On Friday, the White House’s Council of Economic Advisors (CEA), an agency within the Executive Office of the President, released a white paper titled “Reforming Biopharmaceutical Pricing at Home and Abroad.”
On Friday, the White House’s Council of Economic Advisors (CEA), an agency within the Executive Office of the President, released a white paper titled “Reforming Biopharmaceutical Pricing at Home and Abroad.” The paper says that an effort to bring down high drug costs must recognize that prices are sometimes artificially high in the United States.
The CEA writes that the Medicare Part D program “creates perverse incentives for plan sponsors and pharmacy benefit managers (PBMs) to generate formularies that favor high-price, high-rebate drugs” that speed patients through the early phases of the benefit structure. Solutions proposed by CEA to address the issue include requiring plans to share drug manufacturer discounts with patients, allowing plans to manage formularies, lowering co-pays for generics, and discouraging formulary design that speeds patients to the catastrophic coverage phase.
The paper also suggests moving Medicare Part B coverage into Medicare Part D, “where price-competition over drug prices is better structured,” and cutting physician payments for drugs that have few available sales data, to eliminate “the incentive of prescribing a high-priced drug.”
Furthermore, the CEA posits that, as regulation currently stands, most biosimilars will not be granted interchangeable designations, so competition for biosimilars will be limited. If the FDA finalizes its guidance on demonstrating interchangeability and “If these guidelines are relatively easy and inexpensive to adhere to, it could spur interchangeable applications and approvals, which could result in more effective competition with the reference biosimilar and lower prices," according to the white paper.
Also of note is the paper’s contention that drug makers’ returns on investment for developing drugs are “unfairly low” because many governments negotiate drug prices directly with manufactures. “Pharmaceutical innovators—and foreign governments—across the world rely on America’s patients and taxpayers to finance critical research and development,” said the paper’s authors, who contend that the United States must limit “free-riding abroad.”
While President Trump has previously suggested using some of the same tactics employed in overseas markets to drive down drug prices—including negotiating drug prices for Medicare directly with drug makers—the paper does not propose such an approach.
The not-for-profit group Knowledge Economy International took issue with the paper, saying in its response that, “On the lack of competition for biosimilars, the report ignores the most important measure, which is to mandate greater access to manufacturing know-how and materials, in order to reduce the costs and time of entry for competitors.”