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President Donald Trump, left, alongside Health and Social Services Secretary, Alex Azar, right, talks about the price of drugs during a visit to the Department of Health and Social Services in Washington, DC Thursday, October 25, 2018. (AP Photo / Susan Walsh)
Yesterday, the Trump administration unveiled a new proposal to significantly reduce the price of some expensive Medicare medicines, linking the price that Medicare pays for these drugs to that of other industrialized countries. This is a stunning move that could completely change the way the pharmaceutical and biotechnology industries think about their business model.
This difference between what other countries are paying for expensive and patented drugs and what the Americans are paying is long over President Trump. "For decades, other countries have manipulated the system so that American patients are being charged much more – and in some cases, much more – for the same drug," Trump said. "In other words, Americans pay more for other countries to pay less."
The rise of orphan drugs
In the 1990s, the pharmaceutical industry devoted most of its resources to developing "successful" drugs that tackled major public health problems, such as high blood pressure and high blood pressure. # 39; hypercholesterolemia. The most famous example is Lipitor, Pfizer's cholesterol-lowering drug, which has become the best-selling drug ever, generating more than $ 20 billion a year in global revenue before its patents expire.
But in the 2000s, a new strategy emerged, initiated largely by the Swiss pharmaceutical giant Roche and its US biotechnology subsidiary Genentech. The new approach would be to focus on so-called "orphan" or rare diseases, which affect fewer than 250,000 Americans, but where companies are more able to charge higher prices with lower R & D expenditures.
If you want to develop a new drug to treat, for example, diabetes, you have to face several extreme obstacles. The FDA will require that you conduct clinical trials on at least 20,000 patients to monitor the safety and effectiveness of your medication over a period of at least five years. Clinical trials of this magnitude cost more than $ 2 billion. If, at the end of this process, your drug is able to outperform current standard treatment, you must market it in a competitive environment in which there are many well-established inexpensive alternatives.
The Roche-Genentech strategy has addressed this problem by focusing on rare diseases, where phase III clinical trials could be much smaller – 200 patients, for example, instead of 20,000 – reducing research and development costs 10 times, with drugs that treated diseases for which there was little or no competition, and could therefore be priced more aggressively.
Medicare Part B fueling rising drug prices
The Medicare program helped fuel this strategic shift. Part B of the Medicare program covers medications administered to the doctor, such as those requiring an intravenous infusion. The way things work today, once a drug is approved by the FDA, a drug company can set the desired price, and Medicare is actually forced to pay it.
We talk a lot about the damage that government price controls can do. But Medicare Part B is not a market, it's more like a price control system dictated by the private sector, in which pharmaceutical companies can effectively charge taxpayers what they want for the medicines they deliver to the elderly, enriching themselves as well as their shareholders.
This quirk in US politics has fueled the development of particularly interesting drugs for Medicare, Part B: drugs administered in a doctor's office (as opposed to pills that you can buy at the pharmacy) and drugs that treat diseases of the great age. (because Medicare is for people over 65). This privileged area coincides with the areas in which we are spending more and more on prescription drugs: cancer, inflammatory arthritis, etc.
For the main analysis, we included 27 different drugs. In total, this represents $ 17 billion – a majority of Part B spending on drugs. Among these drugs, the United States pays on average 180% more than the international price. And in some cases, more than 400% of the international average. pic.twitter.com/1uIzx6Bn4c
– Secretary Alex Azar (@SecAzar) October 25, 2018
Under the Medicare Modernization Act, 2003, doctors receive a 6% commission on drug infusions, which is linked to the average selling price of a drug. This effectively encourages physicians to encourage patients to purchase more expensive drugs. The higher the commission, the higher the price of the drug.
In The prescription of the contest, the white paper on drug price reform that I published at the Foundation for Equal Opportunity Research, I proposed a relatively modest but important change to Medicare part B: let initial Medicare B prices once a drug comes on the market, but limit over time Medicare repayments so that they increase at the pace of consumer inflation (CPI). This type of reform could save billions of dollars in the Medicare program. Trump's proposal goes much further.
