Drug Pricing in the Crosshairs

Drug pricing reform is in the news again this week as the Medicare Payment Advisory Commission (MedPAC) voted unanimously April 6 in support of the Commission’s multi-part Part B recommendations that include a Drug Value Program (DVP) with elements that align with President Trump’s interest in requiring drug companies to bid for government business.

“Despite Trump’s outreach to industry leaders and declaration of support for reducing drug prices, any attempt at price reform will be hard fought,” Jessica Turgon, MBA, ECG Management Consultants, told attendees last week at the ACCC 43rd Annual Meeting, CANCERSCAPE. The “how” of executing drug pricing reform will be “impressive,” Turgon said. She outlined five possible reform scenarios for lowering U.S. drug costs. The unknown: which reforms will the Administration stick to the most?

1. Importing cheaper drugs from other countries in an effort to reduce average domestic drug prices. Pro: This might force drug companies to lower prices domestically. Con: It could result in higher drug prices worldwide.

2. Increasing availability of generic drugs by requiring the FDA to speed up the approval process for generic versions of drugs. There is a similar option being put forward to hamper or make illegal the practice of “pay to delay,” which slows generic drug advancement. In fact, one study found that “pay to delay” has cost U.S. consumers $14 billion by keeping brand name drugs as the sole source product when cheaper, generic versions were available.

3. Allowing Medicare to negotiate for drug prices using its leverage as the largest healthcare payer to achieve lower drug prices. This would require legislation or possibly execution through the regulatory process. However, the Congressional Budget Office has indicated this option would not have that great of an impact on federal spending, Turgon said.

4. Increasing the use of value-based drug purchasing, i.e., paying for drugs based on the outcomes they achieved (i.e., treatment effectiveness) and not on a flat fee or other standard pricing approach. If this were integrated into protocols or pathways, it’s not clear how the financial results would be quantified, Turgon noted. However, as last year’s proposed Medicare Part B experiment showed, the impact would be very hard on providers.

5. Scaling back the scope of the 340B Drug Pricing Program, for example, by revising the definition of a covered entity. The program remains in MedPAC’s crosshairs, Turgon warned. In FY 2013, covered entities saved $3.8 billion on outpatient drugs through the program; the number of 340B covered entity sites grew to 16,500 in 2013, a rise of nearly 8,000 sites from 2008. Turgon’s take-home message for cancer programs: Ask yourselves, “If I had to operate without my 340B program what would my cancer program, hospital, or health system look like?” Would it would likely have a significant impact on your health system overall? Is 340B funding “everything else” [e.g., services that are currently not-reimbursed, such as patient navigation] at your hospital right now?

Add to the mix, MedPAC’s recommendations for reducing spending in Medicare Part B. (Spending has gone up 9% every year since 2009, Turgon noted, which is not sustainable.) Briefly put, MedPAC’s recommendations fall into two track recommendations:

Track 1: Improve the average sales price (ASP) system.

• Require drug makers to report ASP data and increase penalties for non-compliance.
• Reduce WAC (wholesale acquisition cost), cut the add-on payment from 6 percent to 3 percent.
• Require drug makers to give Medicare a rebate when the ASP price for a product exceeds an inflation benchmark.
• Require the Centers for Medicare & Medicaid Services (CMS) to implement a common billing code for a reference biologic and its biosimilars.

Track 2: Establish a Drug Value Program

For this voluntary program, Medicare would contract with private vendors to negotiate prices for Part B drugs using tools like a formulary. The Drug Value Program vendor would negotiate directly with drug manufacturers. Providers would purchase all DVP products at the price negotiated by their DVP vendor. Medicare would reimburse providers for the DVP-negotiated price AND reimburse DVPs an administrative fee with a shared savings opportunity.

What Cancer Programs Can Do Now

What seems certain is President’s Trump continued interest in drug pricing reform. How (or if) reform is executed remains to be seen. MedPAC serves in an advisory role to Congress on Medicare issues—and whether Congress will consider MedPAC’s recommended changes to Part B is also uncertain. In the face of the many uncertainties surrounding drug pricing reform, cancer programs can still take proactive steps to address the rising cost of drugs, Turgon said. To do so, she suggested that cancer programs:

• Develop and adhere to clinical pathways and protocols.
• Determine the availability of evidence-based alternatives that are cheaper and comparable to high-priced drugs, and remove the higher-priced drugs from your formulary or tighten guidelines around use.
• Deploy clinical pharmacists to educate prescribers about high drug prices.
• Hold cost-of-care conversations with patients.
• Reduce waste associated with high-cost drugs.
• Keep negotiating with GPOs and wholesalers.
• Identify signs of increases in drug prices as close to real-time as possible to avoid delays in taking action to minimize financial impact.
• Keep the lowest possible inventory of high-cost drugs.
• Keep communication lines open with senior administrators so they stay informed of the impact on the drug budget.

Final takeway: “Run your hospital-based cancer program as a private practice and know where your costs are,” Turgon advised.