Prescription Drug Policy: The Year in Review, And the Year Ahead

Rachel Sachs ( published as: “Prescription Drug Policy: The Year in Review, And the Year Ahead, ” Health Affairs Blog, January 6, 2020. DOI: 10.1377/hblog20200103.861605)

This past year, prescription drug policy issues remained at the forefront of the national health policy conversation. With widespread public agreement across the political spectrum that action must be taken on the subject of drug pricing and affordability in particular (though vast disagreement among elected officials about what, exactly, that should be), many different stakeholders became involved in the policy discourse on the subject. In this post, I review five of the biggest prescription drug policy developments of 2019 (and revisit my predictions from last year’s post) and offer five issues to watch for in 2020.

Looking Back At 2019

Congress Finally Makes Progress

In neither 2017 nor 2018 was there any significant movement in Congress on prescription drug pricing. In 2019, that changed substantially (I provided a recent, detailed update). Most importantly, in December 2019 the House Democratic caucus led the passage of H.R. 3, the Elijah Cummings Lower Drug Costs Now Act, which would comprehensively overhaul our drug pricing and payment systems. The Act contains three major pillars: providing relief to seniors through reform of the Medicare Part D benefit structure; controlling drug price increases that outpace inflation in Medicare; and providing the Secretary of Health and Human Services (HHS) with the authority to negotiate prescription drug prices for both Medicare and the private market. The Congressional Budget Office estimated that the Act would have significant cost savings – $456 billion over a decade from the negotiation element of the package alone. The savings would be reinvested in expanded Medicare benefits, additional funding for the National Institutes of Health, and other priorities.

The Senate Finance Committee, under the new leadership of Chairman Chuck Grassley (R-IA), advanced its own bipartisan package. The Finance Committee’s package also redesigns the Medicare Part D benefit structure and aims to control price increases throughout the Medicare program. However, it does not authorize the Secretary to engage in drug price negotiation. After a contentious markup in which many Republicans on the committee voted against the package, the Finance Committee nevertheless advanced the package to the floor, where it remains on hold due to reported opposition from Senate Majority Leader Mitch McConnell.

Although neither the House nor Senate Finance package has yet become law, one piece of drug pricing reform did make it into the year-end spending package: the bipartisan CREATES Act, which has been under consideration since June 2016. See below for further discussion of the Senate package and its prospects in 2020

The Administration’s Efforts Remain Stalled

For the administration, however, 2019 was more of the same. HHS Secretary Azar had placed drug pricing at the forefront of his policy agenda in 2018 with the release of the administration’s drug pricing blueprint, but he made little to no progress on the topic in 2019 and even moved backward on some important potential areas of reform. In November 2018, the administration had put forth a novel proposal to reform Medicare Part D coverage and pricing, but that proposal was walked back in mid-2019. In February 2019, the administration released a proposal that would have fundamentally reformed the drug rebate system as it exists in Medicare Part D, but it dropped that proposal entirely in July 2019.

In October 2018, the administration had released an advance notice of proposed rulemaking regarding its idea of tying Medicare Part B prices to those paid in many foreign countries (known as the “International Pricing Index”), but as of the end of 2019, the administration had yet to advance that idea to the proposed rule stage. The sole proposal the administration finalized in 2019 – to require certain drug companies to disclose the list prices of their drugs in television advertisements, a requirement which would not clearly lead to cost savings – was blocked by the courts as exceeding the agency’s statutory authority.

The administration did begin to move forward in one new policy area: drug importation. In 2018, Secretary Azar had referred to the use of importation proposals as a way to lower prescription drug prices as a “gimmick.” Perhaps due to pressure from the administration, HHS rolled out a plan to permit drug importation in July 2019, which it then advanced to the proposed rule stage in mid-December. Essentially, the administration is seeking to use its existing authority, created in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, to permit importation of prescription drugs from Canada if the Secretary “certifies to the Congress” that importation will both “pose no additional risk to the public’s health and safety” and “result in a significant reduction in the cost of covered products to the American consumer.”

