High Prescription Drug Costs at Issue in Washington and Beyond
With a presidential election not far off, political forces are driving policy debates over high prescription drug prices to a fevered pitch. Because both President Trump and Democratic presidential candidates are vowing to address the ongoing challenge, employers could witness the dawning of a new regulatory landscape for drug pricing.
Although the features of that landscape remain blurry, it’s still a good time to peer through the binoculars of recent studies and other pertinent information to seek a clearer view.
Drug cost trends
Ironically, promises to “fix” the problem come against a backdrop of a moderating trend in drug price increases — if pharmacy benefit manager data is a reliable indicator, and with “moderate” being a relative term.
For example, in early 2019, CVS Health reported a 3.3 percent overall increase for its commercial clients in the previous year, as did Prime Therapeutics. Although relatively moderate, that figure dwarfed the tiny 0.4 percent rise reported by Cigna subsidiary Express Scripts, according to AIS Health, a health care industry research firm.
Aggregate numbers tend to mask dramatic changes within individual drug categories. However, analysts at AIS Health also noted some positive developments in diabetes treatment, typically a large cost category for employers. For instance, CVS Health reported a 1.7 percent drop in antidiabetic drug spending despite a robust 5.6 percent increase in the average wholesale price for brand drugs in that sector. The decline was attributed to a formulary change.
Meanwhile, an analysis of drug spending trends by the Peterson-Kaiser Health System Tracker also paints a mixed picture. Key data points include the following:
- Per capita drug spending was essentially flat in 2017, but trending in the 4% range since then and projected to remain there for the foreseeable future.
- Retail spending on prescription drugs as a percentage of total health care spending is predicted to remain stable in the 10 percent range through 2024.
- Per capita out-of-pocket spending on prescription drugs is forecasted to increase by 25 percent over the next five years, to $200.
- Out-of-pocket spending on prescription drugs as a percentage of total drug spending is predicted to hover near 15 percent through 2024.
Dramatic stories of personal sacrifice and even bankruptcies of those who lack employer-sponsored drug coverage often fuel the political discussion. Lobbying by employer groups is having an impact in Washington, too.
For example, a multipart pending legislative proposal in Congress, the Lower Health Care Costs Act, was being pushed by the American Benefits Council as “a significant step forward” on the eve of the bill’s bipartisan passage by the Senate’s Health, Education, Labor and Pensions (HELP) committee in late June.
That HELP Committee–passed measure, which as of this writing is in front of the Senate, focuses on mandating greater transparency in pricing data to help all purchasers of health care services and products maximize their ability to make value-based purchasing decisions. (It also deals with “surprise billing,” in which patients covered by private health plans unexpectedly find themselves footing large bills for medical services, such as anesthesia, performed in hospital settings by medical specialists not in their employer-provided health plans’ networks.)
Meanwhile, a new pricing transparency requirement for pharma companies kicked in last month as a part of the Trump administration’s “American Patients First” regulatory initiative. Direct-to-consumer television advertisements for drugs covered by Medicare costing at least $35 for a month’s treatment regimen — in other words, virtually all advertised drugs — must include the product’s retail price. Chances are, many (if not most) of those drugs will also be used by patients not yet eligible for Medicare.
One of the most aggressive proposals to tackle drug costs mimics European laws that use government authority to put caps on drug prices. It’s still in the debate stage within the Democratic Party leadership on the House side of Capitol Hill.
Although giving the country’s largest buyer of health care — Medicare — the ability to negotiate with drug companies has been a staple of legislative proposals in recent years, another plan would take it a step further. The idea, favored by some House Democrats, would extend the impact of any Medicare-negotiated drug prices to private health plans.
However, Senate Republicans, with a small handful of exceptions, would likely take a dim view of such an aggressive move. Republicans traditionally haven’t favored changing the rules to allow Medicare to negotiate directly with drug companies on behalf of Medicare beneficiaries, let alone indirectly for other patients.
Yet in April, hospital chain founder and current Florida Republican Senator Rick Scott introduced a proposal that could cap retail drug prices to the lowest price set by any of the following countries: Canada, Germany, France, Japan and the United Kingdom. Shortly thereafter, the Trump administration announced plans for a Medicare demonstration project operating under similar principles. The prospects for Scott’s proposal are unclear, but the senator “isn’t acting on his party’s fringe,” suggests a review of the proposal by Heritage Foundation scholar Doug Badger.
Other proposals zero in on drug companies’ alleged abuse of the patent system. One example, the Affordable Prescriptions for Patients Act, is co-sponsored by Republican senator John Cornyn of Texas and Democratic senator Richard Blumenthal of Connecticut. “Drug companies have taken advantage of the patent system to maintain their monopoly on certain drugs and prevent generics from coming to the market,” Sen. Cornyn said when introducing the measure.
Meanwhile, generic drug manufacturers themselves are the target of another effort to reduce drug prices. In May, a coalition of 44 state attorneys general, led by Connecticut Attorney General William Tong, launched an antitrust lawsuit against 20 of the country’s largest generic drug makers. The suit alleges “a broad conspiracy to artificially inflate and manipulate prices, reduce competition and unreasonably restrain trade for more than 100 different generic drugs.”
At this point, where any or all of these efforts will land when the dust settles is anyone’s guess. But with high prescription drug prices being attacked on so many fronts, something beyond a symbolic gesture may stick — if not before the 2020 presidential election, then soon thereafter.
Employers and other payers “should prepare for a predictable surge in scrutiny by plan members about health plan prescription formularies that in many cases will fuel new appeals and challenges to the plan denials, formularies and other impacted features,” warns health care legal expert Cynthia Marcotte Stamer.
In other words, while the many proposals in play work their way through the lengthy and politically charged legislative process, employers should stay apprised of the developments and be prepared to help their plan participants understand the inevitable changes in prescription drug prices. Work with your benefits advisors to address concerns accurately.