Legislators and policymakers alike have struggled with finding effective ways to reconcile the differences between drug prices in the United States and prices for those same drugs in foreign countries. Many factors including Government price controls, varied supply chains, and differences in the volume and mix of drugs prohibit the direct comparison of drug prices between countries. The concept of developing a price index to track differences in prices over time and across markets is not new. The Medicare program has used market basket updates – a form of price indexing, to keep growth in payments under its prospective payment systems from falling behind prices in the market.
However, the concept of a price index for drugs has not been widely recognized by policy makers. That was, until President Trump released his “American Patients First” (1) blueprint to lower drug costs . In the blueprint, President Trump urged the Department of Health and Human Services to take steps to “address the unfair disparity between the drug prices in America and other developed countries.” While the blueprint stopped short of promoting an international price index (IPI) model, it would have had the same effect -- capping domestic drug prices at amounts that more closely reflect the overall price of drugs in foreign countries.
Shortly after the release of the blueprint, CMS released an advance notice of proposed rulemaking (2), signaling its intent to test the application of an IPI to certain Medicare Part B covered drugs. Stakeholders submitted 2,500 comments. CMS indicated that a potential model could have begun in Spring of 2020.
Instead of finalizing its IPI plan, CMS issued an interim final regulation (3) that would have established a most-favored nation pricing model. This model would have set Medicare payment at the lowest price paid by an Organization for Economic Cooperation and Development Nation with a gross domestic product (GDP) that is at least 60 percent of the U.S. GDP. Stakeholders argued that CMS acted improperly by skipping the public notice and comment period for this rule. The rule was put on hold when a court ordered that CMS must follow the full notice-and-comment rulemaking process before implementing the policy.
The idea of using international drug prices as a limit on domestic drug prices has been reflected by President Biden. During the run-up to the election, then-candidate Biden suggested that he would establish and independent review board that would assess the value of new drugs and recommend a reasonable price, based on the average price in other countries (4). The same concept was reflected in Vice-President Kamala Harris’ recent remarks in which she previewed her plan to allow the federal government to establish a “fair price” for prescription drugs, which will be based on the average price of comparable drugs from countries like the UK, France, Australia and Japan (5).
Congress has stepped into the fray as well. H.R. 3, the “Elijah E. Cummings Lower Drug Costs Now Act”, would allow Medicare to use the Average International Market price to help determine which drugs would be subject to price negotiation by Medicare.
Most recently, the RAND Corporation completed an analysis (6) of domestic drug prices versus drug prices in 32 comparison countries. Using 2018 data, RAND found that domestic prices exceeded foreign prices by 250 percent. They report that, on average, domestic prices for brand name drugs were nearly 3.5 times the prices reported in foreign countries. The US fared much better in the generic drug market where domestic prices were only 84 percent of foreign prices. Acknowledging that the results of its study could have been affected by assumptions made in the study methodology, RAND performed a series of different analyses – reaching substantially the same results.
Controlling the cost of prescription drugs seems to have support from both sides of the aisle in Congress. While the current administration does not share the same level of rhetoric as its predecessor when it comes to its efforts, it is clear that there is interest in finding solutions to the drug pricing problem. It is hard to tell if a reformed IPI will be a part of the administration’s efforts, but it does seem that there is an interest in addressing the price disparity.
The question is, does the administration have the appetite?
For more information, please contact me at john@policypros.net
(1) “American Patients First, The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs”; May 2018
(2) CMS-5528-ANPRM, “Medicare Program; International Pricing Index Model for Medicare Part B Drugs”; October 30, 2018; 83 FR 54546
(3) CMS-5528-IFC, “Most Favored Nation (MFN) Modes; November 27, 2020; 85 FR 76180
(4) http://www.joebiden.com/healthcare
(5) “Biden, Harris Unveil Prescription Drug Pricing Plans”, http://www.biospace.com
(6) “International Prescription Drug Price Comparisons, Current Empirical Estimates and Comparisons with Previous Studies”; Mulcahy, et.al.; Available at: http://www.rand.org/pubs/research_reports/RR2956
John Warren is the owner and principal consultant at Gettysburg Healthcare Consulting. Located in Hanover, Pennsylvania. He focuses on issues affecting the Medicare program -- including coverage, coding, and reimbursement of diagnostic tests, prescription drugs and other Medicare covered services.
Comments
Post a Comment