On May 11, 2018 the U.S. Department of Health and Human Services (HHS) released its plan for lowering drug prices. The plan “American Patients First,” was originally proposed by the White House and has now been revised by the HHS. The plan pinpoints four main issues facing consumers in the drug market:
• High list prices for drugs.
• Government programs overpaying for drugs due to outdated negotiation methods.
• High out-of-pocket costs for prescription drugs.
• “Foreign governments free-riding off of American investment in healthcare innovation.”
HHS offers four strategies to address these issues through: improved competition, more effective negotiation practices, manufacturer incentives for lower prices, and lowering out-of-pocket costs for consumers. HHS’ plan is an elaboration on the multi-part proposal made by the White House.
HHS sets immediate goals as well as long-term objectives for each of the proposed strategies. For increased competition, the administration aims to prevent drug manufacturers from “gaming” regulations, specifically citing Risk Evaluation and Mitigation Strategies (REMS).
The Food and Drug Administration (FDA) describes REMS as a drug safety program that is required for medications with serious safety concerns. While REMS cannot directly mitigate the side effects of certain medications, they provide further education to healthcare providers and consumers on how to reduce risks associated with specific drugs. The HHS has alleged that some drug manufacturers may use REMS to block competition through single shared REMS, which involves all of the companies that produce products in a similar class (i.e. all companies that produce ibuprofen). To further address the lack of competition, the Trump administration will promote innovation and competition in biologics through FDA policies to increase availability and adoption of similar and interchangeable products.
To improve negotiation, HHS plans to experiment with value-based purchasing in federal programs. The Centers for Medicare and Medicaid Services (CMS) defines value-based purchasing as payments made to healthcare providers based on their performance. The better quality healthcare they provide, the larger the payments they receive. The value-based model is intended to both providers and manufacturers accountable with the White House specifically blaming “middlemen,” who include pharmaceutical lobbyists, health insurers, and companies that negotiate drug prices. HHS also plans to tackle negotiation issues by reforming Medicare Part D to give plan sponsors more power when negotiating prices with drug manufacturers. Presently, Medicare Part D plans cannot negotiate lower prices for costly drugs.
In order to lower list prices, the FDA will require manufacturers to include prices in their advertisements for medications. The CMS will track prices and highlight drugs whose prices have not increased. This system will also give consumers additional information to make more informed decisions. The HHS appears to be looking at this issue on a long-term basis, with future plans to reform the rebating system and discount programs.
The plan states that rebates in federal healthcare programs could lead to higher list rates for pharmaceuticals. The HHS is looking to develop proposals to limit the Maximum Rebate Amount provision to limit manufacturer rebates. To lower out-of-pocket costs, the plan could allow pharmacists to tell patients when they could pay less out of pocket by not using insurance, and by providing more information for Medicare Part D recipients about drug price increases and cheaper generic or alternative drugs.
While the HHS does not lay out a specific timetable for these plans, Secretary of Health and Human Services Alex Azar stated “It’s going to be months for the kind of actions that we need to take here.”