It May be Too Late for Meaningful Drug Pricing Legislation this Year
Although the American public, Congress and the Trump administration have pressed for meaningful legislation over drug pricing, time is running out this year. Congress will recess in August, and when they return, 2020 elections will pick up their pace from their already frenetic speed. It’s possible some legislation will move forward, but many suspect if it does, it will be simplified laws in favor of more meaningful laws.
Democrats in the House of Representatives have a pricing bill, but it is tangled up with internal divisions with progressives. In the Senate, the same thing is happening with a Republic-led drug pricing bill backed by Senate Finance Committee Chairman Charles Grassley (R-Iowa).
“As we creep now into it being mid-July and without either chamber passing a larger package than what they’ve been able to do so far, I’m starting to think that we may very well end up with just the lower hanging fruit this year,” Julie Allen, senior vice president of the District Policy Group at Drinker Biddle, told The Hill. “Bills that focus on generic and biologic competition and not other provisions that would truly affect drug prices.”
In the House, Speaker Nancy Pelosi (D-Calif.) agreed to modify the bill after progressives claimed that a provision allowing Medicare to negotiate lower prices didn’t cover enough drugs. And even assuming this bill made it out of committee, it would face a tough road in the Senate and White House.
In the Senate, the Affordable Prescriptions for Patients Act was approved by the Judiciary Committee. One of its provisions would place limitations on how drug companies can exploit the patent system to extend monopolies. This bill hasn’t made it to a floor vote yet.
The Senate Finance Committee is working on a more bipartisan bill to limit drug price increases in Medicare, with a markup aimed for mid-July. But there’s a lot of doubt as to whether Senate Majority Leader Mitch McConnell (R-Ky.) would allow a floor vote for them, assuming they get out of committee ahead of the August recess. There are Republican senators who don’t like the Grassley plan, arguing that it looks like government price controls.
But as a recent New York Times article reports, drug-pricing is a complicated issue that isn’t likely to be “fixed,” assuming it ever can be, with broad legislation.
“All low-priced drugs are alike; all high-priced drugs are high priced in their own way,” wrote Craig Garthwaite, a health economist from Northwestern University’s Kellogg School of Management, reported the New York Times.
Aside from Medicaid and the Veterans Health Administration, almost all low-priced drugs are low-priced because of competition. Garthwaite’s research shows that generic competition of a brand-name drug can push prices down 80% below the brand price, even more in some cases. High-priced drugs, despite efforts to create a stronger biosimilar market, are usually high priced and lack competition for a number of different reasons.
Some of it is related to the complex thicket of patents biopharma companies use to protect their high-priced drugs. Some high-priced drugs, such as Vyera Pharmaceuticals (formerly Turing)’ Daraprim, simply lacks competition. This drug became notorious after Martin Shkreli, then Turing’s chief executive officer, increased the price by more than 5,000%, to $750 from $13.50.
AbbVie’s Humira, for example, doesn’t have competition because of patent protection, for the most part. Daraprim, however, lacks competition because it’s been on the market since 1952, and the cost of starting production on it, particularly with competition driving the price down, would likely take too long—or ever—for companies to pay back costs and make a profit.
The FDA has passed some regulations to speed generic approvals, but there are other issues. Most of the highest-priced drugs are biologic drugs, which use living organisms to produce and can cost 20 times more to manufacture than traditional small-molecule drugs. These biologics are much more difficult to duplicate than small-molecule drugs and the biosimilar (essentially a generic version of a biologic drug) approval process is much closer to that of a new drug, requiring extensive clinical trials. Although adoption of biosimilars has been fairly strong in Europe, it lags behind in the U.S., partly due to patent protection.
As a result, some of the U.S. drug-pricing proposals focus on biologics, including one to change Medicare that would link biologics prices to those in other countries.
Drug pricing will likely remain a hot topic, especially with the ongoing U.S. presidential election heating up, but it remains to be seen if anything meaningful will come out of this busy period for such a complex topic.