Draft Pelosi Plan Targets Drugs Lacking Biosimilar or Generic Option

While chances of her leaked plan to force lower drug prices in the United States getting through the Republican-controlled Senate are extremely small, House Speaker Nancy Pelosi, D-California, put biosimilars, including insulins, into the national conversation this week.

The leaked plan proposes that the secretary of HHS should have the power to “to directly negotiate prices on the top 250 drugs with the greatest total cost to Medicare and the entire US health system without competition from at least [2] generic, biosimilar or interchangeable biologics on the market.”

Each year, the most expensive 250 drugs would be subject to review. Not only that, but the price would be available to all payers—not just Medicare, the document says.

The top 5 drug products with the highest total spending in 2016 accounted for approximately 10% of total prescription drug spending among large employer plans, Medicare Part D, and Medicaid. Among large employers, Humira ($4.9 billion) and Enbrel ($2.4 billion), both of which have FDA-approved but unlaunched biosimilar options, were responsible for the greatest share of spending.

The issue of drug pricing promises to continue over the next year, since, while numerous proposals have been issued by Republicans and Democrats alike, none have gained any momentum, given staunch industry opposition and a divided Washington.

Borrowing a bit from President Donald Trump’s International Pricing Index (IPI) proposal plan, the Pelosi plan would set an upper limit for the price reached in any negotiation as no more than 1.2 times, or 120% of, the volume-weighted average of price of 6 countries (Australia, Canada, France, Germany, Japan, and the United Kingdom).

Writing in The Federalist, Christopher Jacobs called that part of the plan “the de facto imposition of price controls.”

The plan comes with stiff, retroactive penalties for pharmaceutical firms that refuse to comply:

• Those that refuse to participate or fail to reach agreement with the government “will be assessed a Non-Compliance Fee equal to [75%] of the gross sales of the drug in question from the previous year.”
• Those that agree to a price but subsequently overcharge the government, or fail to offer the price to other payers, will be subject to a civil monetary penalty equal to 10 times the difference.

In addition, all 8000 drugs in Medicare Part B and D would have a new inflation rebate to deter price hikes. If a pharmaceutical company has raised the price of a drug in Part B or D above the rate of inflation since 2016, they can either lower the price or be required to pay the entire price above inflation in a rebate back to the government.

A report released by CMS last year found that Medicare and its beneficiaries spend $8.1 billion more on drugs than they would if payments were scaled by international price ratios.