How would Trump's proposal work
The Trump proposal would address Medicare Part B issues in two main ways. First, it would eliminate the 6% physician fee for Medicare Part B drugs and replace it with a fee. In this way, doctors would be reimbursed the same amount for the administration of a costly or inexpensive drug: this would make them highly incentivized to administer more affordable drugs with lower inventory costs. . "We want to make sure that doctors do the same, that they prescribe a more expensive brand-name biologic or its biosimilar (almost generic)," said Alex Azar, Secretary of Health and Social Services today. .
Secondly, it would link Medicare Part B prices to an international price index based on sixteen other countries: Austria, Belgium, Canada, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain and Sweden. and the United Kingdom. Why these countries? Because, in a policy note issued by the Assistant Secretary for Planning and Evaluation (ASPE) of HHS, it was relatively easy for them to obtain price data from these countries, among those 'From the G7 and from all countries of Germany's external reference price basket. "
The program would be piloted at the Center for Medicare and Medicaid Innovation, an agency created by the Affordable Care Act to look at ways to make Medicare and Medicaid programs more profitable, now led by Adam Boehler. The pilot project would cover half of the US population and the administration estimates that the plan could reduce Medicare Part B spending by $ 17 billion over the next five years.
And, since Medicare seniors are required to pay a portion of the cost of their Medicare Part B drugs, a drop in the price of Medicare drugs would result in significant savings for seniors receiving drugs. by infusion.
The drug industry will fight tooth and nail
The main pharmaceutical pressure group, The Pharmaceutical Research and Manufacturers of America (PhRMA), reacted quickly by saying that it would "jeopardize access to medicines for the elderly and disabled patients suffering from devastating diseases such as cancer, rheumatoid arthritis and other autoimmune diseases ". The Biotechnology Industry Organization (BIO) said it would pursue "a worrying trend to undermine the Medicare Part B drug program."
But what undermines the Medicare program is its unsustainable cost – the biggest contributor to the US debt and deficit problems. Many, but not all, pharmaceutical and biotechnology companies have contributed to this problem by charging excessive and abusive prices to the Medicare program.
Ironically, the Trump administration's "American Patients First" drug price master plan has diverted the idea of setting prices on the basis of an international index. She termed the use of "price of a drug in one or more countries to derive a reference price or a reference price" as "price control". [that] prevent pharmaceutical companies from charging market prices for their products, while delaying the availability of new treatments for patients living in countries implementing these policies. "
But as I said earlier, the prices currently paid by Medicare are not "market rates" in the real sense of the term. A market is based on competition and voluntary exchange. In the case of Medicare Part B, pharmaceutical companies charge what they want and taxpayers pay the bill. It's not a free market at all.
A catalyst for further reforms?
Medicare's most marketed model for prescription drug coverage is also the most cost-effective: the Medicare Part D program, which covers drugs purchased by seniors in retail pharmacies. Part D of Medicare offers seniors the choice between dozens of private plans offering competitive prices. This system has led to remarkable cost savings and largely explains why the United States is the world leader in the use of inexpensive but effective generic drugs.
The ideal pathway for prescription drug reform would be to extend the Part D model to drugs administered in hospitals and physicians' offices, piloting the integration of Part A and Part B drugs into Part D plans. Fortunately, the Trump administration is also exploring this idea, which could lead to even greater savings over time compared to the International Price Index.
And the international price index itself could be improved. The index proposed by the government excludes more market-oriented healthcare systems in Europe, such as Switzerland and the Netherlands, and includes more single payer systems, such as Canada and the United Kingdom.
The good news is that the Trump administration plays hardball. For too long, even the most modest and progressive reforms have been blocked by industry lobbyists who do not want to stop the price of drugs from skyrocketing. By taking dramatic steps, the administration finally forces the industry to come to the bargaining table. We hope the result will be a more affordable medicine for all.
* * *
TO FOLLOW @ Avik on Twitter, Google+ and YouTube, and L & # 39; apothecary on Facebook. Or, sign up to receive a weekly email summary of articles from L & # 39; apothecary. Lily The prescription of the contest, Avik's plan to reduce prescription drug prices, on FREOPP.org.
NOTE TO INVESTORS: Roche (OTCQX: RHHBY), Amgen (NASDAQ: AMGN), Regeneron (NASDAQ: REGN), Johnson & Johnson (NYSE: JNJ), Bristol-Myers Squibb (NYSE: Official Journal), are among the largest pharmaceutical companies with products sold under Medicare Part B. BMY) and AbbVie (NYSE: ABBV).
