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August 07, 2017

Improving the Drug Approval Process to Reduce Drug Costs

Panelists Joseph Alvarnas, MD; Elizabeth Carpenter; and John Fox, MD, describe the drug approval process, biosimilars, and drug costs, particularly how changes within the FDA approval process affect drug prices and how the FDAs role helps bring drugs to the market faster.


Joseph Alvarnas, MD: Shifting gears from that initial topic to the drug approval process, we’ve seen biosimilars come through the pike. We’ve seen people raise the question of drug costs, specifically as line items. And the new administration has said that pharmaceutical drug prices are on its radar for some sort of action. Elizabeth, do you think changes with the FDA approval process could influence drug prices? What are your thoughts about how this changes the industry for us?

Elizabeth Carpenter: I guess I would say that we are in a unique political time. We have a Republican president who has been quite outspoken about the role of drug prices in medical care in our society. It really breeds from this very populist nature of the campaign, where drug costs and healthcare costs are a kitchen-table issue. So, I think in DC right now, you have a lot of attention on drug prices, in particular, medications that take price increases—a lot of discussion about importation negotiation—all things that we’ll talk about today. Perhaps more fascinating and challenging for the pharmaceutical industry is what’s going on at the state level.

And so, there’s legislation across the country really focused on increasing the transparency of drug input costs, but also, in some cases, actually controlling drug prices. You saw the state of New York pass legislation that would actually create a drug price control mechanism in its Medicaid program, and that is really the first of its kind and something that could be really a bellwether—an example for other states to come.

Joseph Alvarnas, MD: Any other input on this issue of navigating this potential to change drug pricing?

John Fox, MD: Frankly, I think there’s just a very uneven playing field right now, because competition doesn’t exist. There is no incentive. As long as I’m required—and most health plans are—to cover FDA-approved drugs or even drugs listed in the compendium, there is not really the potential for competition to hold down prices. What we typically see is that with each new incremental improvement—the 6 weeks of overall survival or progression-free survival—there is a nonincremental price increase, and it’s not atypical today to have drugs cost $15,000/month or $20,000/month for a very small increase. And because I don’t have the ability to say no, there’s really no limit on the ability of manufacturers to set a price. So, speaking about the President and his willingness to take on the drug industry where Medicare was given the ability to negotiate drug prices, that would be a substantial game-changer, a paradigm-changer, simply because most payers mirror Medicare’s payment.

Joseph Alvarnas, MD: So, let me ask you that question just straight up, should the government be allowed to negotiate drug prices?

Elizabeth Carpenter: That is a key debate, I would imagine, that would unfold over the next 18 months or so in DC and across the country. I think the interesting thing is, when we think about negotiation or the government negotiating drug prices, what do we mean? I think there is a spectrum of what that could look like. And on one end of the spectrum, you have a president who is very active on social media—who has taken issue with folks like Boeing and other commercial entities and their prices. And then, I think on the other end, you have a scenario where the government is truly negotiating drug prices for all drugs—for all plans in the Medicare market. That, to me, seems pretty unlikely.

What I think we may see some activity on, really, is the government or the Trump administration considering negotiating drug prices in particular instances where there’s a medication without a competitor that’s taking a large price increase or that is really driving a lot of spending for the federal government. And, interestingly, that is something that may be possible through the Center for Medicare & Medicaid Innovation, created by the Affordable Care Act. So, while negotiation is likely pretty toxic in Congress, should the Trump administration decide to take it on, there are some potential vehicles that don’t require Congressional approval.

 
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