The Trump administration is looking to bring down prescription drug costs with separate initiatives intended to bolster the U.S. biosimilar drug market and reform the way drug companies provide rebates to pharmacy benefit managers (PBMs), CQ Health reports.
Infographic: Get 4 pharmacy-led tactics to reduce your employee benefit costs
FDA since 2015 has approved 11 biosimilars, which have been championed as less-costly alternatives to biologic drugs. However, FDA Commissioner Scott Gottlieb in March said just three of those drugs are available in the United States because of existing payment practices involving drug rebates and discounts that encourage insurers to favor the original, more costly biologic drugs. He said that "rigged payment scheme" keeps biosimilars off the U.S. market and leaves patients paying "exorbitant out-of-pocket costs."
Gottlieb in May said the administration could revisit allowing pharmaceutical companies to pay rebates to pharmacy benefit managers (PBMs) in exchange for limiting competition for the drugmakers' products. Currently, drugmakers are permitted to pay certain rebates to PBMs and, in exchange, the PBMs will set the copayments for the drugmakers' products lower than competing drugs' copays or will limit coverage for certain products to those manufactured by the drugmakers. The savings PBMs incur from the rebates are not always passed along to consumers.
Gottlieb in May suggested that the administration was considering whether to change federal policies to no longer allow the practice. He asked, "What if we took on this system directly, by having the federal government re-examine the current safe harbor for drug rebates under the Anti-Kickback Statute?" Gottlieb added, "Such a step could help restore some semblance of reality to the relationship between list and negotiated prices, and thereby boost affordability and competition."
White House considers drug rebate changes
HHS' Office of Inspector General on Wednesday sent a proposed rule to the White House Office of Management and Budget that could address that payment setup, Reuters reports.
The proposed rule is titled, "Removal of Safe Harbor Protection for Rebates to Plans or [Pharmacy Benefit Managers (PBMs)] Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection." According to Modern Healthcare, the rule's details are not yet available, but Bloomberg reports the rule would curb the federal kickback exemptions Gottlieb referenced.
An HHS spokesperson said the department does not comment on pending rulemaking, Modern Healthcare reports.
However, industry stakeholders have been swift to weigh in. Thomas Bulleit, a partner at the law firm Ropes & Gray, said the proposed rule, "[d]epending on how [it is] implemented, could result in lower out-of-pocket costs to consumers for at least some drugs, but [he] see[s] no reason to think they will result in lower list prices from drugmakers."
According to Modern Healthcare, drugmakers have said changing the rebates could have an effect on the discounts drugmakers provide to insurers and consumers. Tamar Thompson, executive director of state government affairs at Bristol-Myers Squibb, in a letter sent to HHS wrote, "This could have a chilling effect on manufacturers offering any sort of discounts on drug sales," and "urge[d] HHS to proceed with caution with respect to any reforms to this safe harbor."
Brian Henry, a spokesperson for Express Scripts, said it is unclear whether the proposed rule would have an effect on out-of-pocket drug costs. "Our business is adaptive to a world with fewer or no rebates. We didn't create rebates—pharma did—and we're agnostic on the matter," he said.
According to Reuters, the shares of several drug wholesalers, including AmerisourceBergen and McKesson, as well as PBMs, including CVS Health and Express Scripts, fell slightly on Thursday. Lisa Gill, a JP Morgan analyst, called Wall Street's response to the proposed rule an overreaction, because drug rebates represent only one part of PBMs' profit streams. "If there are any changes around rebates they can adjust other aspects of the pricing model to ensure they are being paid fairly for the value they are adding," Gill said
FDA announces plan to bolster biosimilar market
The proposed rule came the same day FDA unveiled an 11-point plan intended to increase competition for high-priced biologic drugs by bolstering the biosimilar drug market, Bloomberg reports.
During a Brookings Institution event Wednesday, Gottlieb said FDA is "focused on advancing policies that make the process for developing biosimilars more efficient," adding, "enabling a path to competition for biologics from biosimilars is a key to reducing costs and to facilitating more innovation."
As such, Gottlieb said FDA has issued a new Biosimilar Action Plan. According to the plan, FDA will:
- Collect public input on "what additional policy steps" the agency should consider as part of its effort to "enhance [its] biosimilar program";
- Create an Office of Therapeutic Biologics and Biosimilars that will focus on improving "coordination and support of activities under the Biosimilar User Fee Act … program, accelerate responses to stakeholders, and support efficient operations and policy development";
- Develop and implement new tools to review biosimilar drugs, such as standardized templates "that are tailored to marketing applications for biosimilar and interchangeable products";
- Develop "information resources and development tools" for entities sponsoring biosimilar applications, including tools intended to "make biosimilar drug development more efficient";
- Expand the agency's Biosimilar Education and Outreach Campaign;
- Give biosimilar developers more "clarity … on demonstrating interchangeability";
- Give biosimilar developers more "clarity and flexibility … on analytical approaches for evaluating product structure and function to support a demonstration of biosimilarity";
- Give biosimilar developers more "support … regarding product quality and manufacturing";
- Look into the possibility of entering into "new data sharing agreements" with regulators in other countries "to facilitate the increased use of non-U.S. licensed comparator products in certain studies to support a biosimilar application";
- Publish guidance on how drugmakers must label biosimilars, which the agency released Wednesday; and
- Update FDA's list of approved biological products, known as the Purple Book, to include more "information relating to reference product exclusivity determinations."
Gottlieb also said FDA will work more closely with the Federal Trade Commission to target companies that engage in anticompetitive practices that can delay biosimilar development (Edney, Bloomberg, 7/20; Clason, CQ Health, 7/18 [subscription required]; FDA release, 7/18; Burton, Wall Street Journal, 7/18; Clason, CQ Health, 7/19 [subscription required]; Abutaleb, Reuters, 7/19; Dickson, Modern Healthcare, 7/19; Baker, "Vitals," Axios, 7/20).
Learn more: Get 4 pharmacy-led tactics to reduce your employee benefit costs
Growth in health benefit spend is top of mind for employers across the nation. As large employers themselves, health systems are no exception.
This infographic outlines four pharmacy-led tactics to improve employee medication management and support HR leaders in reducing employee benefit costs. Download it to get details about each tactic, examples of how your peers put them into action, and the resulting impact on health system spend.
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