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President Donald Trump, left, alongside Health and Social Services Secretary, Alex Azar, right, talks about the price of drugs during a visit to the Department of Health and Social Services in Washington, DC Thursday, October 25, 2018. (AP Photo / Susan Walsh)
Yesterday, the Trump administration unveiled a new proposal to significantly reduce the price of some expensive Medicare medicines, linking the price that Medicare pays for these drugs to that of other industrialized countries. This is a stunning move that could completely change the way the pharmaceutical and biotechnology industries think about their business model.
This difference between what other countries are paying for expensive and patented drugs and what the Americans are paying is long over President Trump. "For decades, other countries have manipulated the system so that American patients are being charged much more – and in some cases, much more – for the same drug," Trump said. "In other words, Americans pay more for other countries to pay less."
The rise of orphan drugs
In the 1990s, the pharmaceutical industry devoted most of its resources to developing "successful" drugs that tackled major public health problems, such as high blood pressure and high blood pressure. # 39; hypercholesterolemia. The most famous example is Lipitor, Pfizer's cholesterol-lowering drug, which has become the best-selling drug ever, generating more than $ 20 billion a year in global revenue before its patents expire.
But in the 2000s, a new strategy emerged, initiated largely by the Swiss pharmaceutical giant Roche and its US biotechnology subsidiary Genentech. The new approach would be to focus on so-called "orphan" or rare diseases, which affect fewer than 250,000 Americans, but where companies are more able to charge higher prices with lower R & D expenditures.
If you want to develop a new drug to treat, for example, diabetes, you have to face several extreme obstacles. The FDA will require that you conduct clinical trials on at least 20,000 patients to monitor the safety and effectiveness of your medication over a period of at least five years. Clinical trials of this magnitude cost more than $ 2 billion. If, at the end of this process, your drug is able to outperform current standard treatment, you must market it in a competitive environment in which there are many well-established inexpensive alternatives.
The Roche-Genentech strategy has addressed this problem by focusing on rare diseases, where phase III clinical trials could be much smaller – 200 patients, for example, instead of 20,000 – reducing research and development costs 10 times, with drugs that treated diseases for which there was little or no competition, and could therefore be priced more aggressively.
Medicare Part B fueling rising drug prices
The Medicare program helped fuel this strategic shift. Part B of the Medicare program covers medications administered to the doctor, such as those requiring an intravenous infusion. The way things work today, once a drug is approved by the FDA, a drug company can set the desired price, and Medicare is actually forced to pay it.
We talk a lot about the damage that government price controls can do. But Medicare Part B is not a market, it's more like a price control system dictated by the private sector, in which pharmaceutical companies can effectively charge taxpayers what they want for the medicines they deliver to the elderly, enriching themselves as well as their shareholders.
This quirk in US politics has fueled the development of particularly interesting drugs for Medicare, Part B: drugs administered in a doctor's office (as opposed to pills that you can buy at the pharmacy) and drugs that treat diseases of the great age. (because Medicare is for people over 65). This privileged area coincides with the areas in which we are spending more and more on prescription drugs: cancer, inflammatory arthritis, etc.
For the main analysis, we included 27 different drugs. In total, this represents $ 17 billion – a majority of Part B spending on drugs. Among these drugs, the United States pays on average 180% more than the international price. And in some cases, more than 400% of the international average. pic.twitter.com/1uIzx6Bn4c
– Secretary Alex Azar (@SecAzar) October 25, 2018
Under the Medicare Modernization Act, 2003, doctors receive a 6% commission on drug infusions, which is linked to the average selling price of a drug. This effectively encourages physicians to encourage patients to purchase more expensive drugs. The higher the commission, the higher the price of the drug.
In The prescription of the contest, the white paper on drug price reform that I published at the Foundation for Equal Opportunity Research, I proposed a relatively modest but important change to Medicare part B: let initial Medicare B prices once a drug comes on the market, but limit Medicare repayments over time to increase to the pace of inflation by consumers (CPIs). This type of reform could save billions of dollars in the Medicare program. Trump's proposal goes much further.
