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

MAY 2018
The U.S. Department of Health & Human Services
Hubert H. Humphrey Building
200 Independence Avenue, S.W.
Washington, D.C. 20201

Toll Free Call Center: 1-877-696-6775

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

MAY 2018

One of my greatest priorities is to reduce
the price of prescription drugs. In
many other countries, these drugs cost
far less than what we pay in the United
States. That is why I have directed
my Administration to make fxing the
injustice of high drug prices one of our
top priorities. Prices will come down.”


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|5 |

The Secretary of Health and Human Services

Washington, D.C. 20201

Message from the Secretary

THE UNITED STATES is first in the world These problems have often been
in biopharmaceutical investment discussed, but gone unaddressed.
and innovation. Combining our free Under President Trump, that has now
market system and generous pub- changed. This blueprint is a historic
lic investment made America home plan for bringing down the high price
to the first chemotherapy treat- of drugs and reducing out-of-pocket
ments for cancer, the first effective costs for the American consumer.
treatments for HIV, the first cure The time to act is now: Not only
for Hepatitis C, and now, the first are costs spiraling out of control, but
therapies that turn our own immune the scientifc landscape is changing
systems against cancer. as well. Securing the next generation
But too often, this system has not of cures for the next generation of
put American patients first. We have American patients will require radi-
access to the greatest medicines in cal reforms to how our system works.
the world, but access is meaningless Our blueprint will bring immediate
without affordability. relief to American patients while also
When it comes to the cost of pre- delivering long-term reforms.
scription drugs, our healthcare sys- The men and women of the
tem faces four major challenges: high Department of Health and Human
list prices for drugs; seniors and gov- Services (HHS) are looking at every
ernment programs overpaying for facet of HHS’s programs, author-
drugs due to lack of the latest nego- ities, and spending. Working with
tiation tools; high and rising out-of- our partners in the private sector,
pocket costs for consumers; and for- we will turn this vision into action,
eign governments free-riding off of and thereby improve the health and
American investment in innovation. well-being of every American.

Alex M. Azar II
I. Trump Administration Blueprint in Brief............................................................ 9

II. What’s the Problem? ..............................................................................................12

III. Trump Administration Accomplishments on Drug Pricing ........................18

IV. Responding to President Trump’s Call to Action .......................................... 23

V. Further Actions Under Review and Opportunities for Feedback .................26

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I. Trump Administration Blueprint In Brief | 9 |

I. Trump Administration
Blueprint in Brief

HHS has identifed 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 comprehen-

sive blueprint for addressing these challenges, identify-
ing 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.
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Increased Competition • Sending a report to the President

on whether lower prices on some
Immediate Actions Medicare Part B drugs could be
• Steps to prevent manufacturer negotiated for by Part D plans
gaming of regulatory processes
such as Risk Evaluation and • Leveraging the Competitive
Mitigation Strategies (REMS) Acquisition Program in Part B.

• Measures to promote innovation • Working across the

and competition for biologics Administration to assess the
problem of foreign free-riding
• Developing proposals to stop
Medicaid and Afordable Care Further Opportunities
Act programs from raising prices • Considering further use of
in the private market value-based purchasing in
federal programs, including
Further Opportunities indication-based pricing and
• Considering how to long-term fnancing
encourage sharing of samples
needed for generic drug • Removing government
development impediments to value-based
purchasing by private payers
• Additional eforts to promote
the use of biosimilars • Requiring site neutrality
in payment
Better Negotiation
• Evaluating the accuracy
Immediate Actions and usefulness of current
• Experimenting with national drug spending data
value-based purchasing
in federal programs

• Allowing more substitution

in Medicare Part D to address
price increases for single-
source generics

• Reforming Medicare Part D to

give plan sponsors signifcantly
more power when negotiating
with manufacturers
I. Trump Administration Blueprint In Brief | 11 |

Incentives for Lower Lowering Out-of-Pocket Costs

List Prices
Immediate Actions
• Prohibiting Part D contracts
Immediate Actions from preventing pharmacists’
• FDA evaluation of requiring telling patients when they
manufacturers to include list could pay less out-of-pocket
prices in advertising by not using insurance

• Updating Medicare’s drug-pricing • Improving the usefulness

dashboard to make price increases of the Part D Explanation
and generic competition more of Benefts statement by
transparent including information about
drug price increases and
Further Opportunities lower cost alternatives
• Measures to restrict the use
of rebates, including revisiting Further Opportunities
the safe harbor under the Anti- • More measures to inform
Kickback statute for drug rebates Medicare Part B and D
benefciaries about lower-
• Additional reforms to the cost alternatives
rebating system
• Providing better annual, or more
• Using incentives to discourage frequent, information on costs to
manufacturer price increases for Part D benefciaries
drugs used in Part B and Part D

• Considering fduciary status

for Pharmacy Beneft
Managers (PBMs)

• Reforms to the Medicaid Drug

Rebate Program

• Reforms to the 340B Drug

Discount Program

• Considering changes to HHS

regulations regarding drug copay
discount cards
| 12 | American Patients First

II. What’s the Problem?

TODAY’S COMPLEX U.S. PHARMACEUTI- i. A Recent Drug Pricing History

CAL MARKET is characterized by high
and rising list prices, increasing A Business Model Is Born
consumer out-of-pocket costs, and Thirty years ago, the majority of pre-
a new era of high-cost drugs lacking scriptions flled at retail pharmacies
competition. Recent developments were cash transactions. Over time,
and challenges in the market include however, health plans began to ofer
a business model built on opaque re- drug coverage to compete for new
bates and discounts that favor high members, knowing the beneft could
list prices, a generational loss of be ofered at relatively low cost.
patent exclusivity, the Affordable But the complexity, price, and
Care Act’s taxes, rebates, and ex- benefts associated with prescrip-
pansion of the 340B drug discount tion drugs dramatically increased
program, expansion of internation- during the 1990s. U.S. drug spend-
al price controls, government pro- ing grew between 11 and 17% per
grams lacking modern negotiation year in the 1990s, as both prices and
tools, and changes in insurance ben- volume soared.1
efit design that shifted the burden of As more complex and more ex-
rising prices to consumers. pensive drugs came on the market,

Payers Premium Money
Reimbursement for Consumers’ Rx


Share of Manufacturer Rebates

Contracting Adam. J., The 2016

Copayment Dispensed Economic Report on
Retail, Mail and Specialty
PBM Agreement

Pharmacies, Drug Channels
Network Agreement Prime Vendor Agreement Institute, January 2016.

