High and rising prescription drug prices are of growing concern for policymakers, patients, payers, drug manufacturers, and other pharmaceutical supply chain stakeholders. The level and growth of spending, the price of new and old drugs, and how expenses are borne by patients, employers, health plans, providers, intermediaries and state and federal government agencies are areas ripe for both policy and marketplace reform.
Employer efforts to control costs and steer to value using traditional utilization management techniques, plan designs and educational efforts, while necessary, are not enough to assure affordability for employees or long-term financial sustainability for employer plans, particularly given price tags for many specialty pharmacy products, and are raising questions about pricing models. We believe that federal programs and agencies including Medicare, Medicaid, the Food and Drug Administration (FDA), and the Patent and Trade Office (PTO) should reexamine policies that contribute to rising prices and reduced competition and change them. These reforms include, but are not limited to:
- Removing uncertainties around risk-based and value-oriented contracting in public programs
- Implement indication specific pricing and reference pricing in public programs
- Limiting the reach of Medicare Part D protected classes
- Eliminating perverse payment incentives under Medicare Part B
- Encouraging the uptake of biosimilars and evaluating the utility of an “interchangeability” status
- Reforming permissive patent (USPTO) and exclusivity (FDA) protocols
In addition, we support legislation that would ban pay-for-delay deals that inhibit the entry of generic competition and other legislation that fosters competition.
WHY IT MATTERS
- The growth in plan spending for prescription drugs particularly considering the pipeline for specialty medications, will likely break the bank for most employer plans in the near future absent major changes in pricing and elimination of incentives to drive up prices along the supply chain. In 2017, prescription drugs accounted for 10% of U.S. health spending but 21% of health spending by employer plans. This trend is expected to continue as is the trend toward an ever-greater portion of employer plans drug spend for specialty pharmacy.
- In addition to spending on traditional pharmaceuticals, costly new specialty drugs are a major driver of both spikes in health spending and overall spending - per capita drug spending on specialty drugs increased by 55% from 2013-2016.
- While generic drug prices have decreased over time, there were notable increases between 2008-2016, and the trend is not promising.
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