Rather than implement a nationwide importation program, however, the administration aims to create a pathway for states to develop their own demonstration projects in this area. A number of states (most notably including Vermont and Florida, whose proposals are the furthest along) have expressed interest in this strategy. Serious questions about the feasibility and legality of drug importation remain, and the Food and Drug Administration’s own analysis of the proposal questions “whether this proposed rule could yield non-zero benefits,” given likely responses from both the Canadian regulatory agencies and drug manufacturers. The administration seems interested in moving this proposal forward, although it would be highly unlikely that a state’s program would be able to be implemented in 2020, given the regulatory hurdles that remain.

States Push To Develop Innovative New Models For Pricing Reform

States continue to face increasing budgetary pressures due to the high costs of prescription drugs. Particularly in light of continued federal inaction and the lack of policy change, they have continued to push forward in developing and implementing innovative new drug pricing reform efforts. Here, I can only select a few noteworthy examples of a much broader nationwide trend. Last year, I noted the setbacks that states like Massachusetts and Maryland faced as their efforts to control drug prices were rebuffed by the Centers for Medicare and Medicaid Services (CMS) or blocked in the courts (respectively). However, both states came back in 2019 and created new authority for state review boards to investigate certain expensive prescription drugs and attempt to lower those prices.

CMS also looked more favorably on efforts by states to use innovative contracting models to purchase prescription drugs in their Medicaid programs. In particular, CMS greenlit efforts by Louisiana and Washington to use a Netflix-like subscription model for the purchase of Hepatitis C drugs, enabling the states to dramatically expand access to the products while keeping their spending under control. Similarly, in both 2018 and 2019, CMS approved requests by a number of state Medicaid programs, including Oklahoma, Michigan, and Colorado, to engage in outcomes-based contracting arrangements with willing pharmaceutical companies.

Other state efforts requiring permission from the federal government remain in progress. As noted above, several states are interested in drug importation efforts, and their proposals are under review by the administration. In addition, Tennessee has recently submitted a proposal to CMS to implement a Medicaid block grant, which includes a request to close the state’s Medicaid drug formulary that appears similar to one element of Massachusetts’ previously rejected request. It is not clear why Tennessee believes that it is likely to receive approval, in light of CMS’ prior rejection, but this is certainly a proposal to watch going forward.

The First Million-Dollar Drug Arrives—And Brings New Payment Models With It

As I predicted last year, 2019 saw the approval of the first drug with a list price in the millions of dollars. In May, the FDA approved Zolgensma, a gene therapy for the treatment of children with spinal muscular atrophy. With a list price of $2.1 million, Zolgensma is the most expensive drug ever approved. Zolgensma eclipses the already high prices paid for other products, including $850,000 for Luxturna, a gene therapy for a rare inherited form of blindness, and $750,000 in the first year alone for Spinraza, also for the treatment of spinal muscular atrophy.

With the approval of more gene therapies, intended to be one-time treatments rather than products that are taken over time, have come announcements of new payment models intended to enable payers to more easily afford these products and blunt the sticker shock associated with them. The announcement of Zolgensma’s price came with the proposal of a pay-over-time model, in which the drug’s cost would be spread over a five-year period and could even be reduced if outcomes metrics were not met. The insurer Cigna, aiming to expand access to Zolgensma, Luxturna, and future gene therapy products, has created a “per member per month” model known as Embarc, in which employers would pay a fee (currently under $1 per member per month) to provide patients with access to this suite of products. The idea is to both obtain predictability for plan sponsors and promote access for patients.

Expect these issues to become even more salient in 2020, as the FDA may be asked to approve a gene therapy for hemophilia, among other new products.

