Drug Pricing |

For years, American patients have suffered under a drug-pricing system that provides generous incentives for innovation, while too often failing to deliver important medications at an affordable cost. We have access to the greatest medicines in the world, but access is meaningless without affordability.

The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs 

• Fact Sheet: 100 Days of Results: President Trump’s American Patients First Blueprint - PDF
• Report on 100 Days of Action on the American Patient First Blueprint - PDF

The Trump blueprint has already made significant gains in controlling and perhaps reversing costs of pharmaceutical benefits.

In an address to the American Medical Association, Alex Azar, head of the Dept of Health and Human Services, had this opening remark,

"The first principle of our vision for value-based healthcare is about empowering patients—but we are fully aware this cannot be done without empowering physicians, too. So I want you all to imagine a system where patients are finally in the driver’s seat, free to work with physicians who have been empowered as navigators of the best options for their patient, rather than navigators of a sea of paperwork."

The mission of HHS is to enhance and protect the health and well-being of every American—and I know that is the mission and vocation of every member of the AMA as well.

That includes the four priorities I’ve chosen as Secretary:  1. combating the opioid crisis, 2. reforming the individual insurance market,  3. lowering the price of prescription drugs, and 4.  transforming our healthcare system into one that pays for value.

HHS has identified four challenges in the American drug market: • High list prices for drugs • Seniors and government programs overpaying for drugs due to lack of the latest negotiation tools • High and rising out-of-pocket costs for consumers • Foreign governments free-riding of American investment in innovation goal of the blueprint was very clear: bringing down prescription drug prices and patient out-of-pocket costs. We laid out dozens of possible actions in the blueprint, many of which will entail some disruption to existing industry players.

That’s why we laid out the blueprint in a deliberative way. We want to disrupt how drugs are priced in America because that system is so deeply broken. But we have to accomplish this goal in a way that minimizes any disruption for patients and providers.

HHS has identified four challenges in the American drug market: • High list prices for drugs • Seniors and government programs overpaying for drugs due to lack of the latest negotiation tools • High and rising out-of-pocket costs for consumers • Foreign governments free-riding of of American investment in innovation Under President Trump, HHS has proposed a comprehensive blueprint for addressing these challenges, identifying four key strategies for reform: • Improved competition • Better negotiation • Incentives for lower list prices • Lowering out-of-pocket costs HHS’s blueprint encompasses two phases: 1) actions the President may direct HHS to take immediately and 2) actions HHS is actively considering, on which feedback is being solicited.Last fall, the President put forth a model for overhauling how Medicare pays for physician-administered drugs, in Medicare Part B fee-for-service.

Today’s Part B status quo is totally unacceptable: America pays almost twice as much, and sometimes five or six times as much, as other wealthy countries pay for the most costly physician-administered drugs. Meanwhile, physicians are put in the position of having to acquire and hold these drugs, which are often extremely expensive, risky acquisitions.

Our new International Price Index model, or IPI, is primarily aimed at delivering for American patients a share of the discounts that drug manufacturers currently give to other wealthy countries. Through the advance notice of proposed rulemaking (ANPRM), CMS is seeking feedback on the potential parameters of the IPI Model. The ANPRM can be downloaded from the CMS Newsroom.

Background

Medicare Part B drug expenditures have increased significantly over time. From 2011 to 2016, Medicare FFS drug spending increased from $17.6 billion to $28 billion under Medicare Part B, representing a compound annual growth rate (CAGR) of 9.8 percent, with per capita spending increasing 54 percent, from $532 to $818. Medicare beneficiaries and the Medicare program are also paying more for Part B drugs than international comparators. Based on a HHS analysis comparing Medicare spending for separately payable Part B physician-administered drugs to the prices of those drugs in sixteen other developed economies – Austria, Belgium, Canada, Czech Republic, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain, Sweden, and United Kingdom – spending in the U.S. was 1.8 times higher. As a result, Medicare beneficiaries and the Medicare program are bearing unnecessary, potentially avoidable costs for Part B drugs.

Currently, Medicare payment for separately payable outpatient drugs in physician offices, hospital outpatient departments, and certain other settings is based on drug manufacturers’ average sales prices in the United States plus a six percent add-on payment (+6 percent), and is subject to the sequestration, which effectively reduces the add-on to +4.3 percent. The dollar amount of the add-on is larger as drug prices increase, which may encourage physicians to prescribe higher-cost drugs and raise beneficiary and program spending.

Stakeholders have stated that the high cost of Part B drugs for treating cancer, rheumatoid arthritis, multiple sclerosis, other immune disorders, and other conditions, may pose a barrier to providers furnishing these therapies and beneficiaries receiving treatment. CMS has heard from many physicians, specialty groups and patient advocates that the high cost of drugs is a growing financial risk for beneficiaries and providers.

The ongoing struggle against rising drug costs continues. These provisions apply only to CMS and Medicare Beneficiaries.  This segment is a considerable portion of users and ignores private payers. That is another story and also needs to be addressed. 

A Letter from American Health Insurance Plans (Matthew Eyles, President and CEO) explores the ramification and cost shifting that could come about by the International Price Index Model .




Drug Pricing | HHS.gov: Blueprint for bringing down the high price of drugs and reducing out-of-pocket costs for the American consumer.