How would Trump's proposal work
The Trump proposal would address Medicare Part B issues in two main ways. First, it would eliminate the 6% physician fee for Medicare Part B drugs and replace it with a fee. In this way, doctors would be reimbursed the same amount for the administration of a costly or inexpensive drug: this would make them highly incentivized to administer more affordable drugs with lower inventory costs. . "We want to make sure that doctors do the same, that they prescribe a more expensive brand-name biologic or its biosimilar (almost generic)," said Alex Azar, Secretary of Health and Social Services today. .
Secondly, it would link Medicare Part B prices to an international price index based on sixteen other countries: Austria, Belgium, Canada, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain and Sweden. and the United Kingdom. Why these countries? Because, in a policy note issued by the Assistant Secretary for Planning and Evaluation (ASPE) of HHS, it was relatively easy for them to obtain price data from these countries, among those 'From the G7 and from all countries of Germany's external reference price basket. "
The program would be piloted at the Center for Medicare and Medicaid Innovation, an agency created by the Affordable Care Act to look at ways to make Medicare and Medicaid programs more profitable, now led by Adam Boehler. The pilot project would cover half of the US population and the administration estimates that the plan could reduce Medicare Part B spending by $ 17 billion over the next five years.
And, since Medicare seniors are required to pay a portion of the cost of their Medicare Part B drugs, a drop in the price of Medicare drugs would result in significant savings for seniors receiving drugs. by infusion.
The drug industry will fight tooth and nail
The main pharmaceutical pressure group, The Pharmaceutical Research and Manufacturers of America (PhRMA), reacted quickly by saying that it would "jeopardize access to medicines for the elderly and disabled patients suffering from devastating diseases such as cancer, rheumatoid arthritis and other autoimmune diseases ". The Biotechnology Industry Organization (BIO) said it would pursue "a worrying trend to undermine the Medicare Part B drug program."
But what undermines the Medicare program is its unsustainable cost – the biggest contributor to the US debt and deficit problems. Many, but not all, pharmaceutical and biotechnology companies have contributed to this problem by charging excessive and abusive prices to the Medicare program.
Ironically, the Trump administration's "American Patients First" drug price master plan has diverted the idea of setting prices on the basis of an international index. She termed the use of "price of a drug in one or more countries to derive a reference price or a reference price" as "price control". [that] prevent pharmaceutical companies from charging market prices for their products, while delaying the availability of new treatments for patients living in countries implementing these policies. "
But as I said earlier, the prices currently paid by Medicare are not "market rates" in the real sense of the term. A market is based on competition and voluntary exchange. In the case of Medicare Part B, pharmaceutical companies charge what they want and taxpayers pay the bill. It's not a free market at all.
A catalyst for further reforms?
Medicare's most marketed model for prescription drug coverage is also the most cost-effective: the Medicare Part D program, which covers drugs purchased by seniors in retail pharmacies. Part D of Medicare offers seniors the choice between dozens of private plans offering competitive prices. This system has led to remarkable cost savings and largely explains why the United States is the world leader in the use of inexpensive but effective generic drugs.
The ideal pathway for prescription drug reform would be to extend the Part D model to drugs administered in hospitals and physicians' offices, piloting the integration of Part A and Part B drugs into Part D plans. Fortunately, the Trump administration is also exploring this idea, which could lead to even greater savings over time compared to the International Price Index.
And the international price index itself could be improved. The administration's proposed index excludes more market-oriented healthcare systems in Europe, such as Switzerland and the Netherlands, and includes more single-payer systems such as Canada and the United Kingdom.
The good news is that the Trump administration plays hardball. For too long, even the most modest and progressive reforms have been blocked by industry lobbyists who do not want to prevent anything from intervening in soaring drug prices. By taking dramatic steps, the administration finally forces the industry to come to the bargaining table. We hope the result will be a more affordable medicine for all.
* * *
TO FOLLOW @ Avik on Twitter, Google+ and YouTube, and L & # 39; apothecary on Facebook. Or, sign up to receive a weekly email summary of articles from L & # 39; apothecary. Lily The prescription of the contest, Avik's plan to reduce prescription drug prices, on FREOPP.org.
NOTE TO INVESTORS: Roche (OTCQX: RHHBY), Amgen (NASDAQ: AMGN), Regeneron (NASDAQ: REGN), Johnson & Johnson (NYSE: JNJ), Bristol-Myers Squibb (NYSE: Official Journal), are among the largest pharmaceutical companies with products sold under Medicare Part B. BMY) and AbbVie (NYSE: ABBV).
