Moving Ahead with Rx Pricing Legislation

Top 3 Things You’ll Learn

  1. Status of the Biden Administration’s Focus on Prescription Drug Pricing Regulation
  2. What the Future of Trump’s Rebate Rule May Look Like
  3. How States Are Moving Forward with Affordability Boards and Drug Importation

After just over a month in office, President Biden’s new administration has focused on COVID-19 and getting the vaccine out to more people more quickly, as expected. Meanwhile, several states have continued moving forward with their own legislation in their efforts to lower prescription drug prices for their residents. This article summarizes a few of the latest actions that may have an impact on employer-sponsored pharmacy benefits plans.

Several states have moved forward with their own drug pricing legislation as they await federal action. While the implications of these actions remain to be seen, there are opportunities for payers to reduce wasteful spending now.

Rebate Rule Delayed: Health and Human Services (HHS) pushed back the start date of the proposed rebate rule introduced by the Trump Administration. The rebate rule would have eliminated safe harbor protections for prescription drug rebates and require that Medicare Part D rebates be passed to patients. That rule has been delayed until Jan. 1, 2023, for now. The decision came after a court order agreed to by the Biden Administration in response to a lawsuit filed by The Pharmaceutical Care Management Association (PCMA), the pharmacy benefit management (PBM) industry’s largest trade group. Critics say the rule does not limit drug manufacturers in setting high prices and cite alternatives to addressing high drug costs. The Biden Administration could pull the rule entirely, but that decision will come after HHS explores the proposal and considers the options. In his senate testimony on Tuesday, Xavier Becerra, Biden’s nominee for HHS secretary commented that he felt the rule was rushed.

 Drug Importation Plans Move Ahead: As the Biden Administration awaits confirmation of the new HHS Secretary, several states, including Florida and Colorado, are moving forward with their plans to import lower-priced prescription drugs from Canada. The controversial strategy set in motion by the Trump Administration has not been altered by the Biden Administration and is strongly opposed by drug manufacturers. Biden expressed his support for the strategy during his presidential campaign, but it is unclear if he will allow it to continue considering that Canada has already publicized policies preventing mass exports of drugs, citing shortages of several critical medications.

 Maryland Creates Rx Affordability Board: The Maryland House and Senate recently voted to move forward with establishing a drug pricing regulatory board for the state. These decisions come after Governor Larry Hogan vetoed the plan. With the override in place, Maryland can now set up a new “Prescription Drug Affordability Board” to help control the rising costs of prescription drugs. It would have a similar function as public utilities being monitored by rate-setting boards. Similar legislation has passed in Maine and Washington state and is being considered by Colorado legislators as well. A recent survey among Colorado voters revealed strong support (77%) in favor of establishing a prescription drug affordability board.

 Independent Review Board Established to Monitor Rx Pricing: As part of Biden’s campaign promise, his HHS Secretary would begin working on establishing an independent review board to assess the value of specialty medications that face no competition in the market. The goal is to develop a new approach for keeping the prices of new specialized biotech drugs down. The review board would evaluate the drugs and recommend a reasonable price to the manufacturer. The recommendation would be based on the average reference price in other countries or based on an evaluation by the independent board members for new-to-market drugs. It would dictate the price that will be paid by Medicare and the public option, which would be extended at a similar rate to private plans participating in the individual marketplace.

The Bottom Line

While the outcome of these actions remains to be seen, it’s clear that there is a unifying theme of the industry moving toward a value-based approach to drug pricing being done by independent experts. Perhaps having a consistent methodology to setting drug prices, especially for innovative specialty drugs without any market competition, would be a positive step to someday achieving greater affordability for all to have access to life-changing medications. Until then, it’s imperative that prescription drug utilization is managed closely to prevent wasteful spending. For employer-sponsored pharmacy benefits plans, this means ensuring that only the most clinically appropriate, lowest-cost medication is used every time.

 

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