BioPharma, Policy

Trump administration’s reference pricing proposal gets thumbs-down from BIO CEO panel

Another proposal, to revoke safe-harbor protections under the Anti-Kickback Statute for biopharma-PBM rebates, drew praise from speakers in a panel at the BIO CEO & Investor Conference Tuesday.

L-R: James Greenwood, BIO; Susan Peschin, Alliance for Aging Research, Peter Pitts, Center for Medicine in the Public Interest; Paul Lammers, Triumvira Immunologics; Eric Whittaker, UCB Ventures; Duane Schulthess, Vital Information; Peter Young, Pappas Capital

Key components of the Trump administration’s “blueprint” for lowering drug prices got a mixed review from a panel of industry insiders Tuesday at the BIO CEO & Investor Conference in New York.

The panel, titled “Policy Outlook – How Could the Trump Administration’s Drug Reimbursement Proposals Affect Medical Innovation?” took aim in particular at two policy proposals in the blueprint that administration released last year: international reference pricing; and eliminating the safe-harbor provisions on negotiations between drugmakers and pharmacy benefit managers.

BIO CEO and panel moderator James Greenwood acknowledged the amount of concern among the public about the rise of drug costs, including the out-of-pocket costs that have hit consumers, particularly those with high-deductible plans. “It’s unethical to force people not to have access to drugs because they can’t afford what comes out of their pocket,” he said. “It should not be political – politically speaking, we’ll never get out from under these pricing pressures as long as people are exposed to those out-of-pocket costs.”

But that didn’t mean every proposal to reduce drug costs drew praise. Reference pricing under Medicare Part B, stood out as the most disliked idea, with panelists saying it would discourage innovation by squeezing profitability and also was based on misleading premises. “What a stupid idea,” exclaimed Peter Pitts, president of the Center for Medicine in the Public Interest. “Foreign price controls are not a market number, but a government number,” he said.

The administration called the reference pricing proposal “revolutionary” when formally introducing it in October. However, experts at the time said President Trump’s characterization of other countries as “freeloading” off of American innovation was a misrepresentation because the governments of those countries negotiate the prices, while reference pricing in itself would only benefit a small slice of patients rather than the broader population. The industry panned it as well.

Erica Whittaker, head of UCB Ventures, pointed out that reference pricing often fails to take into account differential pricing between countries, which is often calculated on factors like GDP. Such lack of context results in situations like Saudi Arabia – a wealthy country – paying prices for drugs referenced to prices in much poorer Egypt. “It doesn’t make any sense whatsoever,” she said.

BIO CEO and moderator James Greenwood called reference pricing a “very Trumpian idea,” saying that Secretary of Health and Human Services Alex Azar does not want to damage innovation, but is pushing the idea because of pressure from the White House.

Panelist Duane Schulthess, managing director of Vital Information, also said that while the does pay more, that comes with the tradeoff that the US is driving global innovation and also owning it, while there has comparatively little innovation by European biotech firms, which often end up being acquired by US companies.

A more recent plan that garnered more favorable views was a proposal by the administration to end safe-harbor protection under the Anti-Kickback Statue for the rebates that drugmakers offer to pharmacy benefit managers. HHS proposed the idea earlier this month, whereby rebates offered to PBMs, Medicare Part D programs and Medicaid managed care organizations would be excluded from the protections. The administration maintains that the current rebate system creates an incentive for increasing list prices for drugs. “Revoking safe harbor, if it rolls out as intended, will reduce the price at the pump for patients,” Pitts said.

In a series of tweets, Avalere Health Director Chris Sloan wrote that cracking down on the rebates would reduce costs at the pharmacy counter, but raise premiums. Democrats, in turn, have opposed the proposal on the same grounds. However, panelist Susan Peschin, president of the Alliance for Aging Research, said her group – a bipartisan organization – supports the proposal as likely to reduce out-of-pocket costs. Moreover, she said, premiums under Medicare Part D plans are low enough that even if quadrupled, they would still be less than what beneficiaries pay in out-of-pocket costs. “We hope both sides of the aisle will be supportive of this proposal,” she said.

Overall, panelists said they were bullish about the future of biotech despite, citing factors like scientific advancements and the amount of money raised in venture capital funding rounds and initial public offerings.

Photo: Alaric DeArment, MedCity News

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