Biden administration announces ‘comprehensive’ plan to fix high drug prices

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The US Department of Health and Human Services released its plan to tackle high drug prices last week as part of President Joe Biden’s push to tackle anti-competitive practices in the economy.

But while he went into detail about the abusive practices of drugmakers, he was much more superficial about the practices of much larger companies that serve as drug middlemen and some of the nation’s largest insurers.

The report, “Comprehensive Plan to Tackle High Drug Prices,” was produced by the HHS and forwarded last week to the White House Competition Council pursuant to Biden’s July 9 executive order to promote competition in the American economy.

The board held its first meeting on Friday.

The report notes the harm caused by rapid price inflation in the $ 370 billion drug market, where drugs cost almost twice as much as in other Organization for Economic Co-operation and Development countries, a group of 38 members of mostly developed economies.

“Americans pay too much for prescription drugs,” he says. “We pay the highest prices in the world, which results in higher expenses. Higher spending causes private and public payers to increase premiums or make benefits less generous. Lack of affordable access to prescription drugs and other health care services leads to poorer health outcomes.

Most of the solutions he offers deal with abuse by manufacturers.

For example, it adopts a practice called “pay for the delay”, in which a manufacturer of a brand-name drug with exclusive market access pays generic competitors to delay putting their products into the fray, thereby maintaining the fray. the costs.

The report also offers methods to promote the production of generic and biosimilar drugs and it proposes to reduce costs through direct negotiations between huge programs such as Medicare and the companies that make them.

However, the report is much lighter on the proposals for what to do about pharmacy benefit managers – the middlemen who handle transactions. This market is dominated by three companies which are among the 15 largest in the country and which are also important players in the fields of insurance and pharmacy.

The discounts that the companies, known as PBMs, negotiate with manufacturers have been found to increase the list prices of brand-name drugs, and companies are also believed to play an important role in keeping generic prices artificially high.

Critics have said that a lack of transparency in negotiations over PBM discounts leads them to believe that companies profit generously at the expense of everyone else.

“We have been working for years to clarify the supply chain,” said James Gelfand, senior vice president of ERIC, a group of major employers that provide insurance to 10 million people, in an interview last month. . “You have the drug manufacturer, who gives us a figure for what the drug costs. But by the time it gets to us, no one can explain where this number came from or why it is that number. So we tried to do our best to peel the onion and get a better understanding.

For their part, PBMs say they are using their influence to lower prices for consumers. But they have fought to keep discount information secret, apparently including creating new purchasing organizations that will form another link in the supply chain.

The HHS report released last week recognized the importance of PBMs in drug pricing.

Referring to the questionable practices of drug manufacturers, the report states, “They also pay discounts to PBMs to cover their drugs, with no guarantee that the savings will be passed on to patients.

“PBMs use their market power to collect fees from independent pharmacies. The three PBMs that handle 77% of prescription claims have banded together with the major health insurance companies, and one of them is also the largest drugstore / mail order chain. Companies in the pharmaceutical supply chain currently have little or no incentive to cut drug costs and challenge anti-competitive actions. “

Despite these concerns, the report does not call for scrutiny by antitrust agencies such as the Federal Trade Commission or the Antitrust division of the Department of Justice. However, he mentions a transparency initiative.

The US Centers for Medicare and Medicaid Services require that PBMs representing ACA market health plans provide discounts and other information. “Data collection from PBMs is expected to start in 2022,” he said.


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