Pharmacies Shipped Bulk Drugs

Payment for Payment for

Dispensed Drugs Wholesale Drugs
Benefits Manager
Formulary Payment for
Rebates & Other Fees Wholesale Drugs

Drug Shipped Bulk Drugs

Formulary Agreement Distributor Agreement
Ii. What’s The Problem | 13 |

350$400 FIGURE 2
Retail Prescription
Drug Spend

CMS Ofice of the Actuary
19 5 1980 1985 1990 1995 2000 2005 2010 2015 2020

plans used formularies and copay- to premiums, formularies, and drug

ments to manage utilization and prices. Private health plans outside
keep drug costs low. But drug manu- of Medicare adopted the tools used
facturers paid rebates and discounts by Part D plans, and Part D has in
to be ofered as preferred drugs with large part succeeded at holding down
lower copays, and few drugs were costs for seniors.
excluded from coverage. Meanwhile, drug spending has
In response to rising prices, private been held down in the Medicaid pro-
health plans began to use closed for- gram by other tools. The program’s
mularies to manage drug spending and rules prohibit the use of closed for-
negotiate higher rebates and discounts mularies, but states use “preferred
from drug manufacturers, holding drug lists” to negotiate larger sup-
down increases in net drug prices. plemental rebates than required by
law and limit the use of drugs made
Medicare and Medicaid Evolve by manufacturers not ofering sup-
Medicare Part D introduced new dy- plemental rebates. As a result, drug
namics to the market, as the frst manufacturers have faced pressure
truly insured prescription drug ben- to ofer higher rebates to main-
eft. Part D plan sponsors agreed to tain volume, or risk losing revenue
accept the fnancial risk of providing growth caused from being excluded
covered drugs to Medicare benef- from markets.
ciaries in exchange for a per-benef-
ciary, per-month payment. A Generational Loss of Exclusivity
Part D Plans negotiated ag- Around two decades after the boom
gressively to keep premiums and in drug spending of the 1990s, be-
drug costs low for cost-conscious ginning in 2012, the expiration of
Medicare benefciaries, and the Part patents of popular drugs—many
D Plan Finder brought transparency “blockbuster drugs” with U.S. sales
| 14 | American Patients First

of $1 billion or more—led to the loss igible for the frst time, while the
of over $140 billion in drug manu- ACA’s Medicaid expansion made
facturer revenue.2 New generic com- more hospitals eligible by increas-
petition coincided with a slowdown ing their Disproportionate Share
in new product development, creat- Hospital enrollment.5
ing additional fnancial pressure. In fact, the number of 340B hos-
pitals grew from nearly 1,700 in 2011
Afordable Care Act Taxes to 2,479 in 2017. The number of
and Rebates non-hospital covered entities, of-
The Affordable Care Act (ACA) site clinics or “child sites,” hospital
shifted costs and changed the outpatient departments, and con-
Medicaid Drug Rebate Program in tract pharmacies also grew substan-
ways that may have driven up pric- tially.6 As a result, discounted drug
es for consumers, especially in the purchases made by covered entities
private market. under the 340B program totaled
The ACA also created a new tax more than $16 billion in 2016—
on branded prescription drug sales nearly a 400% increase in purchases
to Medicare, Medicaid, and other from 2009.7 The additional billions
government health care programs. of dollars in discounted sales and the
Drug companies paid $2.5 billion in cross-subsidization necessary may
2011, based on their market share have created additional pressure on
in government programs, a number manufacturers to increase list price.
that increased to $4.1 billion in 2018.
The ACA also increased the manda- Growth in International
tory Medicaid base rebate on brand Price Controls
name drugs to 23.1%, and extended The global financial crisis in 2008
the Medicaid rebate to drugs pur- spurred austerity measures in
chased by Medicaid Managed Care most European countries, includ-
Organizations, more than doubling ing more aggressive use of existing
the number of Medicaid covered drug price controls. Between 2010
lives using rebate-eligible drugs.3,4 and 2011, 23 countries implement-
This expansion of discounts may ed 89 distinct measures to contain
have placed pressure on list prices by government spending on prescrip-
forcing drug manufacturers to raise tion drugs. Most used their sin-
prices overall. gle-payer healthcare systems to
impose drug price controls along-
340B Growth side increased copayments, val-
The ACA also increased the demands ue-added tax rates on prescription
on the 340B drug discount program: drugs, and other measures.8
For one, it made critical access hos- In 2013, the World Health
pitals and other hospital types el- Organization published a paper de-
Ii. What’s The Problem | 15 |

scribing the growing use of exter-

nal reference pricing, or the prac-
tice of using the price of a medicine One in seven
in one or several countries to derive
a benchmark or reference price for employees, and a
the purposes of setting or negotiat-
ing the price of the product in a giv- growing number
en country.9 Every time one country
demands a lower price, it leads to a of people with
lower reference price used by oth-
er countries. Such price controls, individually-
combined with the threat of market
lockout or intellectual property in- purchased
fringement, prevents drug compa-
nies from charging market rates for insurance, now has
their products, while delaying the
availability of new cures to patients a separate drug
living in countries implementing
these policies. deductible.
ii. Where We Are Today
dustry turned to its remaining tool
Industry Impact to drive growth: increasing price.
The loss of patent exclusivity on suc- Prices soared on certain advanced
cessful products, new ACA taxes, and small molecule drugs and new spe-
requirements to extend higher re- cialty drugs. Meanwhile, PBMs ex-
bates and discounts to a markedly in- ploited new utilization management
creased Medicaid and 340B popula- tools and “price protection” con-
tion created an estimated $200 billion tracts to extract even higher rebates,
of downward pressure on pharma- further widening the gap between
ceutical industry revenues—during list and net prices.
a fve-year period when innovation Each increase in list prices sat-
was decreasing. International price isfed the drug industry’s need to
controls and delayed global product grow revenue and increased admin-
launches exacerbated the problem. istrative fees paid to PBMs, but also
Absent new products to launch boosted the prices paid by payers
and the ability to increase revenue and, especially, consumers.
through volume, and in the face of
a more sophisticated PBM industry Lack of Modern Negotiation Tools
demanding higher rebates and re- in Government Programs
stricting access to markets, the in- Private health plans in non-govern-
| 16 | American Patients First

Retail Net
Retail Gross FIGURE 3
List Price vs.
Net Price
Billions ($)

250 Medicine Use and Spending in
the U.S.; A Review of 2017 and
230 Outlook to 2022. April 19, 2018

2013 2014 2015 2016 2017

ment programs use aggressive formu- in both the employer-sponsored and

lary management tools to negotiate individually-purchased markets are
better deals for high-cost drugs dis- more frequently relying on prescrip-
pensed in pharmacies. Private health tion drug coinsurance regardless of
plans are also presently experimenting formulary tier, although they do so
with competitive acquisition and utili- most often for non-preferred brands
zation management of drugs adminis- and specialty drugs.
tered in physicians’ ofces. Consumers who have not met
Medicare rules limit the ability of their deductible or are subject to
Part D plans to use these tools, mak- coinsurance, pay based on the
ing it harder for plans to negotiate as pharmacy list price, which is not
efectively for drugs, particular high- reduced by the substantial drug
cost drugs that lack competition. manufacturer rebates paid to PBMs
and health plans. As a result, the
Changes in Beneft Design growth in list prices, and the wid-
Consumers are more and more being ening gap between list and net
exposed to the rising cost of their prices, markedly increases con-
prescription drugs. sumer out-of-pocket spending,
In 2016, nearly 40% of adults with particularly for high-cost drugs
employer-sponsored insurance, and not subject to negotiation.
over half of adults with individual- This is not only a fnancial chal-
ly purchased insurance, enrolled in a lenge, but a health issue as well: One
high-deductible health plan. One in study found that consumers asked
seven employees, and a growing num- to pay $50 or more at the pharma-
ber of people with individually-pur- cy counter are four times more likely
chased insurance, now has a separate to abandon the prescription than a
drug deductible.10 Private health plans consumer charged $10.11
Ii. What’s The Problem | 17 |

Specialty Spend
Traditional Spend FIGURE 4
Growth in
600 22% Decrease Specialty Drug
500 Spending
Billions ($)

Medicine Use and Spending in
300 the U.S.; A Review of 2017 and
106% Increase
Outlook to 2022. April 19, 2018
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

