May 24, 2018

Administration Proposes Changes to Prescription Drug Program

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HHS Secretary proposes major changes to current prescription drug program.

U.S. Department of Health and Human Services (HHS) Secretary Alec Azar, in a recent press conference this month, indicated the Trump administration has over 50 changes to prescription drug policy that are currently in draft form. He stated the policy changes focus on four key areas:

  • Reducing high drug list prices

  • Reducing government rules

  • Removing free riders from other countries

  • Reducing high out-of-pocket cost

High Cost List Drugs and Free Riders

Exceptionally, I will use myself as an example of the issues above. I currently take the blood thinner Xarelto. This drug was created by Bayer and is marketed by Janssen Pharmaceutica. The monthly list price of my medication is $542 and the patent on this drug runs through 2020. The same medication can be purchased from a Canadian drug company for $116. This is a high-deductible medication, so my insurance only pays the first $120.

I recently spoke to a friend who works for Pfizer. They make a competing blood thinner called Eloquis, which has a virtually identical pricing model. This drug was developed in a joint venture by Pfizer and Bristol-Myers Squibb.

Azar argued that in the U.S. we have simply made bad deals for these drugs. I am puzzled by Azar’s assertion that the U.S. can prevent Pfizer or Janssen from selling drugs at lower list prices in foreign countries. We could only increase the cost to consumers through tariffs on imports.

I do see merit in including the list prices of the drugs advertised on television. Maybe my “dry eyes” are not that dry if the drug costs too much.

 Azar also argued that increasing the number of drugs available as generics would help. I would say this sounds like a great idea, but the only problem would be that it would require changing the patent laws in the U.S. This also seems to directly contradict the idea that we need to force other countries to foot more of the cost of developing drugs in the future. We will get into the weeds when specific recommendations come out. I do remember a very similar push when the Obama administration tried to force drug companies to offer discounts, even to Medicare patients.

Azar also railed against the use of “Bio Similar Products.” This is a method in which drugs are reverse-engineered by countries that cannot afford to pay drug companies for prescription drugs. Again, short of sending out our military forces, using trade embargos or tariffs, I am not sure how this would be accomplished. I also would imagine there would be a huge backlash for any such moves.

Reducing Government Rules

In this area we can see where the 340B drug program would be impacted. Azar seemed to indicate that Medicare Part B separately billable drugs would be moved under the Medicare Part D drug benefit. He specifically addressed drugs billed by physicians in their offices. If this is what he meant, the cuts in the 340B program would become irrelevant as the separately billable drugs that were cut under the 340B drug program will simply move under the Medicare Part D program.

This would force Medicare beneficiaries into the Part D program. It would seem that this could become a regressive benefit when Medicare Beneficiaries that were not paying separately for drugs are forced into paying premiums for Medicare Part D.

Conclusions

We won’t see any actual regulations for months. I would also note that Medicare and healthcare are the “third rail” of politics. For anyone not familiar with trains, the analogy refers to the inner train rail that carries the electric current that kills riders unfortunate enough to touch it. Additionally, the powerful pharmaceutical industry will certainly have a say in regulatory changes.

 

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Timothy Powell, CPA CHCP

Timothy Powell is a nationally recognized expert on regulatory matters, including the False Claims Act, Zone Program Integrity Contractor (ZPIC) audits, and U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) compliance. He is a member of the RACmonitor editorial board and a national correspondent for Monitor Mondays.

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