Changes in the House and Senate and a New Sanders Proposal Has the Biopharma Industry on Edge

Although the recent mid-term elections had a historic changeover of control in the House of Representatives from the GOP to the Democrats, at least one change in the U.S. Senate has the biopharma industry on edge. Sen. Chuck Grassley (R-Iowa) will take over as head of the Senate Finance Committee.

The current chairman is Sen. Orrin Hatch (R-Utah), who is retiring. Pharma lobbyists and drug pricing advocates generally viewed Hatch as being on their side in blocking drug pricing legislation proposed by Democrats and in some cases, even the Trump administration.

Grassley led the Finance Committee from 2003 to 2007, and according to The Hill, “has taken a much more antagonistic approach to drug companies and is well known in Washington as a dogged investigator.”

Rodney Whitlock, a consultant at ML Strategies who previously worked for Grassley, told The Hill, “He has a history of being unafraid to flip over rocks. Any stakeholder that has a role in drug pricing should assume he’s going to be asking questions.”

In September, Grassley worked with Sen. Dick Durbin (D-Ill.) to promote legislation that TV advertisements for drugs include price disclosures. This law was eventually blocked by House Republicans.

An industry lobbyist told The Hill, “We fully expect to be investigated and are under no illusions that Finance won’t take part in it. There are members of the [the Finance Committee] that are a little more sympathetic, but he’s the chairman and he will do what he wants to do.”

In a statement he made when stepping down as chairman of the Senate Judiciary Committee to replace Hatch as chairman of the Finance Committee, Grassley said he would focus on “improving the affordability, quality and accessibility of health care, including in rural America.”

And now that the Democrats are taking control of the House, there are expectations that the Democrats and President Trump, who has talked tough about doing something about drug prices, might find common ground. When signing two drug price transparency bills in October, Trump stated, “If there is anything bipartisan, it’s lowering drug prices.”

For all that, Politico notes that, “Hardly any health policy experts believe an agreement to allow the government to negotiate Medicare drug prices is possible next year—despite Trump’s past endorsement of the idea and House Democrats’ championing such negotiations as part of their ‘A Better Deal’ agenda.”

Sen. Bernie Sanders (I-VT) and Rep. Ro Khanna (D-CA) are working on new legislation to lower drug prices which bears similarities to a recent Trump proposal. The proposal was released yesterday and is called the Prescription Drug Price Relief Act.

Broadly, here is what the legislation proposes. First, each year, the government would identify “excessively priced” drugs, loosely defined as drugs priced higher in the U.S. than the average price in Canada, the UK, Germany, France, and Japan.

The health secretary then could label the drug as “excessively priced” based on a variety of criteria, including patient population size, the value of the drug to patients, and development costs. If stamped “excessively priced,” the drug manufacturer would lose patent protections that control developing generic versions of the drug. That would then allow competitors to begin selling generic versions of the drug, although they would be required to pay a “reasonable royalty” to the originating drug manufacturer.

It's rather easy to see why biopharma wouldn’t like this, and it also would seem to undermine U.S. patent protections, as well as set a precedent for the government deciding how other U.S. products should be priced.

For example, Walid Gellad, head of the University of Pittsburgh’s Center for Pharmaceutical Policy and Prescribing, who typically supports aggressive drug pricing controls, expressed concern over the broad criteria described in the proposal. 

“In my view,” Gellad told Vox, “it’s generally not a good idea to address high drug prices by labeling almost every brand-name drug as excessively priced and then removing all patent rights from the manufacturer. That doesn’t strike the balance we need to address drug prices while maintaining our system of innovation.”

Another criticism is that the proposal basically allows other countries to regulate U.S. drug prices. “I think it’s just lazy; it’s fundamentally lazy,” Craig Garthwaite, a health economist at Northwestern University’s Kellogg School of Management, told Vox. “I think they’re doing it this way because they don’t want to have this debate.”