What had been a hidden negotia- The Situation Today

tion and wealth transfer between drug Taken together, these drivers con-
manufacturers and PBMs is now a tribute to high and rising list prices
direct increase on consumer out-of- and consumer out-of-pocket spend-
pocket spending that likely decreases ing. Because health plans, pharma-
drug adherence and health outcomes. cy beneft managers (PBMs), and
wholesalers receive higher rebates
The Growth of High-Cost Drugs and fees when list prices increase,
New challenges are emerging onto there is little incentive to control
this landscape. A growing number of list prices. Consumers, however, pay
complex drugs account for a grow- higher copayments, coinsurance, or
ing percentage of health care spend- pre-deductible out-of-pocket costs
ing. The pharmaceutical industry when list prices rise.
has shifted its attention to high-cost The Trump Administration be-
drugs that face little to no competi- lieves it is time to realign the sys-
tion, because they ofer the freedom tem in four ways: increasing com-
to set high launch prices and in- petition, improving government
crease them over time. negotiation tools, creating in-
Though these drugs ofer hope centives for lower list prices, and
to the 1 percent of insured benef- bringing down out-of-pocket costs
ciaries who use them, they account for consumers.
for 35-40% of health plan spending,
and will increase to over half of drug
spending over the next 5 years.12
Absent reform, the growth of high
cost drugs will further compound
the issues already described.
| 18 | American Patients First

III. Trump Administration

Accomplishments on Drug Pricing

THE PRESIDENT has consistently em- to spur new entrants and bring
phasized the need to reduce the price prices down. Over 1,000 generic
of prescription drugs. The Trump drugs were approved in 2017,
Administration has already taken which is the most in FDA’s history
a number of signifcant adminis- in a calendar year by over 200
trative steps, and proposed in the drugs. These generic approvals
President’s FY2019 Budget, to im- saved American consumers and
prove competition and end the gam- taxpayers nearly $9 billion in 2017.
ing of regulatory processes, support
better negotiation of drug discounts • Drug Competition Action
through government insurance pro- Plan. In 2017, President
grams, create incentives for phar- Trump’s FDA established a
maceutical companies to lower list Drug Competition Action Plan
prices, and reduce consumer out- to enable patients to access
of-pocket spending at the pharmacy more affordable medications
and other care settings. by focusing the Agency’s
efforts in three key areas: (1)
A. Increasing Competition improving the efficiency of
the generic drug development,
Since the beginning of the Trump review, and approval process;
Administration, HHS has taken a (2) maximizing scientific and
number of actions to increase com- regulatory clarity with respect
petition and end the gaming of regu- to complex generic drugs; and
latory processes that may keep drug (3) closing loopholes that allow
prices artifcially infated or hin- brand-name drug companies
der generic, branded, or biosimilar to “game” FDA rules in ways
competition. These eforts include: that forestall the generic
competition Congress intended.
• Accelerating Food and Drug The Agency also has taken
Administration (FDA) approval of steps to prioritize its review
generic drugs. Studies show that of generic drug applications;
greater generic competition is issued guidance to improve
associated with lower prices. FDA efficiencies in the development,
is publishing the names of drugs review, and approval processes
that have no competitors in order for generic drugs, including
Iii. Trump Administration Accomplishments On Drug Pricing | 19 |

complex generic drugs; and • Finalizing a policy in which each

issued guidance to further biosimilar for a given biologic
streamline the submission gets its own billing and payment
and review process for shared code under Medicare Part B,
system Risk Evaluation and to incentivize development of
Mitigation Strategies (REMS), additional lower-cost biosimilars.
and to allow collective Prior approaches to biosimilar
submissions to streamline coding and payment would have
the review of shared REMS. created a race to the bottom of
biosimilar pricing, while leaving
• FDA also announced it will the branded product untouched,
facilitate opportunities for making it an unviable market that
enhanced information sharing few would want to enter.
between manufacturers, doctors,
patients and insurers to improve B. Better Negotiation
patient access to medical
products, including through Medicare Part D has been very suc-
value-based insurance. cessful since it launched in 2006.
However, prescription drug markets
• Speeding Access to More are diferent than they were 12 years
Afordable Generics by Spurring ago, and in some cases Part D plan
Competition. Today, a generic sponsors may be prohibited from
manufacturer that has been doing what private payers outside
awarded 180-day exclusivity the Medicare program do to nego-
for being the frst generic to fle tiate efectively and keep costs low.
can “park” their application More can also be done across the
with FDA, preventing additional Medicare program to provide ben-
generic manufacturers from efciaries with the lower costs and
entering the market. The greater price transparency resulting
President’s FY2019 Budget from better negotiation.
proposes to prevent companies Since the beginning of the Trump
from using their 180-day Administration, HHS has taken a
exclusivity to indefnitely delay number of actions to support better
real competition and savings for negotiation. These eforts include:
consumers by seeking a legislative
change to start a company’s 180- • Finalizing changes to the
day exclusivity clock in certain Medicare Prescription Drug
instances when another generic Program in the 2019 Part C and
application is ready for approval, Part D regulation allowing for
but is blocked solely by such a frst faster mid-year substitution of
applicant’s 180-day exclusivity. generic drugs onto formularies.
| 20 | American Patients First

Price (ASP) isn’t available; and

improving manufacturers’
“We’re the largest reporting of Average Sales Prices
to set accurate payment rates.
buyer of drugs in
• Increasing the integrity of the
the world, and Medicaid Drug Rebate Program,
so that manufacturers pay their
yet we don’t bid fair share in rebates, by proposing
in the President’s FY2019 Budget
properly.” to remove ambiguity regarding
how drugs should be reported
– PRESIDENT TRUMP under the program. HHS is also
manually reviewing each new
drug that has been reported in
• Proposing in the President’s the Medicaid rebate system on
FY2019 Budgeti a 5-part plan to a quarterly basis to make sure
modernize the Medicare Part classifcations are correct, and
D program, a portion of which the United States took legal
includes enhancing Part D action against Mylan for their
plans’ negotiating power with misclassifcation of EpiPen,
manufacturers by changing Part resulting in an agreement for
D plan formulary standards to Mylan to pay back $465 million in
require a minimum of one drug rebate payments.
per category or class rather than
two. We note that the 5-part plan • Proposing in the President’s
is intended to be implemented FY2019 Budget to further clarify
together, as eliminating even one the Medicaid defnition of brand
piece of the package signifcantly drugs, which would address
changes the proposal’s impacts. inappropriate interpretations
leading some manufacturers to
• Proposing in the President’s classify certain brand and over-
FY2019 Budget to address abusive the-counter drugs as generics
drug pricing by manufacturers for Medicaid rebate purposes,
by: establishing an infation limit reducing the rebates they owe.
for reimbursement of Medicare
Part B drugs; reducing Wholesale • Proposing in the President’s
Acquisition Cost (WAC)-Based FY2019 Budget to call for new
Payment when Average Sales Medicaid demonstration authority

i. https://www.whitehouse.gov/wp-content/uploads/2018/02/budget-fy2019.pdf
Iii. Trump Administration Accomplishments On Drug Pricing | 21 |

for up to fve states to test drug plan, or government program.

