September 13, 2021

What's inside HHS' big plan to lower drug prices

Daily Briefing

    In response to President Joe Biden's July executive order aimed at bolstering competition in the health care industry, HHS last week revealed a new plan to address high prescription drug prices—and key Congressional committees seem to have similar ideas.

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    HHS' drug pricing plan

    In a report released Thursday, HHS outlined its plan to address high drug prices, which aims to make the cost of drugs more affordable and equitable for all consumers, improve and promote competition in the prescription drug industry, and encourage innovation to promote and improve health care.

    Specifically, HHS detailed support for several potential legislative policies that would advance its goals, including:

    • The ability for HHS to negotiate drug prices in Medicare Parts B and D, with the negotiated prices also being available to commercial plans—including those in the federal marketplace—and participating employers
    • Medicare Part D reform, including a limit on beneficiaries' out-of-pocket spending
    • Legislation that would slow the increase of existing drugs' prices over time
    • Legislation to introduce biosimilar and generic drugs to the market more quickly and increase their prescribing by providers
    • Policies prohibiting anti-competitive tactics, such as "pay-for-delay" and "evergreening"
    • Legislation investing in research to foster innovation, including for the creation of the Advanced Research Projects Agency for Health (ARPA-H)

    In addition to the policy recommendations, HHS described several administrative tools the agency could use to promote competition and reduce drug prices, including:

    • Testing models that use value-based payments in Medicare Part B
    • Testing models that provide cost-sharing support for Medicare Part D Low-Income Subsidy Beneficiaries if they use biosimilar and generic drugs
    • Testing total cost-of-care Medicare models to evaluate whether they change rates of drug utilization, reduce total spending, and improve patient outcomes
    • Collecting data from insurers and pharmacy benefit managers to increase transparency around drug prices, rebates, and out-of-pocket spending on prescription drugs
    • Continuing to implement FDA's Biosimilars Action Plan and Drug Competition Action Plan
    • Working with states and Indian tribes to develop drug importation programs

    "Life-saving prescription medication should not cost anyone their life savings. Yet too often, many low-income families cannot take their prescription medications because of cost concerns," HHS Secretary Xavier Becerra said in a statement announcing the plan.

    He added the administration "remains committed to making health care more affordable for American families, and this Plan outlines one key way we will do that… [b]y promoting negotiation, competition, and innovation in the health care industry, we will ensure cost fairness and protect access to care."

    How HHS' plan aligns with proposed legislation

    According to Axios, Democrats in both the House and Senate are currently considering legislation that would address similar issues.

    In particular, HHS' recommendation for legislation allowing Medicare to negotiate drug prices is a major part of the House's drug pricing bill, which has received support from the Energy & Commerce Committee.

    However, in the Senate, lawmakers are working on their own version of a Medicare negotiation plan, Axios reports. In contrast to the House's bill, which would link drugs prices in the United States to the prices in other countries, the Senate is considering domestic benchmarks for drug prices.

    Specifically, senators are considering tying the prices Medicare pays for drugs to prices other government programs, such as Veterans Affairs, pay, Axios reports. (American Hospital Association, 9/9; HHS report, 9/9; HHS.gov press release, 9/9; Owens, Axios, 9/10)

    The executive's guide to pharmacy issues

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