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The economics, politics and reform of drug prices

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Watching a crystal ball is invariably a perilous activity, especially in areas such as economics, politics, and drug price reform, which are so prone to confounding factors. Despite that, it’s a useful exercise in predicting, given what we know – historical precedents – and how we expect the future to unfold.

In this article, I will make some predictions on politics, economics, and drug price reform, while a second article forecasts developments in Covid-19 and public health.

2022 economy and midterms predictions

The economy is experiencing an uneven recovery from the effects of the Covid-19 pandemic. Employment figures have been strong for some time and wages are rising. But inflation is stubbornly high, and labor and supply chain shortages threaten to dampen growth in some sectors. And, while the stock market boom is a consolation for some, there is a disconnect between what is happening on Main and Wall Street.

In addition, on a global scale, there is considerable uncertainty, exacerbated by a large number of unknowns. In fact, the greatest risks to the economy may come from geopolitical shocks: a Russian invasion of Ukraine, for example; China is harassing Taiwan; tension in the Korean Peninsula.

Ten months before the midterm elections, many experts predict a Republican defeat of the Democrats in Congress. Well, that could very well happen. President Biden’s approval ratings are poor, after all. In addition, there are many vulnerable seats in Congress that Democrats will struggle to hold.

However, 10 months is an eternity in politics. And the winds of fortune can change in no time. Covid-19 could fade away in 2022, the economy could continue to produce strong employment figures, and inflation could decline from its current peak. In addition, the enactment of the infrastructure bill and the possibility of adopting a lighter version of the budget reconciliation bill – or Build Back Better Act – could yield tangible results.

Indeed, I’m going to go against the grain here and predict a sustained economic recovery with lower inflation (from its current peak), as well as midterm election results in which Democrats maintain a slim majority at the House and a 50-50 Senate. Perhaps the problem for Republicans is that instead of offering constructive alternative plans on health care, child care, education, infrastructure, climate change and a host of other critical issues , they are blocked against any government intervention for ideological reasons. For independents and swing voters, pragmatism trumps ideology.

Drug pricing and reimbursement

Those who expect major changes in 2022 in the pharmaceutical pricing and reimbursement landscape may be disappointed. The most significant potential change to the drug pricing system – the overhaul of Pharmacy Benefit Manager (PBM) discounts, with a 100% pass-through to beneficiaries – will not happen. The Biden administration essentially rescinded former President Trump’s executive order calling for 100% pass-through of discounts. Moreover, the reform of PBM discounts is not even stipulated in the budget reconciliation bill or in the Build Back Better Act.

Given that Senator Manchin (D-WV) has said “no” to the Build Back Better Act, the prospects for the legislation look dire. But the bill is not yet dead. Senator Manchin can change his mind. He may in fact be using his “no” as a bargaining chip. A truncated budget reconciliation bill has a good chance of being adopted.

Alternatively, popular parts of the bill could be presented, not as budget reconciliation legislation, but rather as separate, smaller bills that go through the regular law-making process.

These could include several of the drug pricing provisions as well as the restructuring of Medicare Part D (outpatient) benefit, as they are very popular among voters. In addition, there is strong support for certain measures, such as a cap of $ 35 on monthly insulin spending and maximum annual spending of $ 2,000 for Medicare beneficiaries.

In Congress, there is also bipartisan support for shifting a substantial part of cost management in the catastrophic phase of Medicare Part D provision to Part D plans rather than the federal government.

As a reminder, the prescription drug proposals included in the Build Back Better Act would allow the federal government to negotiate the prices of a small number of expensive drugs covered by Medicare Parts B and D, especially drugs that no longer benefit from exclusivity. and have no competition. From 2025, 10 drugs would be selected to reach 20 in 2028. The negotiation process would also apply to all insulin products.

The proposal sets an upper limit for the negotiated price (the “maximum fair price”) equal to a percentage of the average price of the non-federal manufacturer; for example, 75% for small molecule drugs over 9 years but less than 12 years after FDA approval.

Notable exemptions include drugs that are less than 9 years (for small molecule drugs) or 13 years (for biologics) from their date of FDA approval, drugs with an orphan designation as the only one. indication approved by the FDA and “small biotech drugs” through 2027. These drugs are defined as 1% or less of Part D or Part B spending and represent 80% or more of the small biotech manufacturer’s approved drug portfolio revenues.

Even without legislation, the market will continue to evolve in ways that put pressure on consumers. report drug prices. Payers in commercial and public spaces will increasingly rely on clinical profitability and cost-effectiveness to determine the prices and reimbursement of prescription drugs.

So, for example, Medicaid policymakers have actively sought ways to apply research findings from the Institute for Clinical and Economic Review (ICER) to help manage their spending on prescription drugs. The Kaiser Family Foundation has found that at least 35 different states now review comparative efficacy studies when determining their coverage criteria, with the most frequently cited studies published by the ICER.

In addition, biosimilars will gain even more ground in several therapeutic categories. The uptake of biosimilars will increase steadily in 2022 and may accelerate further in 2023, for two reasons. First, more biosimilars are in the process of being approved – the most recent example being the insulin glargine biosimilar Rezvoglar in late December. Second, the status of therapeutic interchangeability will stimulate automatic pharmacy substitution. in 2023.

In total, 2022 does not promise anything overwhelming politically or economically. When it comes to drug pricing and reimbursement, a combination of market-driven measures and legislative retooling, among other things, of reimbursable insulin costs, will result in modest changes.


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