coverage and fnancing reforms Obscuring these discounts can shift
that build on private sector best costs to consumers in commercial
practices. Participating states health plans and Medicare bene-
would determine their own fciaries. Many incentives in the
drug formularies, coupled with current system reward higher list
an appeals process to protect prices, and HHS is interested in cre-
benefciary access to non- ating new incentives to reward drug
covered drugs based on medical manufacturers that lower list prices
need, and negotiate drug prices or do not increase them.
directly with manufacturers. Since the beginning of the Trump
HHS and participating states Administration, HHS has taken a
would rigorously evaluate these number of actions to create incen-
demonstrations, which would tives to lower list prices.
provide states with new tools to These eforts include propos-
control drug costs and tailor drug ing in the President’s FY2019 bud-
coverage decisions to state needs. get a 5-part plan to modernize the
Medicare Part D program, a portion
• Proposing in the President’s of which includes the exclusion of
FY2019 Budget to authorize manufacturer discounts from the
the HHS Secretary to leverage calculation of benefciary out-of-
Medicare Part D plans’ pocket costs in the Medicare Part
negotiating power for certain D coverage gap, and the establish-
drugs covered under Part B. ment of a benefciary out-of-pock-
et maximum in the Medicare Part D
• Addressing price disparities in catastrophic phase to reduce out-
the international market. The of-pocket spending for benefcia-
Administration is updating a ries who spend the most on drugs.
number of historical studies The changes in the catastrophic
to analyze drug prices paid phase would shift more responsibil-
in countries that are a part ity onto plans, creating incentives
of the Organisation for for plans to negotiate with manu-
Economic Co-operation and facturers to lower prices for high-
Development (OECD). cost drugs. We note that the 5-part
plan is intended to be implemented
C. Creating Incentives together, as eliminating even one
piece of the package signifcantly
to Lower List Prices changes the proposal’s impacts.
The list price of a drug does not re- In addition, the President’s
fect the discounts or price conces- FY2019 Budget proposes reforms to
sions paid to a PBM, insurer, health improve 340B Program integrity and
| 22 | American Patients First

ensure that the benefts derived from comment on potential policy

participation in the program are used approaches for applying some
to beneft patients, especially low-in- manufacturer rebates and all
come and uninsured populations. pharmacy price concessions to the
price of a drug at the point of sale.
D. Reducing Patient
• Finalizing changes to the
Out-of-Pocket Spending
Medicare Prescription Drug
American patients have the right to Program in the 2019 Part C
know what their prescription drugs and Part D regulation allowing
will really cost before they get to the Medicare benefciaries receiving
pharmacy or get the drug. Too many low-income subsidies to access
people abandon their prescriptions biosimilars at a lower cost.
at the pharmacy when they discover
the price is too high, and too many • Proposing in the President’s
patients are never informed of lower FY2019 Budget a 5-part plan to
cost options. modernize the Medicare Part
Since the beginning of the Trump D program, a portion of which
Administration, HHS has taken a includes eliminating cost-
number of steps to lower consumer sharing on generic drugs for
out-of-pocket spending and improve low-income benefciaries and
transparency. These eforts include: requiring Medicare Part D plans
to apply a substantial portion
• Finalizing Medicare Outpatient of rebates at the point of sale.
Prospective Payment System (OPPS) We note that the 5-part plan
rules to reduce benefciary out-of- is intended to be implemented
pocket spending for 340B drugs together, as eliminating even one
administered in certain hospitals by piece of the package signifcantly
an estimated $320 million in 2018, changes the proposal’s impacts.
which would equal $3.2 billion when We also note that in the months
multiplied over ten years. following this Part D proposed
rule and the President’s budget
• Seeking information about proposal that included this policy
changes in the Medicare change explicitly, several major
Prescription Drug Program insurers and pharmacy beneft
regulations for contract year 2019 managers announced they would
that would increase transparency pass along a portion of rebates
for people with Medicare to individual members in their
prescription drug coverage. fully-insured populations
The proposed rule included a or when otherwise requested
Request for Information soliciting by employers.
Iv. Responding To President Trump’s Call To Action | 23 |

IV. Responding to President

Trump’s Call to Action

PRESIDENT TRUMP has called on the the availability, competitiveness,

Administration to propose new and adoption of biosimilars as
strategies and take bold actions to afordable alternatives to branded
improve competition and end the biologics. FDA will also continue
gaming of regulatory processes, to educate clinicians, patients,
support better negotiation of drug and payors about biosimilar and
discounts through government in- interchangeable products as we
surance programs, create incentives seek to increase awareness about
for pharmaceutical companies to these important new treatments.
lower list prices, and reduce con-
sumer out-of-pocket spending at B. Better Negotiation
the pharmacy and other care set-
tings. HHS may undertake these and In response to President Trump’s
other actions, to the extent permit- call to action, HHS may support bet-
ted by law, in response to President ter negotiation by:
Trump’s call to action.
• Directing Centers for Medicare
A. Improve Competition & Medicaid Services (CMS) to
develop demonstration projects to
In response to President Trump’s test innovative ways to encourage
call to action, HHS may support im- value-based care and lower drug
proved competition by: prices. These models should
hold manufacturers accountable
• Taking steps to prevent gaming for outcomes, align with CMS’s
of regulatory processes: FDA priorities of value over volume
will issue guidance to address and site-neutral payments, and
some of the ways in which provide Medicare providers,
manufacturers may seek to use payers, and states with additional
shared system REMS to delay or tools to manage spending for
block competition from generic high-cost therapies.
products entering the market.
• Allowing Part D plans to adjust
• Promoting innovation and formulary or beneft design
competition for biologics. FDA during the beneft year if
will issue new policies to improve necessary to address a price
| 24 | American Patients First

increase for a sole source generic may discourage Part D plan

drug. Presently, Part D plans sponsors from appropriately
do not contract with generic managing utilization of high-
drug manufacturers for the cost drugs. This change could
purchase of generic drugs, and provide Part D plan sponsors
generally are not permitted with the ability to appropriately
to change their formulary or manage high-cost changes, while
beneft design without CMS holding sponsors accountable
approval in response to a price primarily using other successful
increase. This change could enforcement mechanisms.
ensure Part D plans can respond
to a price increase by the only • Evaluating options to allow
manufacturer of a generic drug. high-cost drugs to be priced
or covered diferently based on
• Providing plans full fexibility their indication. Presently, Part
to manage high cost drugs that D plans must cover and pay the
do not provide Part D plans same price for a drug regardless
with rebates or negotiated of the indication for which it was
fxed prices, including in the prescribed. This change could
protected classes. Presently, permit Part D plans to choose to
Part D plans are unable to cover or pay a diferent price for a
negotiate lower prices for high- drug, based on the indication.
cost drugs without competition.
This change could allow Part D • Sending the President a report
plans to use the tools available identifying particular drugs or
to private payers outside of the classes of drugs in Part B where
Medicare program to better there are savings to be gained by
negotiate for these drugs. moving them to Part D.

