Drug Price Negotiation by CMS

Joseph Alvarnas, MD: Do either of you have any thoughts of is this likely to happen? Is this more in the possibility realm? And how could that play out?

John Fox, MD: Bob, what do you think—or Joe even? What’s your take?

Joseph Alvarnas, MD: I think that, as an aspiration, I could see people continue to clamor for this. On the other hand, I think the reality of this, or as people move forward with the ACA, is the realization that you’re going to take drug prices off the table to un-complicate what the president has realized is a highly complicated, loaded topic. So, I don’t see it as being terribly likely.

Elizabeth Carpenter: Action at the federal level is always really challenging. Action at the state level becomes much more possible.

Joseph Alvarnas, MD: Sure, sure.

Elizabeth Carpenter: And so, I think watching the states is really important as we move forward in this debate—and, frankly, watching states like Vermont, which is requiring additional transparency of many manufacturers in the state. How this new legislation in New York pans out may influence how things gain momentum or not at the federal level.

John Fox, MD: But at the state level, won’t that just apply to the Medicaid programs that are being administered by the states?

Elizabeth Carpenter: In some states, it is Medicaid only. In some states, it’s the state employee plans. It could be broader than that, really, depending on how legislators approach the issue.

Robert Carlson, MD: I think one of the issues here is that it’s clear that the United States is paying a disproportionate amount of the world’s pharmaceutical costs. Drugs cost much more in the United States than in the vast majority of other parts of the world, and we can talk about whether that’s appropriate or not. But, with the absence of value-based pricing in many circumstances—not all circumstances, but many circumstances—and the disproportionate share that we’re actually paying in the United States, something is going to have to give. And I suspect that the pharmaceutical industry is either going to take that upon themselves with time or the government will probably be forced to take that upon themselves with time.

John Fox, MD: So, you’re suggesting a NATO (North Atlantic Treaty Organization)-like approach, where everybody pays their fair share for drug costs.

Robert Carlson, MD: I think so.

Joseph Alvarnas, MD: See how that works.

Robert Carlson, MD: Hopefully, the costs globally or in the United States will come down, rather than the costs in the rest of the world go up. But I think that there does need to be some type of equity.

John Fox, MD: And yet, I’m not sure how that happens. Because with each succeeding generation of drugs the niche becomes smaller and smaller, especially with targeted therapies. Immunotherapy may break that trend, but for manufacturers who need to make a margin to satisfy their shareholders on a smaller and smaller population, I’m not sure how the costs go down unless there’s an external factor.

Elizabeth Carpenter: I don’t know if you’re giving enough credit to the PBM (Pharmaceutical Benefit Management) industry and some of the negotiation that has gone on there—preferred tier placement and the like. I think one of the big debates that we’ll see transpire is, should the government be the one negotiating drug prices or should the private sector, whether or not it’s a PBM or some other kind of third party entity, work in that way? And certainly, we’ve seen when competitors do come into the market, and the influence of those types of entities has led to lower cost.

John Fox, MD: You may be right, but a drug that used to cost $10,000 here that now costs $30,000—and I get a 5% price break—isn’t a deal. I just think about the advent of biosimilars and pick any biosimilar. If you get a 15% price break, it’s going to take you back to 2015 prices. It’s not going to take you back to the cost of the drug when it came out on the market. So, I think that’s the real challenge for us. We can negotiate around the edges, but it doesn’t change the basic economic structure that’s really breaking the bank.

Robert Carlson, MD: Talk more about the biosimilar issue. Do you expect to see downward pressure in prices where the innovator product goes down to what the biosimilar is, and there’s a spiral downward?

John Fox, MD: If we go outside the cancer field, because there are no therapeutic biosimilars yet, maybe rituximab will be the first one. But if you look at Inflectra, which is a biosimilar for Remicade, the manufacturer said, “We’ll meet that price for the biosimilar.” And so, the biosimilar has been kept—not off the market, but it hasn’t gotten a significant market share. When another biosimilar comes on the market, maybe the prices will drop further. Nevertheless, the 10% to 15% price break for the biosimilar of Remicade didn’t take us back too far—to 2015 or late 2014. So, that’s the challenge.

Leonard Lichtenfeld, MD: When it comes to the government negotiating drug prices, it’s a topic that’s top of mind for a lot of people who simply say, “Absolutely terrific, they should be able to negotiate drug prices.” Well, the government already does negotiate drug prices in the Medicaid program and in the Veterans Administration Program as well.

I’m compelled to say that the American Cancer Society has not taken a position on that particular issue. From a personal perspective, I’m certainly aware of that discussion. Given the pricing of drugs, I suspect it will move in that direction in terms of negotiated prices. However, some drugs really do occupy a very unique space. So, there’s no—I don’t know what the negotiation is—saying “Don’t use the drug.”

For example, if you go to Europe, some of the European countries have basically a social contract. That is, people in those countries understand that the government will make the decision if they’re going to use a drug based on a cost-benefit ratio. Are we going to go that route? I think that would be, in the present climate, very difficult to do. When we’ve seen the whole discussion about death panels and about not paying for medication, we in this country prize our access to medications.

So, if the government walked in and said, “You can’t have that drug because it’s too expensive,” or, “The quality-adjusted life years are insufficient,” someone would turn around and say, “You’re rationing my care.” That’s a discussion I don’t think this country is having. It’s a discussion we’re having. I don’t think it’s a place where people are ready to say, “Yes, okay, government, take over making those decisions.”

So, there are, as we go forward, a lot of issues. There was a proposal from Medicare, nobody paid much attention to it, called indication-based pricing. A drug may be successful—one drug in particular I can think of—in treating lung cancer for some people, but is not as successful in pancreatic cancer. The government had a proposal where they were going to consider paying more for the lung cancer indication than they were for the other. That proposal, however, along with some other issues about payment, was pulled by the Centers for Medicare and Medicaid Services. It’s no longer on the table today, but they did say that they were interested in moving in that direction.