drug pricing policy making


In May 2018 U.S. President Donald Trump predicted that pharmaceutical manufacturers would “announce voluntary massive drops in prices” after introducing his “American Patients First” 44 page blueprint for reforming drug pricing. This blueprint includes a laundry list of policy ideas but not the one most feared by the pharma industry: allowing the government to negotiate drug pricing on behalf of the Medicare program. There was no real reaction from pharma and biotech trading prices rose 1.5%.

This May plan had one recommendation that seemed to actually help drug manufacturers: forcing other wealthy countries to pay more for U.S. drugs. It was implied but not required that this would allow U.S. manufacturers to then lower their U.S. prices. That has not happened….yet.

This blueprint also lashes into the supply chain that lies between drug makers and patients, health insurers, distributors and pharmacy benefit managers. “We’re very much eliminating the middleman. The middlemen became very, very rich, right?” was President Trump’s introduction of this aspect of the plan.

The list price of drugs increased 6.2% in first quarter 2018 but the real net price declined 5.6% compared to a decline of 1.7% in the same period last year. SSR Health attributes this real net price decrease to copay accumulators or accumulated adjustments that shift the drug costs from payors to drug manufacturers and patients. Patients receive the same amount of money from drug makers as before, but the payments doesn’t count toward their deductibles or out of pocket maximums, and prices are based on list price, not rates the payors have negotiated. A dramatic transfer of expense to the patient.

Putting consumers more on the hook for their medical costs and curiosity on the workings of the drug supply chain is drawing more and more public scrutiny. The projected increase in healthcare inflation for 2018 is 5.3%. Celgene indicated they wouldn’t raise drug prices any more than this healthcare inflation number and Roche and Sanofi said in July they wouldn’t raise drug prices at all in the U.S. Amgen recently announced a 60% reduction in the list price of their cholesterol-lowering drug Repatha. It is unclear whether this was due to competitive pressure from the pricing of other PCSK9 inhibitors, the amount of medicare patients unable to pay for Repatha or pressure from government policies.

In August of 2018 President Trump said there was an announcement pending that would bring down prescription drug prices “really, really substantially.” In October 2018 U.S. Health and Human Services Secretary, Alex Azar announced a proposed rule change requiring pharmaceutical companies to provide list prices of certain drugs in DTC advertising. Specifically prescription drugs with a monthly cost of at least $35 and that are also covered by Medicare and Medicaid. In an effort to buffer this plan, the Pharmaceutical Research and Manufacturers of America (PhRMA) introduced a new initiative that would direct patients from DTC ads to websites with information about drug costs.


On Thursday, October 25, President Trump said, “Same company, same box, same pill, made in the exact same location and you go to some countries and it would be 20% of what we pay (in the U.S.)…we’re fixing it.” The fix is lowering some prescription drug costs by using international prices as benchmarks for setting Medicare payment. Just the government intervention in setting drug prices for Medicare payments the industry was dreading.

Clearly there is patient interest and government interest in drug pricing. It isn’t clear how any of the participants in the drug supply chain are going to impact or be impacted by that pricing.

Interested in a position that examines this drug pricing question? Contact Smith Hanley Associates’ Pharmaceutical Commercial Analytics Recruiter, Eda Zullo, at [email protected] or 203.319-4309.

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