• Updating the methodology used • Taking steps to leverage

to calculate Drug Plan Customer the authority created by the
Service star ratings for plans Competitive Acquisition
that are appropriately managing Program (CAP) for Part B Drugs
utilization of high-cost drugs. & Biologicals. This program will
Presently, if a Part D plan issues generally provide physicians a
an adverse redetermination choice between obtaining these
decision, the enrollee, the drugs from vendors selected
enrollee’s representative or the through a competitive bidding
enrollee’s prescriber may appeal process or directly purchasing
the decision to the Independent these drugs and being paid under
Review Entity (IRE). This process the current average sales price
Iv. Responding To President Trump’s Call To Action | 25 |

(ASP) methodology. The CAP, increases, and recognize when

or a model building on CAP competition is working with an
authority, may provide updated drug pricing dashboard.
opportunities for Federal savings This tool will also provide
to the extent that aggregate bid patients, families, and caregivers
prices are less than 106 percent of with additional information to
ASP, and provides opportunities make informed decisions and
for physicians who do not wish predict their cost sharing.
to bear the fnancial burdens and
risk associated with being in the • Develop proposals related to the
business of drug acquisition. Afordable Care Act’s Maximum
Rebate Amount provision, which
• Working in conjunction with the limits manufacturer rebates on
Department of Commerce, the U.S. brand and generic drugs in the
Trade Representative, and the U.S. Medicaid program to 100% of the
Intellectual Property Enforcement Average Manufacturer Price.
Coordinator to develop the
knowledge base necessary to D. Reduce Patient
address the unfair disparity
between the drug prices in America
Out-of-Pocket Spending
and other developed countries. In response to President Trump’s
The Trump Administration call for action, HHS may:
is committed to making the
appropriate regulatory changes • Prohibit Part D plan contracts
and seeking legislative solutions to from preventing pharmacists
put American patients frst. from telling patients when they
could pay less out-of-pocket by
C. Lowering List Prices not using their insurance – also
known as pharmacy gag clauses.
In response to President Trump’s
call to action, HHS may: • Require Part D Plan sponsors to
provide additional information
• Call on the FDA to evaluate the about drug price increases and
inclusion of list prices in direct- lower-cost alternatives in the
to-consumer advertising. Explanation of Benefts they
currently provide their members.
• Direct CMS to make Medicare and
Medicaid prices more transparent,
hold drug makers accountable for
their price increases, highlight
drugs that have not taken price
| 26 | American Patients First

V. Further Actions Under Review

and Opportunities for Feedback

BUILDING ON THE IDEAS already pro- incentives to obtain afordable pric-

posed, HHS is considering even es on safe and efective drugs? Does
bolder actions to bring down pric- the Best Price reporting requirement
es for patients and taxpayers. These of the Medicaid Drug Rebate Program
include new measures to increase pose a barrier to price negotiation
transparency; fx the incentives that and certain value-based agreements
may be increasing prices for pa- in other markets, or otherwise shift
tients; and reduce the costs of drug costs to other markets? Are govern-
development. HHS is interested in ment programs causing underpricing
public comments about how the de- of generic drugs, and thereby reduc-
partment can take action to improve ing long-term generic competition?
competition and end the gaming of Afordable Care Act Taxes and
regulatory processes, support bet- Rebates. The Afordable Care Act im-
ter negotiation of drug discounts posed tens of billions of dollars in
through government insurance pro- new taxes and costs on drugs sold in
grams, create incentives for phar- government programs through a new
maceutical companies to lower list excise tax, an increase in the Medicaid
prices, and reduce consumer out- drug rebate amounts, and an exten-
of-pocket spending at the pharmacy sion of these higher rebates to com-
and other care settings. HHS is also mercially-run Medicaid Managed
interested in public comments about Care Organizations. How have these
the general structure and function changes impacted manufacturer
of the pharmaceutical market, to list pricing practices? Are govern-
inform these actions. Proposals de- ment programs being cross-subsi-
scribed in this section are for admin- dized by higher list prices and excess
istrative action, when within agency costs paid by individuals and em-
authority, and legislative proposals ployers in the commercial market?
as necessary. If cross-subsidization exists, are the
HHS is soliciting comments on taxes and artifcially-depressed pric-
these and other policies under active es causing higher overall drug costs
consideration. or other negative efects?

Increasing competition Access to reference product samples

Underpricing or Cost-Shifting. Do Distribution restrictions. Certain
HHS programs contain the correct prescription drugs are subject to
V. Further Actions Under Review And Opportunities For Feedback | 27 |

limitations on distribution. Some

of these distribution limitations are
imposed by the manufacturer, while Some manufacturers
others may be imposed in connec-
tion with an FDA-mandated Risk may be gaming
Evaluation and Mitigation Strategy
(REMS). Some manufacturers may distribution
be gaming these distribution lim-
itations to prevent generic devel- limitations to
opers from accessing their drugs
to conduct the tests that are legal- prevent generic
ly required for a generic drug to be
brought to market, thereby limiting developers
opportunities for competition that
could place downward pressure on from accessing
drug prices. In some instances, for
products that are subject to REMS their drugs.
that impact distribution, manufac-
turers continue to restrict access to
generic developers even after the neric drug developers, companies
FDA issues a letter stating that it has engaged in biosimilar and inter-
favorably evaluated the develop- changeable product development
er’s proposed safety protections for may encounter difculties obtain-
testing and would not consider the ing sufcient samples of the ref-
provision of drug samples to this de- erence product for testing. What
veloper for generic development to actions should be considered to fa-
violate the applicable REMS. Should cilitate access to reference product
additional steps be taken to review samples by these companies?
existing REMS to determine whether
distribution restrictions are appro- Biosimilar development, approval,
priate? Are there terms that could education, and access
be included in REMS, or provided in Resources and tools from FDA: FDA
addition to REMS, that could expand prioritizes ongoing eforts to im-
access to products necessary for ge- prove the efciency of the biosimilar
neric development? Are there other and interchangeable product devel-
steps that could be taken to facilitate opment and approval process. For
access to products that are under example, FDA is working to identify
distribution limitations imposed by areas in which additional informa-
the manufacturer? tion resources or development tools
Samples for biosimilars and may facilitate the development of
interchangeables. Like some ge- high quality biosimilar and inter-
| 28 | American Patients First

changeable products. What specif- most useful to heath care profes-

ic types of information resources or sionals and patients to promote un-
development tools would be most derstanding of these products? What
efective in reducing the develop- role could state pharmacy practice
ment costs for biosimilar and inter- acts play in advancing the utilization
changeable products? of biosimilar products?
Improving the Purple Book. In Interchangeability. How could
the Purple Book, FDA publishes in- the interchangeability of biosimilars
formation about biological prod- be improved, and what efects would
ucts licensed under section 351 of the it have on the prescribing, dispens-
Public Health Service Act, including ing, and coverage of biosimilar and
reference products, biosimilars, and interchangeable products?
interchangeable products. The Purple
Book provides information about B. Better Negotiation
these products that is useful to pre-
scribers, pharmacists, patients, and The American pharmaceutical mar-
other stakeholders. FDA is committed ketplace is built on innovation and
to the timely publication of certain competition. However, regula-
information about reference prod- tions governing how Medicare and
uct exclusivity in the Purple Book. Medicaid pay for prescription drugs
How could the Purple Book be more have not kept pace with the avail-
useful to health care professionals, ability of new types of drugs, partic-
patients, manufacturers, and other ularly higher-cost curative therapies
stakeholders? What additional infor- intended for use by fewer patients.
mation could be added to increase the Drug companies, commercial insur-
utility of the Purple Book? ers, and states have proposed cre-
Educating providers and pa- ative approaches to fnancing these
tients. Physician and patient con- new treatments, including indica-
fdence in biosimilar and inter- tion-based pricing, outcomes-based
changeable products is critical to contracts, long-term fnancing
the increased market acceptance of models, and others. Value-based
these products. FDA intends to build transformation of our entire health-
on the momentum of past educa- care system is a top HHS priority.
tion eforts, such as the launch of its Improving price transparency is an
Biosimilars Education and Outreach important part of achieving this aim.
Campaign in 2017, by developing What steps can be taken to improve
additional resources for health care price transparency in Medicare,
professionals and patients. What Medicaid, and other forms of health
types of information and educa- coverage, so that consumers can
tional resources on biosimilar and seek value when choosing and using
interchangeable products would be their benefts?
V. Further Actions Under Review And Opportunities For Feedback | 29 |

