The decision by the House Leadership to choose not to bring the American Health Care Act (AHCA) to a vote left industry analysts speculating both about the fate of “Obamacare,” and the prospects for narrower reforms. With bipartisan support to reduce prescription drug prices, it appears as though Democrats and Republicans are working on plans to fix drug prices. This tenth article in our series on the effect of a “slow repeal” of the ACA updates our January 12, 2017, article on the pharmaceutical industry and addresses current efforts aimed at reducing drug prices in the U.S.

BIPARTISAN SUPPORT TO ADDRESS DRUG PRICING

Speaker of the House Paul Ryan (R – WI) said that “[w]e are going to be living with Obamacare for the foreseeable future.” Whether the withdrawal of the ACHA signals a retreat or merely a pause — and there are reports that the Freedom Caucus and the Tuesday Group are working on a new deal to repeal and replace the ACA — both Democrats and Republicans appear poised to tackle prescription drug pricing. A recent Kaiser Family Foundation poll found that 63 percent of Americans want the government to take action to lower drug prices.

With strong bipartisan support to rein in escalating drug prices, it appears as though legislation to curtail and control drug pricing might be an achievable goal for both the Trump administration and Congress. On March 29, 2017, a group of House and Senate Democrats proposed a comprehensive bill that attempts to address drug pricing from many different angles. The Republicans have yet to present their own plan, but the Administration continues to signal its desire to reduce drug prices through a bidding process.

HIGHLIGHTS FROM THE IMPROVING ACCESS TO AFFORDABLE PRESCRIPTION DRUGS ACT

On March 29, 2017, nearly two dozen House and Senate Democrats introduced S.771, the “Improving Access to Affordable Prescription Drugs Act” (IAPDA) in the Senate, and its companion, H.R.1776, in the House of Representatives. S.771 and H.R.1776 attempt to bring down the rising cost of pharmaceuticals through transparency, access and affordability, innovation, and choice and competition.

Transparency. Under the IAPDA, drug makers would be required to significantly increase their transparency on research and development, including manufacturing and marketing costs by disclosing this information to the Secretary of the Department of Health and Human Services (HHS) for publication. Pharma and biotech argue that this is proprietary information. Also, the  IAPDA requires that pharma and biotech disclose information regarding patient assistance programs and tasks the GAO to commission a study on the impact of patient assistance programs on prescription drug pricing and expenditures.

Access and Affordability. At present, Medicare — one of the largest purchasers of prescription drugs — is not allowed to negotiate drug prices directly with the pharmaceutical companies. The IAPDA changes this by allowing the Secretary of HHS to negotiate with drug companies on behalf of Medicare. The bill also requires that the HHS Office of Inspector General monitor changes in drug prices and prevent drug manufacturers from increasing the price of a drug “beyond medical inflation (over a one year period or cumulatively), [otherwise] the drug manufacturer is subject to a graduated excise tax that depends on the size of the price increase.”

Innovation. The IAPDA creates a $2 billion prize fund at the National Institute of Health to incentivize antibiotic development. Awardees of the prize must show a significant benefit over existing therapies for the treatment of life-threatening bacterial infections. There are two significant conditions to accepting the prize money: (1) recipients are required to commit to offering the drugs at a reasonable price, and (2) recipients waive exclusivity periods (including patent rights) for the drugs.

Choice and Competition. The IAPDA prevents anti-competitive agreements between brand-name manufacturers with generic drug manufacturers, where the brand-name company pays the generic competitor to keep the generic drug off the market. Under the IAPDA, if a generic company enters into an anti-competitive agreement with a brand-name manufacturer, the generic drug company loses the 180-day generic drug exclusivity period. This removes a valuable benefit from generic manufacturers that enter into anti-competitive agreements.

The bill eliminates tax credits and incentives from pharmaceutical companies for television, magazine, and internet advertisements for direct-to-consumer advertisements for drugs.

PRESIDENT TRUMP’S PROMISE TO GET DRUG PRICES “WAY DOWN”

President Trump appears focused on keeping his campaign promise to reign in drug pricing. On January 31, 2017, President Trump met with CEOs from six pharmaceutical companies plus PhRMA representatives to discuss strategies to lower drug prices. During this meeting, President Trump indicated that pharma companies that bring operations to the U.S. and lower drug prices will do so in a significantly less regulated arena.

On March 7, 2017, President Trump tweeted that he was “working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!” While few details emerged, it appears as though President Trump will attempt to achieve this goal through a bidding process. On March 22, 2017, President Trump told the Congressional Black Caucus that:

We’re going to bid on drug prices, and we’re going to try and have the lowest prices anywhere in the world, from really the highest.  And that’s not only the drugs, it’s prescription drugs…So we’re going to be instituting a very, very strong bidding process. We’ll probably need some legislation, but we’re going to do it regardless. We have to do it. And we’re going to get drug prices way down, way down.

HHS Secretary Tom Price recently told a House Appropriations Committee that HHS is working with President Trump on a plan to bring down the cost of pharmaceutical drugs, but he did not provide more specific details regarding this plan. The Trump administration has yet to provide specific details regarding the bidding process and its ability to reduce prescription drug prices.

At a time when Congress remains divided along party lines on most issues, we believe that there will be legislation addressing drug pricing.  Although it is unlikely that the IAPDA will survive in its current form, the draft legislation sets the stage, both as a framework for bipartisan legislation, and as the “stalking horse” for the inevitable negotiations with pharma and biotech.  It is unclear as to what compromises President Trump and Congress will make to get this legislation passed, but it is certainly possible that pharma and biotech will seek significant tax breaks which would open the door for mergers and acquisitions. Will President Trump significantly deregulate the drug approval process to appease pharma and biotech in exchange for their cooperation in lowering drug prices? Will lowering drug prices require the U.S. to import cheaper drugs manufactured in other countries? Pay close attention to the IAPDA and any legislation proposed by the Republicans as both sides explore avenues to lower drug prices.