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HHS Calls for Authority to Negotiate Medicare Drug Prices (2)

Sept. 9, 2021, 1:30 PM; Updated: Sept. 9, 2021, 1:43 PM

The Biden administration is calling for Congress to pass a set of proposals already backed by Democrats to lower prescription drug prices, including one to let the government negotiate prices with drugmakers.

The proposals unveiled Thursday are part of a long-awaited report from the HHS to the White House that offers a wide-ranging series of recommendations on curbing rising drug costs. Lawmakers have pushed for much of these proposals for years, and former President Donald Trump took action on some.

The Health and Human Services Department attributed the high cost of prescription drug prices in the U.S. to “lack of competition,” and said Americans pay more than $1,500 per person a year for medications.

The HHS said the pharmaceutical industry is “characterized by multiple market failures,” attributable to several factors, including “monopolistic or oligopolistic behavior” and “legal abuses.”

U.S. prescription drug prices are 1.9 times as high as those in other Organisation for Economic Co-operation and Development countries, including rebates, according to a RAND study. U.S. insulin prices are about four times higher. Spending on retail prescription drugs represented 10% of national health spending and 13% of out-of-pocket spending in 2019.

“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,” Health and Human Services Secretary Xavier Becerra said in a statement. “By promoting negotiation, competition, and innovation in the health care industry, we will ensure cost fairness and protect access to care.”

Backing House Democrats’ Proposal

The plan backs a proposal that House Democrats have long wanted to see pass, allowing the HHS secretary to negotiate the price of drugs in Medicare—both those administered in a doctor’s office and those obtained in a retail pharmacy—with drug companies and making those prices available to commercial insurance plans and employer-based plans.

Employers have urged the administration to allow Medicare to negotiate drug prices that private sector purchasers would also have access to, a policy included in the Biden administration’s plan.

“If price protections aren’t extended to employers and employees, the cost balloon will be pushed down for Medicare and everyone else will pay for it,” Elizabeth Mitchell, chief executive of the Purchaser Business Group on Health, said in a statement Tuesday. The group includes large employers like Walmart, Boeing, and Intel.

House Democrats are expected to reveal their policy agenda for drug pricing as soon as Friday, Democratic aides and lobbyists told Bloomberg Government. The House plan will align closely with their signature drug pricing bill (H.R. 3), which the House has already passed in a previous session. Senate Finance Chairman Ron Wyden (D-Ore.) has said allowing the government to negotiate with drugmakers will be a key part of his bill.

Drugmakers are vocally opposing H.R. 3 and its excise tax on drugmakers that won’t negotiate with the government.

If industry doesn’t agree to the prices proposed by the HHS secretary, under H.R. 3 there would be a penalty of 95% of sales. Ken Frazier, executive chairman of Merck’s board of directors, told reporters Wednesday that is not negotiation, but a “substitute for the words price controls.”

“We cannot support, and we will not support the very dangerous idea of allowing the government to simply set prices,” Frazier said.

However, the drug giant would support “mechanisms that would give the government—specifically Medicare—the negotiated prices in the private sector, the best prices available commercially.”

Advocacy groups are ramping up campaigns to influence lawmakers and public opinion. The group Patients For Affordable Drugs Now launched fresh TV ads this week urging Congress to support the drug-price negotiation plan.

The HHS plan is in response to a July executive order from President Joe Biden that called for a plan to “combat excessive pricing of prescription drugs and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the Federal Government for such drugs, and to address the recurrent problem of price gouging.”

Other Recommendations

The HHS plan also calls for legislation to create:

  • a cap on out-of-pocket spending for the Medicare prescription drug benefit;
  • “slow price increases over time on existing drugs;”
  • hastening the entry of generic and biosimilar drugs to the marketplace; and
  • Biden’s proposal for a new special projects agency to be housed within the NIH that aims to speed up game-changing biomedical discoveries, known as the Advanced Research Projects Agency for Health.

The HHS will also look at putting into place several policies that don’t require action from lawmakers, including:

  • paying for Medicare drugs based on the clinical value they provide patients;
  • collecting data from insurance companies and pharmacy middle managers about prices, rebates, and out-of-pocket spending; and
  • developing a program to allow the importation of drugs from other countries, among others.

The plan suggests Medicare can use existing authority to bring down prices by linking payments for physician-administered drugs to patient outcomes. That may be relevant as the agency weighs how to reimburse for Biogen Inc.'s new Alzheimer’s drug. Regulators granted the the $56,000-a-year therapy accelerated approval despite uncertainty about its ultimate clinical benefits to patients.

Medicare’s innovation center could use mandatory models that tie drug reimbursements “to factors such as improved patient outcomes, reductions in health disparities, patient affordability, and lower overall costs,” the drug price plan says. The document doesn’t refer to Aduhelm specifically.

—With assistance from John Tozzi and Alex Ruoff

(Updates with additional reporting throughout.)

To contact the reporter on this story: Shira Stein in Washington at sstein@bloomberglaw.com

To contact the editor responsible for this story: Brent Bierman at bbierman@bloomberglaw.com

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