US: is pricing power moving out of Pharma’s hands?
US Senator Bernie Sanders intends to introduce legislation to put an end to dramatic increases in prescription drug prices
By Brandon Goode, Analyst
10 September 2015
US Senator and Democratic presidential candidate Bernie Sanders intends to introduce the Prescription Drug Affordability Act of 2015, which outlines policies that would lower drug prices and increase access to prescription drugs. While previous efforts to introduce drug price negotiations did not find fertile ground, shifting public opinion and the ongoing debate about drug pricing mean that the proposal will, at the very least, put further pressure on US drug pricing going forward.
With high-profile discussions regarding pharmaceutical pricing becoming commonplace, Sanders’ proposed legislation puts forward policies aimed at lowering drug prices in the US. In a statement on his Senate webpage, Sanders cited the fact that US citizens pay the highest prescription drug prices in the world and 2014’s 12.6% rise in US prescription drug prices as reasons new policies are needed.
A key measure in the proposed legislation would require the Secretary of the Department of Health and Human Services (HHS) to negotiate drug prices under the Medicare Part D prescription drug program – something that is currently not possible. The act would also allow individuals, pharmacists, and wholesalers to import prescription drugs from licensed Canadian pharmacies, as well as require pharmaceutical companies to report information affecting drug pricing, including information from other countries, to the Secretary of the HHS. Other measures include restoring a minimum rebate on drugs covered under Medicare Part D for low-income Medicare beneficiaries, requiring generic drug manufacturers to pay an additional rebate to Medicaid if their prices rise faster than inflation, a ban on pay-for-delay, and terminating remaining market exclusivity periods on any product found in violation of criminal or civil law.
Sanders’ move is aligned with the ongoing heated debate about runaway drug pricing in the US, which began with the launch of $1,000 per pill hepatitis C treatment Sovaldi (sofosbuvir) by Gilead in 2014. High oncology drug prices have also been in the spotlight, with several medical institutions putting forward tools to compare cancer drugs by the value they bring (eg American Society of Clinical Oncology’s value framework, Memorial Sloan Kettering’s Drug Abacus, and the National Comprehensive Cancer Network’s tool, expected to be published in October 2015). Furthermore, according to a poll by the Kaiser Family Foundation, the American public feels the same way as Sanders. The poll, conducted in August 2015, revealed that 72% of Americans find the cost of prescription drugs unreasonable and 74% believe that they pay higher prices than nationals of other countries. Furthermore, 86% of the surveyed population agree with the idea that drug companies should release information on drug pricing methods, while 72% agree that they should be allowed to buy prescription drugs imported from Canada.
This is not the first time Medicare Part D drug price negotiation has been proposed, with such bids also part of some of the earlier versions of the Affordable Care Act. However, the impetus for such a significant legislative change is now present among not only public and private payers, but also physicians and the general public, meaning that there is a higher chance this bill could result in new legislation that would introduce a notable change in drug pricing dynamics in the US. Even if it is not passed, the bill will add to the pressure pharmaceutical firms are already experiencing regarding pricing of their new products.
Posted in Strategy.