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Health and Human Services Drug Pricing Report – What Does It Mean?

 On July 9, 2021, President Biden issued an Executive Order affirming his administration’s commitment to encouraging competition in the prescription drug market as well as reducing the prices of prescription drugs in the United States. The order required the Secretary of Health and Human Services to report on the challenges addressing innovation and costs within the prescription drug market and to recommend legislative and administrative actions.

The HHS report focused on three “guiding principles”: affordability, competition and innovation. By following these three principles, the report intends to illustrate a pathway to protecting patient access to prescription drugs while simultaneously improving quality of care.








Controlling drug pricing has been a focal point for many years. Many proposals have been made but few have taken root. In fact, according to AARP’s report “TRENDS IN RETAIL PRICES OF BRAND NAME PRESCRIPTION DRUGS USED BY OLDER AMERICANS, 2006 TO 2020” the cost of prescription drugs has risen faster than the rate of inflation every year since 2006.

The HHS report suggests areas where legislative changes are needed to address factors that pose roadblocks to lowering drug costs. Allowing direct price negotiation by Medicare Part B and Part D, making programmatic changes that would protect beneficiaries from high out of pocket costs and limiting the rate of price increases on drugs are three areas where Congress could directly impact drug prices.

The report also highlights the need for legislative reforms that would encourage more and faster development of competitive drugs – including biosimilars, by investing in innovative research and removing roadblocks to generic drug market entry.

The report also probes into areas where existing authorities could be used to move policies levers in turn effecting drug pricing. Using the CMS Innovation Center to test different models of payment, including value-based payments and total cost-of-care models are ways that CMS can leverage its existing infrastructure to address rising prices. Other levers could include modeling different levels of cost sharing for certain populations in order to minimize patient out-of-pocket spending.

Transparency initiatives could also be expanded to include drug price, rebates and outcomes measures providing beneficiaries and others with meaningful information about the connections between cost and quality care. HHS can also work within its existing authorities to make the generic drug approval process more predictable and transparent, thereby encouraging the development of more competitive products.

Some of these initiatives have carried over from prior plans and some carry over into current legislative products. Price negotiation, for example, was a part of the former Administration’s American Patients First blueprint and is included in the latest markup of the Build Back Better Act. The concept of reducing out-of-pocket spending carries over from prior efforts as well. 

There is still significant work to do before any of these proposals come into effect. With only a thin margin in the House and a split Senate, Democrats will need to develop policy proposals that can reach across the aisle and win support from Republicans. Even though these does not appear to be a clear-cut pathway for these proposals, manufacturers should continue to stay aware of this movement and of the significant impact it could have on the pharmaceutical industry overall.



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