Turnover At the FDA

After nearly two years of steady, public health-oriented leadership, 2019 was a time of great turnover at the FDA, and thus a time of relative stasis in its policymaking efforts. In March of 2019, FDA Commissioner Scott Gottlieb announced that he would step down from his position. In the prescription drug context, Commissioner Gottlieb advanced policies in a number of key areas: prioritizing generic drug approvals, expanding the agency’s focus on biosimilars, and altering the prescription drug approval process. He also spoke out about ways in which he saw drug companies abusing the system to delay generic competition: He called for additional authority to enable the agency to fight back against strategies like the denial of drug samples for bioequivalence testing (which the CREATES Act addresses through private litigation) and he acted to deter citizen petition abuse.

Gottlieb’s temporary successors, Acting Commissioner Ned Sharpless (who had been the director of the National Cancer Institute) and then Acting Commissioner Brett Giroir (who had been HHS Assistant Secretary for Health), appeared to take fewer public stances on important topics than did Commissioner Gottlieb. They largely eschewed big speeches on drug pricing. On tobacco control – an issue Commissioner Gottlieb had prioritized, particularly regarding youth vaping – they were subject to the whims of a fickle chief executive, who first announced and then walked back a flavored e-cigarette ban (a narrower version of which was just issued).

Now the agency has its fourth leader in eight months in Commissioner Stephen Hahn, a Washington outsider with no previous political experience. This constant turnover may have stalled the agency’s momentum as it confronted many of these important policy issues. However, the presence of a newly Senate-confirmed head may enable the agency to stake out firmer positions in 2020.

Looking Ahead To 2020

In a presidential election year, we can again expect a heavy policy focus on drug pricing issues. Here are five drug policy issues across the spectrum I’ll be focusing on in 2020.

All Eyes On the Senate

Now that the House has passed its sweeping prescription drug reform bill, focus will shift to the Senate. Finance Committee Chair Grassley and Ranking Member Ron Wyden (D-OR) have advanced their bipartisan drug pricing package out of the committee, but the package sharply divides Republicans. Senator Grassley has stated that Senate Majority Leader Mitch McConnell remains opposed to the legislation, and so it may be difficult to imagine that chamber taking up its own reform package unless there are additional political pressures brought to bear. However, with Republicans seeking to pass something before the election, they might well advance an even more moderate package, perhaps consisting only of Part D benefit restructuring. In any case, it is unlikely that any affordability benefits from such a package would be felt by patients before the election.

Assessing the Executive Branch’s Remaining Options

As noted above, in 2019 HHS’ drug pricing efforts were largely stalled on various fronts. But like the Republicans in the Senate, President Trump will be looking for policy wins on drug pricing – reportedly one of his main areas of focus – as the 2020 election looms. Yet time is running out for the administration to even finalize many of its own rulemaking efforts before the election. In theory, it is possible in 2020 for the administration to finalize their importation proposal and both formally introduce and finalize their International Pricing Index model in Medicare Part B. However, neither could be implemented before the election. Instead, the administration may seek to support the Senate Finance package more publicly, aiming to get recalcitrant Republicans on board and achieve a broader set of reforms than it can accomplish administratively.

Democratic Presidential Candidates Propose To Use Executive Action To Lower Drug Prices

All the leading Democratic Presidential candidates have put forth specific policy proposals on the topic of prescription drug pricing. Notably, most of the candidates have explicitly embraced the use of existing legal authority, in the form of both march-in rights under the Bayh-Dole Act and compulsory licensing authority under 28 U.S.C. § 1498, to permit the production of lower-priced versions of patented products. Mayor Pete Buttigieg envisions using these authorities against “worst offender” companies; Senator Elizabeth Warren (MA) has specifically identified insulin and EpiPens as examples of products against which she’d seek to use these authorities, given the large price increases that their manufacturers have engaged in and the serious health impacts on patients. Senator Bernie Sanders has previously supported the use of these existing authorities and has proposed legislation to expand the government’s ability to engage in this practice.

