euclid managers legislative review

VOL. XXIII, ISSUE 6 – June 2018

“American Patients First”
The Trump Administration Plan to Lower Drug Prices

Whether the recent announcement of the “American Patients First” plan to lower drug prices was worthy of a Rose Garden ceremony is yet to be proven. Nonetheless, the Trump administration announced their “blueprint” to lower drug costs in this manner.

This issue of Legislative Review outlines the administration’s plan to lower drug prices and reduce out-of-pocket costs.

Drug prices were one of the issues featured prominently during Trump’s presidential run. The newly announced “blueprint” is an attempt to fulfill the President’s campaign promise to reign in drug costs. Prescription drug costs are a concern to individuals and employers to be sure. But, this campaign promise is aimed squarely at senior citizens who are prolific voters who take, on average, more prescription drugs than other demographic groups.

The blueprint contemplates two (2) phases. The first phase can be accomplished by direction of the President.  The second phase offers HHS ideas to address costs but for which they are seeking feedback.

Identifying the Problem

The report notes that the pharmaceutical market is a complex one. While the report goes into some detail, this graphic from the report depicts the complexity better than words.  For more information click here

Improve Competition

Part of the effort to improve competition is to address what the administration characterizes as  “gaming of the regulatory processes.” This gaming is seen as keeping drug prices artificially inflated. It also includes efforts to hinder the move to generic competition

The FDA is publishing names of drugs that have no competitors in an effort to encourage new entrants to compete with the drugs. Generic approvals will also be fast-tracked. A number of other actions are also proposed or underway to speed up drug approvals or availability of generic drugs.

Actions that may be taken include measures that would prohibit actions to block generic products from entering the market. Other steps under consideration would encourage biosimilars as more affordable alternatives to branded biologics.

Better Negotiation

The report notes that Medicare Part D faces a very different drug market than when Part D first came into being in 2006.
One change to Medicare occurring in 2019 will allow for faster mid-year substitution of generic drugs onto formularies.  Another proposal would reduce the requirement for two (2) drugs per category or class in a formulary to one (1) drug.

The plan also calls for Medicare Part D plans to negotiate for certain drugs covered under Part B.

One proposal would allow Medicare Part D plans to contract with generic manufacturers. This proposal would allow Part D plans to adjust formulary or benefit design during the year if necessary to respond to a price increase for a sole source generic without CMS approval.

Another idea would allow Part D plans to base coverage for high-cost drugs on the indication. This would address situations where a high-cost drug is used for another condition than it was intended for especially when there are lower cost alternatives.

An evaluation of drugs or classes of drugs that are presently covered under Medicare Part B but where savings would occur if they were moved to Part D is also contemplated.

The blueprint also proposes establishing a database that identifies the disparity between drug prices in the United States versus other countries.

Creating Incentives to Lower List Prices

List prices do not reflect discounts or other price concessions paid to a pharmacy benefit manager (PBM), insurer or government program. Also, the report states that many of the incentives in the current system reward higher list prices. To counter this, the President’s budget plan excludes manufacturer discounts from the calculation of beneficiary out-of-pocket costs in the Medicare Part D catastrophic spending level. This change shifts costs to the insurers which the administration believes would lead insurers to negotiate more aggressively.

HHS Secretary Azar noted in his Rose Garden remarks that prescription drug advertising contains a wealth of information regarding benefits and risks associated with a drug. He suggested that the ads could be more useful to consumers if they also included cost information. The blueprint reflects that HHS may call on the FDA to evaluate including list prices in direct-to-consumer advertising.

Reduce Patient Out-of-Pocket Spending

The report observes that patients often have no idea what a drug will cost until they are at the pharmacy. In addition, patients may not be aware of lower-cost options. Actions being taken are aimed at increasing price transparency. This would include a potential policy that would apply some manufacturer rebates and pharmacy price concessions to the price of a drug at the point of sale.

The plan may also prohibit contractual provisions in Part D contracts that prevent pharmacists from informing patients when they could pay less for a prescription by not using their insurance. These are known as “pharmacy gag clauses.

”The administration may review whether Explanation of Benefits (EOB) forms may be modified to provide additional information regarding drug prices or lower cost alternatives.

Action or Inaction?

This blueprint is a first step for the administration in articulating a vision on prescription drug costs. Some of the actions identified in the blueprint may be accomplished through executive action while others require legislative or regulatory action. To some extent, the blueprint may also be a use of the “bully pulpit” to encourage drug manufacturers, PBMs, and insurers to work together to address the cost concerns.

With ACA reform stalled, success in reducing drug costs may be the administration’s most promising effort to have a healthcare “win.” Only time will tell.

Letter from Karen Knippen

It’s likely we’ve all been surprised at the pharmacy counter when the clerk tells us how much a drug costs. Sometimes it’s because the cost is so minimal. More often, though, it’s because the cost – after insurance –is really high.  I can definitely get behind the administration’s thinking that we should know what the price will be before we get to the counter. Whether the rest of the blueprint is good or whether the proposals would be effective…I’m not yet certain. I am certain that Euclid Managers offers you and your clients some of the best products and programs in the industry!
“American Patients First”

Sincerely yours,
Karen Knippen Signature
Karen Knippen, RHU, REBC Senior Vice President

EUCLID MANAGERS has been serving the independent agent since 1976 with a portfolio of group health, life, disability, dental and individual health. We proudly represent UnitedHealthcare of Illinois, Delta Dental of Illinois, MetLife and UnitedHealthOne Individual. We encourage your feedback and suggestions. Please call your EUCLID MANAGERS Marketing Representative or Marcy Graefen at (630) 238-2915 for more information.

The information contained in this publication is intended for the general information of our clients. It should not be construed as legal advice or legal opinion regarding any specific or factual situation.