Legislators Bridge ACA Cut, Discuss Drug Costs

OCTOBER 17, 2017
Kevin Kunzmann
HELP committee, hearings, ACA, subsidiesOn a day of dissenting healthcare rhetoric, a Democrat and Republican pair have announced a bipartisan 2-year extension of Affordable Care Act (ACA) subsidies.

US Senators Lamar Alexander (R-TN) and Patty Murray (D-WA) announced an extension of the ACA subsidies canceled by President Trump last week, in the midst of numerous Republican majority attempts to repeal and replace healthcare act.

The subsidies extended by Alexander and Murray — the leaders of the Senate Committee on Health, Education, Labor & Pensions (HELP) — provide insurers capability to cover low-income clients.

With concise legislation expected to be made public next week, the tentative extension would also allow for states to experiment alternative commonwealth standards for insurance plans, while still having to cover residents with pre-existing conditions.

Alexander and Murray also hosted a HELP committee hearing on prescription drug costs Tuesday. The hearing was a follow-up to a July meeting that Alexander said was detailed by discourse surrounding the future state of the ACA.

Differing opinions across party lines still lingered in the part-2 hearing, “The Cost of Prescription Drugs: How the Drug Delivery System Affects What Patients Pay.” Alexander, who expressed hope for bipartisan progression through the committee hearing series to come, noted that ACA issues only comprise a “relatively small part of healthcare.”

“But there are many other issues that have caused health care spending in this country to grow from consuming 9% of the gross domestic product in 1980 to nearly 18% in 2015, and a predicted 20% in 2025, according to the Centers for Medicare & Medicaid Services,” Alexander said. “We need to look at all aspects of healthcare spending.”

Murray called US prescription prices an urgent discussion, noting that she is among other legislators to have heard of families having to pick between “some high-priced medication and paying their bills.”

The uptick of generic drug competition — as supplanted by the US Food and Drug Administration (FDA) Reauthorization Act of 2017 — will not be able to solely address high-priced drug markets, Murray said. She praised Democratic legislation in particular for demanding more transparency and accountability from manufacturers regarding prices.

Murray’s reference to partisan legislation includes California governor Jerry Brown’s signed state legislation from last week that will require drug makers to provide provide 60-day notices for market price increases of 16% or more over 2 years. The bill, effective 2019, will apply for drugs priced wholesale for more than $40 for a 30-day supply.

For more advances in drug maker regulations and price lowering, the Trump administration has to be a partner, Murray said, “not a hindrance to our efforts.”

Five experts were present for the hearing:
  • Lori M. Reilly, executive vice president, Policy, Research & Membership, Pharmaceutical Research and Manufacturers of America
  • Chester Davis, Jr., president and chief executive officer, Association for Accessible Medicines
  • Elizabeth A. Gallenagh, senior vice president, Government Affairs and General Counsel, Healthcare Distribution Alliance
  • Mark Merritt, president and chief executive officer, Pharmaceutical Care Management Association
  • Thomas E. Menigham, BSPharm, MBA, executive director and chief executive officer, American Pharmacists Association

With the US in the midst of what Alexander called a “remarkable time in science,” there’s an emphasized need to balance drug costs without jeopardizing the state of clinical breakthroughs. Reilly suggested that may already be happening.

“In the midst of the incredible scientific progress that we’ve seen, drug spending growth is actually declining from its peak in 2014,” Reilly said. “In fact, last year, prescription drug spending cost growth was 3 to 5%, in line with all other forms of spending growth.”

Reilly explained that less than half of drug spending revenue returns to brand manufacturers — the rest is allocated to the generic industry and others in the supply chain.

“We have, for pharmaceuticals, some of the most stringent cost containment across the entire healthcare sector,” Reilly said.

Davis similarly gave emphasis to the underrated role generics play in the US healthcare market.

“Generics represent 89% of all prescription dispense for the US, but only account for 26% of all expenditures of prescription drugs, saving patients and prescriptors nearly $5 billion every week,” Davis said.

Generics actually operate in a deflationary market, Davis said, increasing in volume by 2% annually while revenue has fallen by 13%. The healthcare system can only function with competition spurred by generic companies using drug samples to accelerate through the FDA’s reauthorized policies for generic approval.

“And that system only works when generic medicines have the ability to enter the market when patents and other (intellectual property) protections are actually supposed to expire,” Davis said. “And ultimately, that system works when public policy doesn’t favor one side of the access and innovation equation at the expense of the other.”

HELP committee member Al Franken (D-MN) countered to the hearing witnesses that the US simply spends more on prescription drugs than other industrialized country, “in part because prices are higher in the US than any other country.”

Addressing the drug manufacturer leadership response that country-to-country price comparisons do not account for insurer discounts and other cost-saving methods, Franken borrowed a 2015 article from Bloomberg News. In the article, the reported 2015 price of asthma inhaler Advair (fluticasone/ salmeterol) was $309.60. Accounting for a 50% insurance discount, the inhaler’s $154.80 revised US cost would still be higher than in Canada ($74.12), Germany ($37.71), and France ($34.52).

“These higher prices in the United States support high-level profits and some research development costs, but we also pay these high prices because of the way our system is structured, the laws we set, and the clout of the drug industry,” Franken said. “All of you presented yourself as part of the piece that keeps the price down. Why are the prices so much higher, assuming a 50% discount from the list price?”

Reilly offered that European markets have “artificially depressed” drug prices — meaning patients pay more for generics, and their generic market has fewer options. US residents do pay more for drugs, Reilly said, but do so in a market that “incentivizes new therapies and innovations” before greatly shifting to low-cost generics again.

“In that system we have, we’re able to support a broader innovation ecosystem,” Reilly said. “The fact that we have 90% generics here and in most European countries it’s 50 to 60% in part because they don’t incentivize their entry.”

There is a reasonable case for the US to make stronger trade agreements with European countries to ensure they pay “more of their fair share” for drugs, in respect to its generation of breakthrough therapy opportunities.

Franken interpreted Reilly’s idea as resolving domestic drug costs by raising other countries’ costs, and reiterated his question to the panel as to why the US pays more.

Though the hearing ended without Franken getting his thematic question answered to his liking, there will be more chances moving forward. The HELP committee will hold an executive session Wednesday, before hosting the third series hearing Thursday.

The hearing, “Examining How Healthy Choices Can Improve Health Outcomes and Reduce Costs,” will feature 4 expert witnesses and begin at 10 AM Thursday.

Related Coverage

California Passes Drug Price Transparency Law
FDA Introduces Guidelines to Ease Approvals for Generics
A Biosimilar Cure for Sky-High Drug Prices
 

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