Employers hoping for quick relief to their prescription drug cost pain were disappointed by President Trump’s price-reduction speech Friday. However, the ambitious, multi-pronged attack on escalating prices–dubbed American Patients First– may at least set the stage for further debate. And that could be a positive outcome for benefits plan designers and administrators who now struggle with the unpredictability of plan costs.
“What’s important is the increased focus on high and escalating prescription drug prices,” said Steve Wojcik, vice president of public policy at National Business Group on Health. “Especially on specialty pharmaceutical medications where we’ve seen the largest increases. To extent government implements policy changes, with Medicare, Medicaid, the [Federal Drug Administration] and the patent and trade offices, that’s where we could have positive impact for employers.”
Wojcik said it’s crucial to separate the rhetoric from the concrete in Trump’s address. “Some things are just not in the realm of the possible, like government dictation of drug prices,” he said.
For instance, employers wouldn’t expect much relief from Trump’s proposal to pressure U.S. trade nation partners to reduce their drug price subsidies. Over time, continued pressure on trade partners could produce slightly higher prices overseas and slightly lower ones here. But that could take years.
Policy changes could be more quickly effective, Wojcik said, if the Administration and Congress can concentrate on ones that currently–and unintentionally–lead to increased drug costs.
However, David Henka, president and CEO of ActiveRADAR, a benefits plan consulting firm, doubts that either Big Pharma nor “the middlemen”--pharmacy benefit managers—Trump referred to have much to fear from the president’s reform framework.
“The president hasn’t put any political rigor to his proposed policy,” was Henka’s analysis of Trump’s remarks. “From a political standpoint it’s going to be business as usual for PBMs and pharmacy manufacturers. Nothing will materially impact how they conduct business. Big Pharma and the PBMs know how to play this game, and Trump didn’t say anything that sounded to me like they’d have to change their games much.”
Policy reform shows promise
Wojcik was a bit more optimistic that relief could come from policy reforms. He says that certain Medicare and Medicaid policies “encourage the use of more expensive rather than less expensive medications, and encourage delivering them in more expensive settings. If those policies could be addressed, it would dovetail with private sector and employer efforts to reduce these costs.”
Trump referred to reforms in the drug approval process. That’s an area where current policies lead to higher costs for employer plans, Wojcik said. Incremental enhancements of existing drugs now often receive the same patent extensions that new drugs are awarded, thus protecting the drugmakers from generic versions undercutting their prices.
Market exclusivity for new drugs is often too easily granted, Wojcik said. That prevents competitors from entering certain markets. Employer groups have recommended adjustments to those policies to encourage greater competition–and lower priced drugs.
“If it’s truly a breakthrough medication, the government has set up system where there’s a legitimate monopoly. There’s not much we can do about that, because you want to reward the innovation. But when it’s something short of a breakthrough drug–say, an incremental improvement–it’s hard to justify the monopoly and the price differentials.”
Patent and FDA processes don’t have to be completely thrown out, he said. “It’s a matter of raising the bar for patent extensions and market exclusivity. These things are doable.”
Other initiatives, such as lifting bans on government agencies from negotiating lower drug prices, could have a ripple effect on company-sponsored plans. Currently, companies have little recourse but to accept pharmaceutical company pricing. If government agencies were able to achieve lower costs, it would open the way for similar negotiations by employer groups.
Outside forces still in play
Any true relief for employer plans remains in the mid-to-distant future–unless pharmaceutical companies decide to proactively reduce prices to fend off reforms. Policy and regulatory reforms will depend upon consensus between the White House and Congress, and, Wojcik points out, Big Pharma represents just one of many special interest groups that will ratchet up the lobbying as initiatives yet to be unveiled appear.
And despite the efforts of employer collaborations designed to address drug pricing, employers only have limited clout in the massive drug marketplace, Henka said.
“It’s hard for employers to get a critical mass in purchasing power,” he said. “The system is simply too large for even a large employer group to make significant inroads.”
Wojcik said employers need to step up their involvement in reining in pharmaceutical costs. “I’m glad [the administration is] highlighting the issue,” he said. “Meantime, the government is calling for recommendations and comments from interested parties. So for you as an employer, if this is a concern, I would encourage you to consider weighing in with comments and supporting employer groups in their efforts to change these policies that continue to drive up prescription drug costs.”
Henka was less sanguine about how much effect employers can have now that Trump has set a “hands-off” tone for Big Pharma and the PBMs.
Asked if he found any cause for optimism on the part of employers in Trump’s remarks, he said: “If I were an employer at a pharmaceutical manufacturer I’d be optimistic. In a way he is protecting Big Pharma. But for the general employer, my prediction is that the pharmaceutical rate trend will exceed the medical rate trend for the foreseeable future. He offered no meaningful policy that will change that trend.”