Much emphasis is placed on the value of congressional action to reduce prescription costs, but the Center for American Progress suggests there is an existing toolkit to accomplish this objective.
As the costs of prescription and health care continue to rise during the coronavirus disease 2019 (COVID-19) pandemic, a report by the Center for American Progress (CAP) disclosed ways in which the president can lower costs without the need for new legislation.
CAP is a liberal public policy research and advocacy organization.
Prescription drug net prices increased by an average of 4.5% per year from 2007 to 2018, “a rate far greater than average annual inflation,” said authors of the report. In 2020, drug companies have raised the prices of more than 800 drugs—40 in July.
The report suggests means by which the current sitting president or the one elected in November 2020 can take immediate actions to alleviate these problems and make drugs more accessible to a broader swath of the population.
The Bayh-Dole Act
The Bayh-Dole Act allows private entities, including businesses, nonprofits, and universities, to retain intellectual property rights to new products that are developed through federally funded research.
The law was passed in 1980, and prior to that the United States retained rights to federally funded intellectual discovery. This was thought to stifle grant-funded innovation because entities worried competitors also would have access to their discoveries, according to the report.
Detailed in the act, the federal government has the right to “march in” when a drug company has not made use of the research, meaning that the product must be available to the public on reasonable terms in order to avoid government intervention.
“Thus, if a drug company is not charging a reasonable price for a drug, or if its pricing harms public health by substantially restricting access to the drug, the federal government is well within its rights to ensure the availability of cheaper generic versions,” said the authors of the report.
Government Patent Use
US Code Title 28, Section 1498 allows the federal government to issue licenses for patented technologies without the government having to get permission from the patent holder, so long as the government is willing to compensate the patent holder for their development efforts.
These licenses are distributed to additional drug manufacturers to produce a drug in order to increase capacity and lower the price of the drug.
There is already a growing concern that emerging COVID-19 therapies will be priced beyond the reach of many Americans and will be in high demand, according to the report.
Compulsory licensing authorities have not been used in reference to prescription drugs in recent years, as the mere threat of using Section 1498 against companies can help curb high prices. For example, when the United States was under threat from anthrax attacks in 2001, Bayer lowered its price for its anthrax treatment, ciprofloxacin, in 2001 in response to the federal government threatening to use its licensing privilege to obtain cheaper supplies of the drug.
Administrative Action for Medicare
Regardless of who wins the 2020 election, the next administration could revive the Part B plan that President Obama’s administration proposed in 2016. This would, first, change the average sales price ad-on for Part B drugs from 6% to 2.5% plus a flat fee, and second, introduce value-based purchasing tools into the Medicare program and incentivize providing lower-cost drugs, such as biosimilars and generics.
“Switching to a flat fee would help incentivize providers to choose the appropriate drug rather than the one that will result in a higher payout. Additionally, this policy would encourage drug manufacturers to lower their prices as providers no longer prescribe their more expensive drugs,” wrote the authors of the report.
In addition to Part B reforms, the next president can also reduce the cost of Medicare Part D drugs, which constitute the majority of Medicare drug spending, by encouraging the Center for Medicare and Medicaid Innovation to waive the noninterference clause that prohibits Medicare from being involved in direct price negotiations.
In addition, the president could establish reference pricing, which involves setting a single price for similar drugs..
Recently, President Trump signed 4 executive orders with the aim of lowering drug costs, some of which deferred decisions on future rule making to the HHS. However, the orders lacked specifics on when future rule making would occur and left key terms undefined, according to the report.
“Instead of issuing unnecessary, nonbinding executive actions, the next administration should immediately undertake notice-and-comment rule making that targets the most expensive drugs and ensures patients benefit from lower drug prices,” wrote the authors.
HHS Actions
The next administration could implement the Affordable Care Act’s medical loss ratio (MLR) provision, which would require HHS to issue regulations to establish which expenditures by payers are considered medical claims.
“In making these determinations, HHS can significantly affect spending; if an expense is changed to be considered an administrative—rather than medical—expenditure, health insurers would have an additional incentive to minimize spending, in order to leave as much additional revenue for profit and salaries,” said the report’s authors.
In addition, HHS could issue a rule establishing that spread pricing, the practice of pharmacy benefit managers (PBMs) charging a payer more than the cost of the drug so they can retain the difference, is not considered a medical expenditure for the purposes of MLR calculations. Spread pricing can drive up costs for prescription drugs and premiums without any accompanying benefit beyond providing extra money for PBM companies.
Reference
Calsyn M, Waldrop T. How the next administration can lower drug prices. September 17 2020. Center for American Progress website. https://www.americanprogress.org/issues/healthcare/reports/2020/09/17/490140/next-administration-can-lower-drug-prices/. Accessed September 23, 2020.
Julie Reed: Why 2024 Is Important for Biosimilars
April 17th 2024Julie Reed, executive director of the Biosimilars Forum, showcases how the biosimilar industry is expected to develop throughout 2024, including major policy changes and hope for continued improvement in market share for adalimumab biosimilars.
Exploring the Biosimilar Horizon: Julie Reed's Predictions for 2024
February 18th 2024On this episode of Not So Different, Julie Reed, executive director of the Biosimilars Forum, returns to discuss her predictions for the biosimilar industry for 2024 and beyond as well as the impact that the Forum's 4 new members will have on the organization's mission.
Alvotech’s Stelara Biosimilar, Selarsdi, Receives FDA Approval
April 16th 2024Alvotech’s Selarsdi (ustekinumab-aekn), a biosimilar referencing Stelara (ustekinumab), gained FDA approval, making it the second ustekinumab biosimilar and second for the company to be given the green light for the American market.
A New Chapter: How 2023 Will Shape the US Biosimilar Space for 2024 and Beyond
December 31st 2023On this episode of Not So Different, Cencora's Brian Biehn and Corey Ford take a look back at major policy and regulatory advancements in 2023 and how these changes will alter the space going forward.
BioRationality: Removing the Misconceptions Surrounding Interchangeability
April 15th 2024Sarfaraz K. Niazi, PhD, outlines the current state of interchangeable biosimilars in the US and policy changes needed to clear up misconceptions surrounding the meaning behind interchangeability designations.
Biosimilars Council: PBM Rebate Schemes Cost Americans, Payers $6 Billion
April 10th 2024A report from the Biosimilars Council evaluating IQVIA data found that rebate schemes orchestrated by pharmacy benefit managers (PBMs) are costing US patients and payers billions of dollars by suppressing biosimilar adoption.