[Ip-health] Health GAP Blog on Pelosi Bill

Ruth Lopert ruth.lopert at gmail.com
Sat Sep 21 00:45:11 PDT 2019

Apropos the fourth point, in several of those countries the list prices
will also significantly exceed the actual prices paid, a perennial problem
with international price referencing.

On Fri, Sep 20, 2019 at 9:05 PM Baker, Brook <b.baker at northeastern.edu>

> The “Lower Drug Costs Now Act of 2019”: What’s Good, What’s Bad, and What
> Must be Improved
> September 20, 2019 | Brook Baker<https://healthgap.org/author/brook/>
> http://bit.ly/ldcn2019<
> https://nam05.safelinks.protection.outlook.com/?url=http%3A%2F%2Fbit.ly%2Fldcn2019&data=02%7C01%7Cb.baker%40northeastern.edu%7C45452bb529c64a209c5f08d73df6f3a6%7Ca8eec281aaa34daeac9b9a398b9215e7%7C0%7C0%7C637046003175637340&sdata=8scHyjnDoKZ7kdfl6W5FNQPfjCIvtA0A3DPoPCM1ku8%3D&reserved=0
> >
> On September 19, 2019, House Speaker Nancy Pelosi released the “Lower Drug
> Costs Now Act of 2019” (HR 3<
> https://docs.house.gov/meetings/IF/IF14/20190925/110024/BILLS-1163ih.pdf>).
> Excessive drug pricing is a major factor obstructing access to life-saving
> treatment in the Global South—and right here in the U.S. where the high
> cost of medicines is a leading cause<
> https://thehill.com/opinion/healthcare/445401-voters-are-angry-about-prescription-drug-costs>
> of anger among voters, who are demanding major corrective actions<
> https://www.arnoldventures.org/stories/poll-shows-publics-frustration-with-congress-over-inaction-on-drug-prices/>.
> While Health GAP is still analyzing the entire 101-page bill, here is our
> rapid assessment:
> The good news:
> This bill challenges Big Pharma’s monopoly pricing abuses by giving some
> teeth to the newly granted direct negotiating power of Health and Human
> Services (HHS) to drive prices for some medicines both for Medicare and
> insured and private payers. Big Pharma carries out excessive pricing in the
> U.S. compared with other high-income countries because the U.S. does not
> have the price control mechanisms used by other countries. HR 3 would not
> implement such mechanisms but drug makers that refuse to negotiate newly
> defined fair prices would pay a “non-compliance fee” starting at 65% of
> gross U.S. sales of the medicines accelerating up to 95% following three
> quarters of non-compliance. The bill requires greater transparency to HHS
> concerning R&D and manufacturing costs and domestic and foreign sales
> information, although it does not require increased public transparency.
> The second positive move combats unjustifiable drug price increases—more
> than two-and-a-half times higher than the general inflation rate on
> average. For the 8000 drugs covered by Medicare, manufacturers that have
> raised prices by more than the rate of inflation since 2016 will either
> have to lower their prices to the true inflation rate or face a 100%
> retroactive inflation rebate back to the Treasury.
> The bad news:
> 1.      First and foremost, the proposal only requires action on a minimum
> of 25 Medicare medicines a year with a maximum of only 250. The top 25
> drugs in terms of spending account for only 23% of Part D drug spending,
> meaning that 7975 drugs accounting for 77% of Part D funding could go
> unchecked.
> 2.      Second, the proposal has no impact on or oversight regarding
> initial launch prices which can be gamed by biopharmaceutical companies to
> soak American payers until the drug reaches the top 25 (or maybe 250 list).
> This generates a very long lag time before there would be any deterrent
> restraint affecting drug prices, and would likely trigger further price
> gouging earlier, in anticipation of the effects of HR 3.
> 3.      The proposal covers brand-name medicines that lack price
> competition, defined as lacking just one generic or biosimilar competitor.
> However, the entry of two competitors rarely reduces prices significantly
> according to previous studies and it is only when there are six competitors
> that bloated originator prices are reduced by 75%. Thus, there will be many
> brand name medicines excluded from negotiations where true competition has
> not yet significantly dented prices.
> 4.      Fourth, the Average International Market price ceiling will be
> based on average prices charged in six high-price, upper-income countries
> (Australia, Canada, France, Germany, Japan, and the United Kingdom) and
> will be set at 1.2 times the average. These are all countries that also
> face high launch prices from Big Pharma, though they have historically
> achieved somewhat better pricing through negotiation, price controls, and
> use of therapeutic formularies. But the average ceiling price will in no
> sense be justified by any economic or therapeutic benefit analysis.
> Similarly, the proposal does not explain why the U.S. should pay as much as
> a 20% premium over the average price paid by other rich countries. Drug
> companies can and expectedly will seek to impose higher prices in those six
> reference countries in order to maintain higher prices and profits in the
> U.S. Although the President has trumpeted his intention to make other
> countries pay more, there is no justification for this result given the
> bloated global profits that the biopharmaceutical industry earns year after
> year. At the very least, any resulting legislation should provide for
> studies of and aggressive remedies to correct these harms.
> 5.      Fifth, although there is some limited R&D cost, manufacturing
> cost, and sales transparency for the government that this bill would
> trigger, such information would be kept from the public despite the
> public’s right to such information.
> What is missing?
> The real solution to correcting the stranglehold Big Pharma enjoys is to
> challenge their government-granted monopoly power and take away exclusive
> rights when they are so systematically abused. Given the pre-dominate role
> of public funding of R&D in break-through medical discoveries and the
> licensing of government owned drug discoveries, the U.S. should already be
> getting a much better deal both for government payers and the
> public-at-large. But, in many instances, the best solution to excessive
> drug pricing is to promote robust generic competition through lawful,
> government-imposed licenses, where multiple producers can make medicines
> efficiently and sell them cheaply while still making a profit and while
> still providing some remuneration to the patent holder.
> We have to make sure that prioritized R&D is paid for, but it is a
> terrible system that requires unconscionable payments through extortionate
> pricing, systematically excluding desperate people from access to the
> medicines they require. The neglect of a licensing option, such as that
> contained in HR 1046<
> https://www.congress.gov/116/bills/hr1046/BILLS-116hr1046ih.pdf>, the
> “Medicare Negotiation and Competitive Licensing Act of 2019,” is a glaring
> weakness in HR 3 and must be addressed by lawmakers. Instead of reaching
> near parity with bloated prices in other rich countries, Congress should
> aim for a much better deal.
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