Cost of Care

Administration Touts Some Drug Price Improvements

August 21, 2018 9:05 am

The drug price initiative followed “staggering” price increases in the first part of 2018, including 116 increases by Pfizer, as cited by a hospital advocate.

Aug. 20—One hundred days after the Trump administration’s release of a blueprint to cut drug costs and out-of-pocket expenses, administration officials touted some signs of progress.

Since the blueprint’s release in May, 60 percent fewer brand-drug price increases have occurred and 54 percent more price cuts have occurred than in the same period in 2017, according to the administration.

Additionally, a record-breaking 126 generic drugs were approved in July by the Food and Drug Administration.

Among specific drug company responses to the administration’s initiative, two companies lowered prices, 13 committed to price freezes for the remainder of 2018, and four canceled planned price increases.

“As President Trump has repeatedly made clear, American drug prices are too high,” Alex Azar, secretary of the U.S. Department of Health and Human Services, said at a recent address to state legislators. “Since rolling out our American Patients First blueprint in May, HHS has already begun taking aggressive action to reform our country’s drug pricing system.”

However, the recent progress followed “staggering” drug prices increases that were closely tracked by provider groups.

For example, data compiled by the American Hospital Association (AHA) found that the price of brand-name prescription drugs doubled from 2008 to 2016.

“The United States is facing a crisis of drug spending, and it is being fueled by the increases in drug prices,” Joanna Hiatt Kim, vice president of payment policy for AHA, said at a July media briefing. “As a result, we’re hearing more and more from our patients things like, ‘I can’t fill that prescription that you just gave me.’”

Examples of “staggering” price increases in the first part of 2018—most of which happened before the administration’s initiative—included 116 by Pfizer and 75 each by Allergan and Novartis, Hiatt Kim said.

Specific hospital concerns have focused on drug costs in the inpatient setting, which increased by nearly 40 percent per admission just from 2013 through 2015, according to AHA research.

“Getting these prices under control would improve the Medicare program, particularly for its beneficiaries,” Hiatt Kim said about AHA’s top priority with respect to drug prices.

Coming Initiatives

Upcoming initiatives to control drug prices include bolstering the Medicaid rebate program. Earlier in August, Azar issued guidance to drug manufacturers “that will ensure they are paying the full Medicaid rebates they owe on certain prescription drugs.”

The Medicaid Drug Rebate Program requires prescription drug companies to pay substantial rebates to states on drugs purchased by Medicaid programs.

However, drug companies have used designated drug “line extensions,” such as extended-release formulations, to reset the price used to calculate the inflation rebates that are required by Medicaid.

“This meant they could pay less than they would otherwise owe, just by introducing a new drug formulation,” Azar said. “This is the kind of abusive behavior from drug companies that this administration will not tolerate.”

About 10 percent of American drug spending occurs in Medicaid, and a new generation of high-cost drugs has created financial challenges for many states. For instance, a 10 percent price hike for Humira will cost the healthcare system an estimated $1 billion just in 2018, Hiatt Kim said.

The administration also recently changed Medicare rules to allow Medicare Advantage (MA) plans to negotiate lower drug prices beginning in 2019.

In 2017, MA insurers spent $11.9 billion on Medicare Part B drugs. Among commercial health plans, such rules changes have previously produced 15 to 20 percent savings, according to the Trump administration.

“By allowing Medicare Advantage plans to negotiate for physician-administered drugs like private-sector insurers already do, we can drive down prices for some of the most expensive drugs seniors use,” Azar said.

Hospital Impacts

Hospitals have seen a mixed impact from the push to control drug prices. Many advocates have urged federal action due to the outsized financial impacts of those prices on hospitals and their patients in recent years.

“Competition for prescription drugs has shown to be one of the most effective ways of reducing the cost of drug therapies, particularly when multiple generic options are available,” AHA wrote in a July 16 letter to HHS on the blueprint.

However, a separate AHA letter warned that provisions related to the 340B drug savings program were “misplaced” as  part of efforts to reduce drug prices.

Following a cut in 340B payments that started at the beginning of 2018, the Centers for Medicare & Medicaid Services (CMS) recently proposed in the 2019 Hospital Outpatient Prospective Payment System (OPPS) proposed rule to extend the lower 340B Medicare payment rate—the average sale price (ASP) minus 22.5 percent—to 340B drugs furnished in non-grandfathered off-campus provider-based departments.

CMS also would cut Medicare payments for biosimilar drugs purchased under the 340B program to ASP minus 22.5 percent based on the biosimilar’s own ASP, rather than the ASP of the reference product.

“Added regulatory requirements to curtail the 340B program, particularly for hospitals, would only benefit drug manufacturers, who could drive up already sky-high margins by forcing hospitals to pay higher prices for a portion of their drugs,” AHA wrote in the 340B letter. “In the end, it is the patients and the communities served by the 340B hospitals that would ultimately pay the price through limited access to needed services.”

Tom Nickels, executive vice president for the AHA, recently warned that the latest 340B cut, along with a site-neutral payment change that was included in the OPPS proposed rule, would cut hospitals’ 2019 payments by nearly $1 billion.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare


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