Value-Based Arrangements and ganizations fnd helpful in negotiat-

Price Reporting. What benefts would ing VBP supplemental rebates with
accrue to Medicare and Medicaid manufacturers? How would these
benefciaries by allowing manufac- changes afect Medicare or the 340B
turers to exclude from statutory price program? Are there particular sec-
reporting programs discounts, re- tions of the Social Security Act (e.g.,
bates, or price guarantees included the anti-kickback statute), or other
in value-based arrangements? How statutes and regulations that can be
would excluding these approach- revised to assist with manufacturers’
es from Average Manufacturer Price and states’ adoption of value-based
(AMP) and Best Price (BP) calcu- arrangements?
lations impact the Medicaid Drug Indication-Based Payments. Pre-
Rebate program and supplemental scription drugs have varying degrees
rebate revenue? How would these of efectiveness when used to treat dif-
exclusions afect Average Sales Price ferent types of disease. Though drugs
(ASP) and 340B Ceiling Prices? What may be approved by the FDA to treat
benefts would accrue to Medicare specifc indications, or used of-la-
and Medicaid benefciaries by ex- bel by prescribers to treat others, they
tending the time for manufacturers are typically subject to the same price.
to report restatements of AMP and/ Should Medicare or Medicaid pay the
or BP reporting, as outlined in 42 CFR same price for a drug regardless of the
§447.510, to accommodate adjust- diagnosis for which it is being used?
ments because of possible extended How could indication-based pric-
VBP evaluation timeframes? Is there ing support value-based purchasing?
a timeframe CMS should consid- What lessons could be learned from
er that will allow manufacturers to private health plans? Are there unin-
restate AMP and BP without nega- tended consequences of current low-
tive impact on state rebate revenue? cost drugs increasing in price due to
What modifcations could be made to their identifcation as high value? How
the following regulatory defnitions and by whom should value be deter-
in the current Medicaid Drug Rebate mined?? Is there enough granularity
Program that could facilitate the de- in coding and reimbursement systems
velopment of VBP arrangements: 1) to support indication-based pricing?
bundled sale; 2) free good; 3) unit; or Are changes necessary to CMS’s price
4) best price? Would providing spe- reporting program defnitions or how
cifc AMP/BP exclusions for Value- the FDA’s National Drug Code num-
based Purchasing (VBP) pricing used bers are used in CMS price reporting
for orphan drugs help manufactur- programs? Do physicians, pharma-
ers that cannot adopt a bundled sale cists, and insurers have access to all
approach? What regulatory changes the information they need to support
would Medicaid Managed Care or- indication-based payments?
| 30 | American Patients First

Long-term Financing Models. the marketplace evolved such that

States and other payers typically es- there would be more vendors capa-
tablish budgets or premium rates for ble of successfully participating in
a given beneft year. As such, their this program? Are there a sufcient
budgets may be challenged when a number of providers interested in
new high-cost drug unexpected- having a vendor selected through
ly becomes available in the beneft a competitive bidding process ob-
year. Long-term fnancing models tain these drugs on their behalf, and
are being proposed to help states, bear the fnancial risk and carrying
insurers, and consumers pay for costs? How could this program be
high-cost treatments by spread- implemented in a way that ensures
ing payments over multiple years. a competitive market among multi-
Should the state, insurer, drug man- ple vendors? Is it necessary that the
ufacturer, or other entity bear the vendors also hold title to the drugs
risk of receiving future payments? and provide a distribution channel
How should Medicare or Medicaid or are there other ways they can pro-
account for the cost of disease avert- vide value? What other approaches
ed by a curative therapy paid for by could lower Part B drug spending for
another payer? What regulations patients of providers choosing not to
should CMS consider revising to al- participate, without restricting their
low manufacturers and states more access to care?
fexibility to participate in novel Part B to D. The President’s
value-based pricing arrangements? Budget requested the authority to
What efects would these solutions move some Medicare Part B drugs
have on manufacturer development to Medicare Part D. Which drugs or
decisions? What current barriers classes of drugs would be good candi-
limit the applicability of these ar- dates for moving from Part B to Part
rangements in the private sector? D? How could this proposal be imple-
What assurances would parties need mented to help reduce out-of-pock-
to participate in more of these ar- et costs for the 27% of benefciaries
rangements, particularly with re- who do not have Medicare prescrip-
gard to public programs? tion drug coverage, or those who
Part B Competitive Acquisition have Medicare supplemental benefts
Program. HHS has the authority to in Part B? What additional informa-
operate a Competitive Acquisition tion would inform how this proposal
Program for Part B drugs. What could be implemented and operated?
changes would vendors and pro- Part B drugs are reportedly avail-
viders need to see relative to the able to OECD nations at lower prices
2007-2008 implementation of this than those paid by Medicare Part B
program in order to successful- providers. HHS is interested in re-
ly participate in the program? Has ceiving data describing the difer-
V. Further Actions Under Review And Opportunities For Feedback | 31 |

ences between the list prices and

net prices paid by Medicare Part B
providers, and the prices paid for “We want to look at
these same drugs by OECD nations.
Though these national health sys- negotiating for drugs
tems may be demanding lower pric-
es by restricting access or delaying in Medicare that
entry, should Part B drugs sold by
manufacturers ofering lower prices have never been
to OECD nations be subject to nego-
tiation by Part D plans? Would this negotiated for.”
lead to lower out-of-pocket costs on
behalf of people with Medicare? How – SECRETARY AZAR
could this afect access to medicines
for people with Medicare?
Fixing Global Freeloading. U.S. amounts for drugs they adminis-
consumers and taxpayers general- ter to patients, but the facility fees
ly pay more for brand drugs than do when drugs are administered at
consumers and taxpayers in oth- hospitals and hospital-owned out-
er OECD countries, which often have patient departments are many times
reimbursements set by their central higher than the fees charged by phy-
government. In efect, other countries sician ofces. What efect would a
are not paying an appropriate share of site neutral payment policy for drug
the necessary research and develop- administration procedures have on
ment to bring innovative drugs to the the location of the practice of med-
market and are instead freeriding of icine? How would this change afect
U.S. consumers and taxpayers. What the organization of health care sys-
can be done to reduce the pricing dis- tems? How would this change afect
parity and spread the burden for in- competition for health care services,
centivizing new drug development particularly for cancer care?
more equally between the U.S. and Site neutrality between inpatient
other developed countries? What pol- and outpatient setting. Medicare
icies should the U.S. government pur- payment rules pay for prescription
sue in order to protect IP rights and drugs diferently when provided
address concerns around compulsory during inpatient care (Part A) or ad-
licensing in this area. ministered by an outpatient physi-
Site neutrality for physician-ad- cian (Part B). Benefciaries also have
ministered drugs. Currently un- diferent cost-sharing requirements
der Medicare Part B and often in in Part A and Part B. Some drugs can
Medicaid, hospitals and physi- be administered in either the in-
cians are reimbursed comparable patient or outpatient setting, while
| 32 | American Patients First

