A Bi-Partisan Agreement to Keep Drug Prices Sky High?
Policy + Politics

A Bi-Partisan Agreement to Keep Drug Prices Sky High?

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Americans frequently rail against the soaring costs of prescription drugs and demand that drug costs somehow be reined in.

Just last week, members of the Senate Special  Committee on Aging berated several top executives of the Valeant Pharmaceutical company for driving up the prices of two blood pressure and heart drugs, Nitropress and Isuprel, by 212 percent and 525 percent, respectively.

Related: Obama Administration Will Press Medicare Doctors to Use Cheaper Drugs

The outgoing CEO, Michael Pearson, admitted that the company had been “too aggressive” in acquiring the drugs and jacking up their prices and that, in hindsight, “I regret pursuing” those types of transactions.

The Obama administration recently unveiled a pilot project that could save Medicare and consumers billions of dollars in costly cancer drugs by encouraging oncologists to use high quality but less costly alternative drugs. The goal would be to eliminate existing financial incentives for doctors and other specialists to prescribe newer, more costly drugs when less expensive drugs would be just as good.

But as the Obama administration has quickly learned, powerful political, industry and medical profession interests are arrayed against the proposed rule change drafted by the Centers for Medicare and Medicaid Services (CMS), and the fate of the plan is very much up in the air.

Huffington Post reported late last  week that influential Republicans and Democrats in the House have drafted letters to Acting CMS Administrator Andy Slavitt raising objections to the proposed rule change and urging that it either be temporarily shelved or pulled altogether.

Related: Ignoring Warnings, Drug Companies Hike Prices By 10 Percent

“CMS’s proposed Medicare drug experiment would unnecessarily disrupt care for the sickest seniors who depend on Medicare, including those with cancer, macular degeneration, rheumatoid arthritis, neurological disorders and primary immunodeficiency disease,” the GOP letter states in demanding that the proposal be rescinded. House Budget Committee Chair Tom Price of Georgia, Rep. John Shimkus of Illinois and Rep. Charles Boustany Jr. of Louisiana were among those signing the letter.

House Democrats including Rep. Richard Neal of Massachusetts subsequently sent a letter to the administration expressing “concerns” about the administration’s attempt to lower drug prices, but it stopped short of calling for the withdrawal of the proposed rule, which was published in the Federal Register March 11, and awaits final action.

“We support the Administration’s goal to reform the health care delivery system by rewarding high value patient care and innovative approaches to meet this goal,” the Democrats said. “However, we have concerns about the proposed payment model and its potential for unintended effects on beneficiaries and the physician community. We have important questions that CMS should resolve before finalizing the parameters of this demonstration.”

At present, Medicare Part B pays doctors and hospital outpatient departments the average sales price of a drug, plus a 6 percent add-on. While doctors typically base their choice of drugs on which ones they feel are most effective for treatment, their fees and add-on charges are considerably higher when they choose the most expensive drugs.

Related: Extreme Rise in Some Drug Prices Reaches a Tipping Point

Under one approach being explored by the administration, physicians would be reimbursed by Medicare for a drug’s average sale price plus 2.5 percent, as well as a flat daily payment of $16.80. A second approach would link reimbursements to a drug’s effectiveness for different uses. The goal is to force physicians to think twice about prescribing newer and costlier drugs and at least consider prescribing a less expensive alternative.

“What this does is evens out the difference between the less expensive drugs and more expensive drugs,” according to a Department of Health and Human Services official

Not surprisingly, however, the CMS proposal is getting strong push back from the medical profession and patient advocates who fear that the proposed overhaul might force doctors to allow price concerns to cloud their judgement in treating patients – especially in the treatment of cancer victims with new and much costlier drugs.

“It is inappropriate for CMS to manipulate choice of treatment for cancer patients using heavy-handed reimbursement techniques,” Dr. Allen Lichter, chief executive officer of the American Society of Clinical Oncology, a professional group, told The Wall Street Journal

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Moreover, PhRMA, the leading lobbyist for the major U.S. pharmaceutical companies, views the proposal as a threat to their profits in bringing out new, advanced drugs to replace existing ones. Allyson Funk, a spokesperson for the Pharmaceutical Research and Manufacturers of America (PhRMA), said recently, "Proposing sweeping changes to Medicare Part B drug reimbursement without thoughtful consideration and stakeholder input is not the right approach and puts Medicare patients who rely on these medicines at risk."

The proposed rule change has strong backing from some patient advocate groups, but until now, House and Senate Democrats have had little to say about it. But Big PhRMA and the medical community has been making considerable headway on Capitol Hill, according to Huffington Post, and House Democratic leaders felt compelled to circulate a letter of their own to keep their members from signing onto the much stronger GOP letter.

“Members are outlining their concerns, but this letter is in furtherance of getting an effective rule in place under the current timeline, Drew Hammill, a spokesperson for House Democratic Leader Nancy Pelosi of California, told Ryan Grim and Jeffrey Young, authors of the Huffington Post article. “This in no way is an effort to slow down or undermine the administration’s efforts.” Hammill confirmed his comments in an email to The Fiscal Times on Friday.

Related: Drug Company Profits Soar as Taxpayers Foot the Bill

The administration for now, at least, appears to be pressing ahead with its proposal, although Republican lawmakers including Price and Boustany, who are both physicians, appear determined to block it. “The policies in the proposed Part B model were developed with no input from outside experts and those with real-world experience,” Price and Boustany said in their letter.

However, the administration disagrees. “Americans from all walks of life have felt the impact of the high cost of prescription drugs, and it continues to be a prime driver of spending across the health care system,” Benjamin Wakana, a Department of Health and Human Services spokesperson, said on Friday.

“The administration's Part B proposal seeks to deliver better value for consumers and Medicare, while ensuring that doctors and patients continue to have access to life-saving drugs. That's why the proposal enjoys support from a diverse set of voices - from AARP to the American Academy of Family Physicians to the former head of the Centers for Medicare and Medicaid Services under George W. Bush.”