Analysis: Administration’s plans on drug pricing faced recent multiple setbacks
- On July 8, a Federal Judge ruled the administration cannot force pharmaceutical companies to disclose the list price of their drugs in television ads.
- On July 10, the White House pulled its proposed rule requiring pharmacy benefit managers to eliminate rebates from Medicare Advantage Part D Plans and other government drug benefit plans.
- There was concern in the administration that raising seniors’ premiums for MA Part D Plans in an election year may have negative consequences at the polls, particularly in key swing states like Florida.
On July 8, a Federal Judge ruled the administration cannot force pharmaceutical companies to disclose the list price of their drugs in television ads, according to an article in The New York Times.
On July 10, the White House pulled its proposed rule requiring pharmacy benefit managers (PBMs) to eliminate rebates from Medicare Advantage (MA) Part D Plans and other government drug benefit plans and provide direct discounts to consumers at the point of sale.
A July 11 Politico article is reporting that, “analyses indicated the rebate rule would have reduced some seniors’ out of pocket spending for drugs while raising all seniors’ premiums and cost billions without touching pharmaceutical profits.”
There was concern in the administration that raising seniors’ premiums for MA Part D Plans in an election year may have negative consequences at the polls, particularly in key swing states like Florida.
Further, Politico is reporting that “the rebate rule was estimated by the nonpartisan Congressional Budget Office to cost the government $177 billion over the next 10 years. The CBO also said it was likely drug makers would not cut their prices because of the rule.”
The administration started the year with a robust portfolio of proposals that aimed to address prescription drug costs in a visible way. That portfolio is now considerably smaller.
And one of the last most impactful things in its portfolio is the International Pricing Index (IPI) Model for Part B drugs. Which means that despite opposition from industry and Republicans on the Hill, the administration is likely to move it forward as aggressively as possible in order to score a visible “win” on drug prices before the 2020 election.
A proposed rule for the IPI model is currently under review at the Office of Management and Budget and will likely be released late summer or early fall. Based on the Advanced Notice of Proposed Rule Making (ANPRM) released last fall, the IPI model, run under the auspices of Center for Medicare & Medicaid Innovation, would initially focus on Part B single-source drugs, biologicals and biosimilars that encompass a high percentage of Part B drug utilization and spending.
IPI model components
The model, which would be mandatory in select geographic areas has the following components:
- Set the Medicare payment amount for selected Part B drugs to be phased down to more closely align with international prices.
- Allow private-sector vendors to negotiate prices for drugs, take title to drugs and compete for physician and hospital business.
- Increase the drug add-on payment in the model to reflect 6% of historical drug costs.
- Pay physicians and hospitals the add-on based on a set payment amount structure. Centers for Medicare & Medicaid Services (CMS) would calculate what CMS would have paid in the absence of the model, before sequestration, and redistribute this amount to model participants based on a set payment amount.
An HFMA news article reporting on the ANPRM, suggests that the financial impact could be significant: “a CMS preliminary estimate was that it would cut Medicare spending (both in FFS and Medicare Advantage) by $23.9 billion between 2020 and 2025.”