Is Drug Pricing Policy Really Poised for Change?

Something’s gotta give. In health policy, angst about drug pricing is a constant. Businesses that spend billions to discover and develop new drugs need prices that will be sufficient to pay back the costs incurred for the drugs that succeed, plus the costs of many more that fail. But those prices drive ever higher costs for health insurance plans – both public and private – that teeter on the edge of being unaffordable. So the tension between forces pushing prices up and pulling them down is relentless.

Right now, though, it does seem that downward pressure on prices for some innovative drugs – including amazing new drugs for obesity – is becoming intense. The indications of this are everywhere.

A Wedge Against Drug Patents

This week, the Biden Administration proposed a framework to put a dent in unreasonably high prices for patented drugs. National Economic Advisor Lael Brainard explained the concept:

“When drug companies won’t sell taxpayer funded drugs at reasonable prices, we will be prepared to allow other companies to provide those drugs for less. If American taxpayers paid to help invent a prescription drug, the drug companies should sell it to the American public for a reasonable price.”

The administration proposes that the authority for this comes from the Bayh-Dole Act of 1980.

Predictably, PhRMA says this is a bad idea. Spokesperson Megan Van Etten explained the industry’s view:

“This would be yet another loss for American patients who rely on public-private sector collaboration to advance new treatments and cures. The Administration is sending us back to a time when government research sat on a shelf, not benefitting anyone.”

Is this a progressive economic proposal? Or a regressive anti-innovation proposal? The masters of spin are hard at work.

CVS Squirming

CVS has put itself in a precarious position of dominance in the distribution and pricing of drugs. It has dominant roles in the retail pharmacy business, in the health insurance business (owning Aetna), and in the PBM business (Caremark).

This is great for reaping outsized profits. But with that comes scrutiny for the possibility of anticompetitive practices that might drive drug prices up. FTC is busy investigating the PBM business.

So it’s probably more than mere coincidence that CVS this week announced it is rejigging its approach to drug pricing. Drug Channels Institute CEO Adam Fein called it “a legitimate step toward transparency.”

Forgive our skepticism, but we’ll call it squirming.

A Spectacle of Negotiation

The other news of the week that relates to this is the announcement of a Senate hearing on diabetes where Senator Bernie Sanders intends to grill the industry about pricing for GLP-1 drugs like Ozempic and Wegovy. He says:

“They’re apparently very significant drugs that could be helpful, but they’re not going to be helpful if people can’t afford them. And then the question is why we are paying in some cases eight times more for that drug than people in other countries?”

We’ll call this a very public spectacle of price negotiation.

Something Has to Give

Price negotiation is an ancient ritual that is alive and well. New drugs like the gene editing innovations approved this week for curing sickle cell are breathtaking – and breathtakingly expensive at two million dollars per person.

It makes thousand dollar monthly tabs for obesity meds seem a little less daunting – but only a little.

Yes, big innovations in medicine are fueling the flow of big sums of money. Sky-high prices will bring ever more pressure on drug companies in the give and take of price negotiation. The sky is not the only limit on drug pricing.

Click here for more on the new proposal regarding unreasonably priced drugs, here for more on the CVS strategy, and here for more on the Senate hearing.

50 Pfennig Notgeld (Emergency Money), image by Palauenc05, licensed under CC BY-SA 4.0

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December 10, 2023