Accuracy of national spending

data. Are annual reports of health
“For high-cost spending obscuring the true cost of
prescription drugs? What is the val-
products, the ue of better understanding the dif-
ference between gross and net drug
amount that prices? How could the Medicare
Trustees Report, annual National
Medicare pays Health Expenditure publications,
Uniform Rate Review Template, and
difers dramatically other publications more accurately
collect and report gross and net drug
based on the spending in medical and pharmacy
benefts? Should average Part D re-
site of service.” bate amounts be reported separately
for small molecule drugs, biologics,
– CMS ADMINISTRATOR and high-cost drugs? What inno-
SEEMA VERMA vation is needed to maximize price
transparency without disclosing
proprietary information or data pro-
others are currently limited to in- tected by confdentiality provisions?
patient use because of safety con-
cerns. Do the diferences between C. Create Incentives
Medicare’s Part A and Part B drug
payment policies create afordabil-
to Lower List Prices
ity and access challenges for bene- Government programs, commercial
fciaries? What policies should CMS insurers, and individual consumers
consider to ensure inpatient and pay for drugs diferently. The price
outpatient providers are neither paid at the pharmacy counter or re-
underpaid nor overpaid for a drug, imbursed to a physician or hospital
regardless of where it was admin- is the result of many diferent com-
istered? Which elements of the in- plex fnancial transactions between
patient or outpatient setting lead to drug makers, distributors, insurers,
naturally diferential payments, and pharmacy benefts managers, phar-
why? If a drug can be used safely in macies and others. Public programs
the outpatient setting, and achieve are also subject to state and federal
the same outcomes at a lower cost, regulations governing what drugs
how should Medicare encourage the are covered, who can be paid for
shift to outpatient settings? In what them, and how much will be paid.
instances would inpatient adminis- Too often, these negotiations do not
tration actually be less costly? result in the lowest out-of-pocket
V. Further Actions Under Review And Opportunities For Feedback | 33 |

costs for consumers, and may actu-

ally be causing higher list prices.
Fiduciary duty for Pharmacy Too ofen,
Beneft Managers. Pharmacy Beneft
Managers (PBMs) and benefts con- negotiations do not
sultants help buyers (insurers, large
employers) seek rebates intended to result in the lowest
lower net drug prices, and help sellers
(drug manufacturers) pay rebates to out-of-pocket costs
secure placement on health plan for-
mularies. Most current PBM contracts for consumers.
may allow them to retain a percentage
of the rebate collected and other ad-
ministrative or service fees. forbidden from receiving any pay-
Do PBM rebates and fees based on ment or remuneration from manu-
the percentage of the list price cre- facturers, and should PBM contracts
ate an incentive to favor higher list be forbidden from including rebates
prices (and the potential for higher or fees calculated as a percentage of
rebates) rather than lower prices? list prices? What efect would im-
Do higher rebates encourage bene- posing this fduciary duty on PBMs
fts consultants who represent pay- on behalf of the ultimate payer (i.e.,
ers to focus on high rebates instead consumers) have on PBMs’ ability to
of low net cost? Do payers manage negotiate drug prices? How could this
formularies favoring beneft designs afect manufacturer pricing behav-
that yield higher rebates rather than ior, insurance, and beneft design?
lower net drug costs? How are ben- What unintended consequences for
efciaries negatively impacted by benefciary out-of-pocket spending
incentives across the benefts land- and federal health program spend-
scape (manufacturer, wholesaler, ing could result from these changes?
retailer, PBM, consultants and in- Reducing the impact of rebates.
surers) that favor higher list prices? Increasingly higher rebates in fed-
How can these incentives be reset to eral health care programs may be
prioritize lower out of pocket costs causing higher list prices in public
for consumers, better adherence and programs, and increasing the prices
improved outcomes for patients? paid by consumers, employers, and
What data would support or refute commercial insurers. What should
the premise described above? CMS consider doing to restrict or
Should PBMs be obligated to act reduce the use of rebates? Should
solely in the interest of the entity for Medicare Part D prohibit the use of
whom they are managing pharma- rebates in contracts between Part D
ceutical benefts? Should PBMs be plan sponsors and drug manufac-
| 34 | American Patients First

doing, under current authorities,

to create incentives for Part D drug
Increasingly manufacturers committing to a
price over a particular lookback pe-
higher rebates riod? How long should the lookback
period be?
in federal health The Healthcare Common Proce-
dure Coding System (HCPCS) codes
care programs for new Part B drugs are not typical-
ly assigned until after they are com-
may be causing mercially available. Should they be
available immediately at launch for
higher list prices. new drugs from manufacturers com-
mitting to a price over a particular
lookback period? What should CMS
turers, and require these contracts consider doing, under current au-
to be based only on a fxed price for thorities, to create incentives for Part
a drug over the contract term? What B drugs committing to a price over a
incentives or regulatory chang- particular lookback period? How long
es (e.g., removing the discount safe should the lookback period be?
harbor) could restrict the use of re- How could these incentives afect
bates and reduce the efect of rebates the behavior of manufacturers and
on list prices? How would this afect purchasers? What are the operation-
the behavior of drug manufacturers, al concerns to implementing them?
PBMs, and insurers? How could it Are there other incentives that could
change formulary design, premium be created to reward manufacturers
rates, or the overall structure of the of drugs that have not taken a price
Part D beneft? increase during a particular look-
Incentives to lower or not in- back period?
crease list prices. Should manufac- Infationary rebate limits. The
turers of drugs who have increased Department is concerned that lim-
their prices over a particular look- iting manufacturer rebates on brand
back period or have not provided a and generic drugs in the Medicaid
discount be allowed to be includ- program to 100% of calculated AMP
ed in the protected classes? Should allows for excessive price increas-
drugs for which a price increase has es to be taken without manufactur-
not been observed over a particu- ers facing the full efect of the price
lar lookback period be treated dif- infationary penalty established by
ferently when determining the ex- Congress. This policy, implemented
ceptions criteria for protected class as part of the ACA, may allow for run-
drugs? What should CMS consider away price increases and cost-shift-
V. Further Actions Under Review And Opportunities For Feedback | 35 |

ing. When is this limitation a valid CMS regulations presently ex-

constraint upon the rebates manu- clude manufacturer sponsored drug
facturers should pay? What impacts discount card programs from the de-
would removing the cap on the in- termination of average manufacturer
fationary rebate have on list prices, price and the determination of best
price increases over time, and public price. What efect would eliminating
and private payers? this exclusion have on drug prices?
Exclusion of certain pay- Would there be circumstances
ments, rebates, or discounts from under which allowing benefciaries of
the determination of Average federal health care programs to uti-
Manufacturer Price and Best Price. lize copay discount cards would ad-
The Department is concerned that vance public health benefts such as
excluding pharmacy beneft man- medication adherence, and outweigh
ager rebates from the determination the efects on list price and concerns
of Best Price, implemented as part about program integrity? What data
of the ACA, may allow for runaway would support or refute this?
price increases and cost-shifting.
The Department is also interested The 340B drug discount program
in learning more about the efect of The 340B Drug Pricing Program was
excluding payments received from, established by Congress in 1992, and
and rebates or discounts provided to requires drug manufacturers partic-
pharmacy beneft managers (PBMs) ipating in the Medicaid Drug Rebate
from the determination of Average Program to provide covered outpa-
Manufacturer Price. tient drugs to eligible health care
What impacts would these chang- providers—also known as covered
es have on list prices, price increas- entities—at reduced prices. Covered
es over time, and public and private entities include certain qualify-
payers? What data would support or ing hospitals and federal grantees
refute the premise described above? identifed in section 340B of the
Copay discount cards. Does the Public Health Service Act (PHSA).
use of manufacturer copay cards The Health Resources and Services
help lower consumer cost or actu- Administration (HRSA) adminis-
ally drive increases in manufactur- ters and oversees the 340B program,
er list price? Does the use of copay and the discounts provided may af-
cards incent manufacturers and fect the prices paid for drugs used
PBMs to work together in driving by Medicare benefciaries, people
up list prices by limiting the trans- with Medicaid, and those covered by
parency of the true cost of the drug commercial insurance.
to the benefciary? What data would Program Growth. The 340B pro-
support or refute the premise de- gram has grown signifcantly since
scribed above? 1992—not only in the number of
| 36 | American Patients First