Expect more focus on these issues in 2020 – and more questions for the Trump administration about why it hasn’t sought to use these authorities itself. (Secretary Azar is likely opposed, having referred publicly to compulsory licensing as “socialist,” but he has nevertheless advanced the above-described drug importation proposal under presidential pressure, despite his previously stated opposition to the practice.)

Keeping An Eye On the FDA—And Its Review Standards

As noted, Stephen Hahn was sworn in as the new FDA Commissioner just weeks ago. Because Hahn, a radiation oncologist who was previously the chief medical executive of the MD Anderson Cancer Center, lacks political experience, it is difficult to predict his actions as Commissioner. In 2020, however, he will be forced to confront a number of difficult policy questions that will shape both his tenure and perceptions of the agency. Some of these do not relate to drug policy – the FDA will continue to grapple with questions regarding the use of e-cigarettes, particularly among children, for example.

But other questions facing the FDA go squarely to the heart of its mission as an agency responsible for approving safe, effective drugs, and for ensuring the public’s trust in those drugs. In 2020, the FDA will reportedly be asked to approve aducanumab, Biogen’s investigational treatment for Alzheimer’s disease. Even after the drug failed a futility analysis in March 2019, the company has now argued that additional data weigh in favor of the drug’s approval. At least some analysts remain skeptical, particularly in light of the decades of failures of drugs relying on the same biological strategy to target Alzheimer’s disease.

In light of the agency’s willingness to approve drugs on the basis of little evidence for rare conditions with few effective therapies, it would be a mistake to count Biogen out entirely. But an approval of a drug that turned out not to be effective would have serious consequences for patients’ hopes, for prescription drug spending, and ultimately for public trust in the meaning of FDA approval itself.

Checking In On Judge O’Connor

Last year, I selected Texas v. Azar as an “Honorable Mention” drug pricing development to watch in 2019. The lawsuit, brought by a number of Republican Attorneys General, points to Congress’ zeroing out of the Affordable Care Act’s (ACA) individual mandate penalty in the 2017 tax law and argues that, as a result, the entire ACA is unconstitutional and ought to be invalidated. Initially, the Trump Administration argued that only the pre-existing condition protections in the ACA should fall with the individual mandate, but the administration later changed its views and is now arguing that the entire ACA should be struck down.

As Katie Keith has summarized for this blog, in December 2018, United States District Judge Reed O’Connor agreed with the challengers and declared that the entire ACA was unconstitutional. In December 2019, the Fifth Circuit agreed that the individual mandate must now fall, but remanded the case to Judge O’Connor for a new determination of how much of the law should fall with it. Even though legal scholars on both sides of the aisle find little merit in the case, it nevertheless remains alive and continues to threaten both health care coverage for tens of millions of Americans and other protections for hundreds of millions more.

Both last year and in other writing, I focused on the relationship of the lawsuit to prescription drug policy. The ACA includes a range of provisions that relate to the approval and affordability of prescription drugs across the health ecosystem. The ACA includes the Biologics Price Competition and Innovation Act, which created a simpler path to approval for follow-on biosimilar versions of innovator biologic drugs. The ACA closed the Medicare Part D donut hole, making it easier for tens of millions of seniors to afford their prescription drugs. The ACA increased the mandatory minimum Medicaid rebates companies must pay when they provide drugs through that program, making it easier for states to purchase these products.

The list goes on, and even includes authorities that the Trump Administration itself has relied on to advance some of its drug pricing priorities. If all these provisions must fall along with the zeroed-out individual mandate, that will impact the ability of the vast majority of Americans to afford the prescriptions they need. In 2020, Judge O’Connor will be called upon to explain how he sees each of these pieces of the Act as related (or not) to the individual mandate.

Despite the sharp policy focus on the issue of high prescription drug costs in 2019, little has changed for most patients’ ability to afford their prescription drugs, with nearly one in four Americans reporting that it is difficult for them to afford their medications. Expect these issues to remain at the forefront of the policy conversation in 2020, particularly as election season ramps up at both the state and federal level.