 2021, after the presidential election.
As the 2020 presidential election gets closer, rhetoric around drug pricing will only increase, keeping a spotlight on a sector already unpopular with voters. While political gridlock means that U.S. lawmakers probably won’t agree on new measures any time soon, the cost of medicine will remain a hot topic.
Recently, the Trump administration announced a new process to help states rein in prescription drug spending. This opportunity to lower drug prices is part of a far bigger package of proposed changes to Medicaid. As proposed, states can only take advantage of this process if they accept a cap on the federal funding for their Medicaid program.
Unlike private insurers and certain federal providers, Medicaid programs currently must cover every drug. If implemented, the new process will give states the power to negotiate prices directly with pharmaceutical companies and to deny coverage for certain medications. This has the potential to drive prices significantly lower, creating a huge challenge for pharma, which is already opposing the drug pricing provision. However, in an election year there will be heightened interest in all options available to states hoping to reduce their prescription drug spending—and pharma will just have to reckon with this.
No one political party wants to give the other a victory—not leading up to such a critical election—so very little substantial change is likely. Ultimately, 2021 is really the year when things will happen.
That said, there are topics that are bipartisan and increase the potential for positive debate and movement. For example, price transparency. While we are unlikely to see significant legislative changes, the current administration is pushing executive power to create an environment in which companies are proactively working to educate consumers about the costs of their products. While all parties agree that when consumers are more aware of the real costs they can make smarter decisions, we also know this is difficult considering the complexity of the healthcare system. But some manufacturers are already working to provide more transparency and to ensure they are educating patients about all the resources available to help them afford their medications.
Biosimilar interchangeability is another concept policymakers could move forward in 2020. We could see legislation and policy changes that focus on easing the ability of dispensing biosimilars in exchange for a branded biologic. Improving the uptake of biosimilars in the U.S. market is a shared goal across both political parties.
A major challenge in pharma is knowing how to strategically partner with payers. True partnerships shouldn’t just focus on drug-based reimbursement. They can include consulting or risk-sharing agreements, but the most collaborative partnerships are expertise-based, in which parties combine resources to improve outcomes and lower costs.
Expertise-based partnerships may include medication adherence programs or retrospective data analysis, as well as newer joint data-generation partnerships. Manufacturers can partner with various payer organizations to generate real-world data, from commercial and government insurers to PBMs and employers. In particular, IDNs present an excellent opportunity for joint data generation due to their ability to combine medical and pharmacy claims data to assess the total cost of care.
As payers shift their focus from “sick care” to “preventive care,” the desire for partners that can help analyze data, identify gaps, and plan measurable interventions for high-risk, high-cost members is growing. Partnering with manufacturers to generate real-world data that support payers’ population health goals represents a win-win-win opportunity (payers, pharma, and patients). Today is the day to start exploring payer partnerships, because the manufacturers who can best align with payer needs and priorities will outpace the competition.
2020 brings a new year of plan changes that will impact patients, providers, and pharma. As costs continue to rise, payers are utilizing a number of tactics to manage the benefits. This year will see payers having the most price sensitivity. This will cause a number of trends designed to shift cost to the patient and drive towards lowest cost appropriate care:
- Accepted use of step therapy as a utilization management tool
- 77% of patients will use coinsurance
- 62% of patients will be connected to a preferred pharmacy network
- Utilization management programs will be applied to 48% of specialty drugs
As pharma companies plan their commercial strategies, careful attention must be paid to patient out-of-pocket costs, real-world evidence, and appropriate distribution strategies. Standard programs may not allow the plan to extend to all the patients that need assistance, so affordability solutions must be dynamic and adjust to the benefit design for the patient. Focus messages on a brand’s cost-effectiveness compared to competing products and include information on discounts and rebates, as well as medical cost advantages of using the brand. Also, build value propositions centered around the clinical advantages of a brand versus competitor drugs.
Biosimilars continue to take market share from reference products, triggering increased competition. In response, originators may leverage larger portfolios to protect markets, as payers demonstrate a willingness to sign near-exclusive deals—presenting a challenge that biosimilars cannot overcome via low WAC alone.
Perceived insufficient provider cost recovery and payers’ expectations of medical-benefit rebate savings are pain points. Providers can use specialty pharmacy distribution to escape buy-and-bill unpredictability with commercial and Medicare Advantage plans, but biosimilar and originator manufacturers must partner with the Centers for Medicare and Medicaid Services and the Office of the Inspector General on approaches that can offer providers a specialty pharmacy safe haven on Medicare Part B. Thoughtful price action remains critical to preserving patients’ access to therapy.
For biosimilars under the pharmacy benefit, trade fees are squeezed as drug prices in competitive baskets drop. Such fees are reduced when lower-priced competitors enter the market; as such, manufacturers are asked to offset trade partners’ lost revenue. Manufacturers must construct sub-segment gross-to-net models to ensure discretionary price concessions and fees are appropriate for the market basket.
Manufacturers navigating the biosimilar landscape must develop value chain tactics that balance stakeholders’ needs while assessing payer access and provider demand.