afected list prices? Has it caused

cross-subsidization by increasing list
Does the use of prices applicable in the commercial
sector? What impact has this had on
manufacturer insurers and payers, including Part
D plans? Does the Group Purchasing
copay cards help Organization (GPO) exclusion, the
establishment of the Prime Vendor
lower consumer Program, and the current inventory
models for tracking 340B drugs in-
cost or actually crease or decrease prices? What are
the unintended consequences of this
drive increases program? Would explicit general reg-
ulatory authority over all elements of
in manufacturer the 340B Program materially afect
the elements of the program afect-
list price? ing drug pricing?
Program Eligibility. Would
changing the defnition of “patient”
covered entities and contract phar- or changing the requirements gov-
macies, but also in the amount of erning covered entities contracting
money saved by covered entities. with pharmacies or registering of-
HRSA estimates that covered en- site outpatient facilities (i.e., child
tities saved approximately $6 bil- sites) help refocus the program to-
lion on approximately $12 billion in wards its intended purpose?
discounted purchases in Calendar Duplicate Discounts. The 340B
Year (CY) 2015 by participating in the statute prohibits duplicate dis-
340B program.ii It is estimated that counts. Manufacturers are not re-
discounted drug purchases made by quired to provide a discounted
covered entities under the 340B pro- 340B price and a Medicaid drug re-
gram totaled more than $16 billion bate for the same drug. Are the cur-
in 2016—a more than 30 percent in- rent mechanisms for identifying
crease in 340B program purchases in and preventing duplicate discounts
just one year.iii How has the growth effective? Are drug companies pay-
of the 340B drug discount program ing additional rebates over the

ii. 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation, 82 Fed. Reg.
1210, 1227 (Jan. 5, 2017).
iii. Aaron Vandervelde and Eleanor Blalock, Measuring the Relative Size of the 340B Program: 2012-2017, BERKE-
LEY RESEARCH GROUP (July 2017), available at
V. Further Actions Under Review And Opportunities For Feedback | 37 |

statutory 340B discounts for drugs

that have been dispensed to 340B
patients covered by commercial Discounted drug
insurance? What is the impact on
drug pricing given that private in- purchases made
surers oftentimes pay commercial
rates for drugs purchased at 340B under the 340B drug
discounts? Do insurers, pharmacy,
PBM, or manufacturer contracts program totaled
consider, address, or otherwise
include language regarding drugs more than $16
purchased at 340B discounts? What
should be considered to improve billion in 2016.
the management and the integri-
ty of claims for drugs provided to
340B patients in the overall insured as an annual report, or by the health
market? What additional oversight plan on a more regular basis, or some
or claims standards are necessary combination of these approaches?
to prevent duplicate discounts in Could CMS improve transparency
Medicaid and other programs? for Medicare benefciaries without
violating the Part D program’s con-
Reduce Patient fdentiality protections? What oper-
Out-of-Pocket Spending ational challenges or concerns about
Part D end-of-year statement on burden exist with this approach, and
drug price changes and rebates col- how could CMS measure compliance
lected. Part D plans presently pro- with this approach?
vide their members with an expla- Federal preemption of con-
nation of benefts, which includes tracted pharmacy gag clause laws.
information about the negotiated Right now, some contracts between
price for each of their dispensed pre- health plans and pharmacies do
scriptions, and what the plan, mem- not allow the pharmacy to inform
ber, and others paid. What addition- a patient that the same drug or a
al information could be added about competitor could be purchased at
the rate of change in those prices a lower price of-insurance. What
over the course of the beneft year? purpose do these clauses serve oth-
Alternatively, could pharmacists er than to require benefciaries pay
could be empowered to inform ben- higher out-of-pocket costs? What
efciaries when prices for their drugs other communication barriers are
have changed? Would this informa- in place between pharmacists and
tion be best distributed by pharma- patients that could be impeding
cists at the point of sale, by Medicare lower drug prices, out-of-pocket
| 38 | American Patients First

costs, and spending? Should phar- natives specifc to individual patients.

macists be required to ask patients How could these tools reduce out-
in federal programs if they’d like of-pocket spending for people with
information about lower-cost al- Medicare? Is this technology present
ternatives? What other strategies in all or most electronic prescribing
might be most efective in provid- or pharmacy dispensing systems?
ing price information to consumers Should Medicare require the use of
at the point of sale? systems that support providing this
Inform Medicare benefciaries information to patients? What exist-
with Medicare Part B and Part D ing systems, tools, or third-party ap-
about cost-sharing and lower-cost plications could support the creation
alternatives. Health plans and phar- of these tools? Does the technology
macy beneft managers have found exist for this approach to be quick-
new ways to inform prescribers and ly and inexpensively implement-
pharmacists, when prescribing or ed? Would this increase costs for the
dispensing a new prescription, about Medicare program? Does this create
the formulary options, expected unreasonable burden for prescribers
cost-sharing, and lower-cost alter- or pharmacists?
V. Further Actions Under Review And Opportunities For Feedback | 39 |

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Design.” Health Afairs 23, no. 1 (January/February 2004): 194-99.

2. “2016 Medicine Use and Spending in the U.S.,” IQVIA

3. PL 111-148; Payment for covered outpatient drugs, § 42 U.S. Code § 1396r–8

4. “Medicaid Managed Care Enrollment Reports, 2009 & 2010.” Medicaid.gov. Accessed April
23, 2018. https://www.medicaid.gov/medicaid/managed-care/enrollment/index.html.

5. “Overview of the 340B Drug Pricing Program.” MedPAC.gov. May 2015.

6. U.S. Congress. House. Energy & Commerce Committee. Review of the 340B Drug Pricing
Program. 115th Cong. H. Rept.

7. Fein, Adam J. “The 340B Program Hits $16.2 Billion in 2016; Now 5% of U.S. Drug Market.”
Drug Channels. May 18, 2017. Accessed April 23, 2018. http://www.drugchannels.net/2017/05/

8. Rémuzat, C., D. Urbinati, J. Roïz, A. Kornfeld, and M. Toumi. “Overview Of External Reference
Pricing Systems In Europe.” Journal of Market Access & Health Policy 17, no. 3 (September 15, 2015).

9. “External Price Referencing.” WHO Collaborating Centre for Pharmaceutical Pricing and
Reimbursement Policies. http://whocc.goeg.at/Glossary/PreferredTerms/External price

10. https://www.kf.org/report-section/ehbs-2017-section-9-prescription-drug-benefts/;
https://www.cdc.gov/nchs/data/nhis/earlyrelease/ERHDHP Access 0617.pdf.

11. Shrank, William H., Niteesh K. Choudhry, Michael A. Fischer, Jerry Avorn, Mark Powell,
Sebastian Schneeweiss, Joshua N. Liberman, Timothy Dollear, Troyen A. Brennan, and M.
Alan Brookhart. “The Epidemiology of Prescriptions Abandoned at the Pharmacy.” Annals of
Internal Medicine 153, no. 10 (November 16, 2010): 633.

12. IQVIA proprietary data.