CEimpact Podcast

Drug Price Negotiation by the Inflation Reduction Act

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The cost of medications is often attributed to a burden on healthcare - despite hospitalizations costing four times as much. Join host, Geoff Wall, as he discusses the new Inflation Reduction Act which allows the government to negotiate medication prices.
 
The GameChanger
The US Federal Government can now negotiate with drug companies for the cost of medications. Similar to other countries, this bulk buying power can help lower medication prices for patients.
 
Host
Geoff Wall, PharmD, BCPS, FCCP, BCGP
Professor of Pharmacy Practice, Drake University
Internal Medicine/Critical Care, UnityPoint Health
 
Reference
HHS Selects the First Drugs for Medicare Drug Price Negotiation
https://www.hhs.gov/about/news/2023/08/29/hhs-selects-the-first-drugs-for-medicare-drug-price-negotiation.html

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CPE Information
 
Learning Objectives
Upon successful completion of this knowledge-based activity, participants should be able to:
1. List the 10 medications first targeted by the new legislation for negotiation
2. Describe the common arguments against this provision of the Inflation Reduction Act

0.05 CEU/0.5 Hr
UAN: 0107-0000-23-321-H03-P
Initial release date: 10/2/2023
Expiration date: 10/2/2024
Additional CPE details can be found here.


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Speaker 1:

Welcome to the Game Changers podcast, where we have clinical conversations that impact your pharmacy practice. Let's listen in as our team discusses this week's clinical practice game changer.

Speaker 2:

Hello and welcome to Game Changers clinical conversations. I'm your host, jeff Wall, professor of pharmacy practice at Drake University. Today, we are going to talk about something a little bit off the beaten path. We tend to focus more on studies and pharmacotherapy, but it is such a big political and policy issue that we felt it was really worth talking about. That, of course, is the drugs that are now going to be considered for negotiation by CMS for Medicare Part D and the unfortunately 2026 financial cycle or budget cycle. So, unfortunately, even though this made a lot of splash in the lay media, it's not like you're going to see a decreased cost in any of these drugs for the next couple of years, unfortunately. So, anyway, we thought that this is certainly going to affect people down the road, I think, mostly in a good way, and so I think it's certainly something we're talking about.

Speaker 2:

As I'm sure you've seen in the lay media, as part of the Inflation Reduction Act that was signed in August 2022, there were several provisions. There's lots of things that were in that act, but one of the provisions was to help lower prescription drug costs for patients who are in Medicare Part D in particular, and, of course, offsetting some of the costs that the federal government pays for this. I'm old enough to remember back when Part D passed. It doesn't seem like that long ago, but it's kind of sobering to realize it's probably close to 20 years since the Part D part of Medicare was passed that finally covered prescription drugs, at least kind of for patients on Medicare. And before then, of course, patients were basically on their own and they would have to buy supplemental insurance, which many Medicare patients do anyway. But it was really something that was, as medication prices were starting to go up and up and up and up, really taking a toll on a lot of patients on Medicare because they were literally having to make choices about eating or paying rent and taking their medications. And, as you might imagine, if I was one of those people, I know that rent and food takes precedent over the medications that some doctor told me to take. So it was a real, real problem and George W Bush administration really worked hard Again, whatever politics you may think of that, but you had to get Part D passed.

Speaker 2:

But as a pharmacist and I know many of the pharmacists are listening out there there was a lot of puzzlement and, I suspect, a lot of backdoor backroom dealing about how could we get this Part D plan passed, and one of them was the whole notion of the donut hole, which again, every community pharmacist struggles with, as patients have that first couple of months where their copays are relatively low, things are going okay, and then they hit the donut hole where they're basically on the hook for the entire price until they reach catastrophic coverage and they end the donut hole and then it's covered again and again.

Speaker 2:

That has just made life incredibly difficult for a lot of patients. And part of all that which really always surprised me was the notion that as part of the Part D plan, when it originally was conceived, basically the federal government really had no power to negotiate prices for Medicare patients. And if any of you who work in the VA system know that that's actually one of the most powerful tools that the government has for negotiating prices is basically just the ability to buy a bulk and such large numbers they're able to work with competition and basically decrease prices associated with these medications, and that was explosively forbidden in the original Part D legislation.

Speaker 2:

The other piece that always kind of made me angry and I suspect many community pharmacists feel this way too was that it blocked patients with Part D from participating in reduction in price coupons or discount prescription cards and things along those lines. And so, yes, it was some strides definitely forward in helping patients be able to forward things, but patients were still paying lots of money and also the government was paying tons of money. So, again, as part of the Inflation Reduction Act, this allowed basically a Medicare Part D and eventually Part B as well, and allowing the government to negotiate decreasing price and allow the different companies to compete with each other. So again, from my side of the world, that sounds great and I'm sure if you're a patient who you know, someone on Medicare, you know what you yourself or Medicare you probably think it's pretty good too. I wish I could tell you this. It's going to go into effect next week, but unfortunately, as I said, it doesn't actually take place until 2026.

Speaker 2:

But when they announced the 10 drugs, I think I was pleasantly surprised to see that these are medications that not only are crucial, I think, to treating several disease states, they're crucial to treating common disease states as well, as there were some medications in the list that were a little more rare. So I was kind of glad to see that. So the list of drugs themselves and again, keep in mind that none of this is going to get inputted in for several years is aliquus and cerreltos. So they actually put in both DOAX that are probably the most commonly used DOAX in the United States. They put in jargons and farsita, which are the two most common Esteele II drugs. They put in genuvia, which kind of surprised me because it's like I don't see a ton of DPV4 inhibitors used anymore. They put in intresto, which I think is crucial for heiferous patients, and then, interestingly, they added a couple of biologics. They added embryo and scelara and then they added a cancer drug and brubica. So in addition to those, they also added several types of insulins, particularly the peninsulins. So I think that everyone would agree these are some of the big blockbuster medications that millions of patients are either on or really should be on.

Speaker 2:

I was talking yesterday to a cardiologist about the difficulty of implementing gold therapy in the hospital and patients. When you're writing prescriptions for patients who you know are out of the gate literally can't afford them, and if they're Medicare Part E, we really can't help them with any sort of prescription, drug help or cards or anything along those lines. So again, 10 medications that I think are pretty crucial to practicing modern medicine I've had a couple people talk about why did they add both do-axe, why did they add two STL2 drugs when they could have added something else? And it's worth noting that the process by which they pick these medications and the limitations associated with it are substantial and that I think there is kind of discussing a little bit here as well. Now, of course, we have no idea right now exactly how much this negotiation might save Medicare and also patients money.

Speaker 2:

There was an interesting simulation study that was published in the JAN Online Network a while back that took a look at what the projected cost savings would be. So in the study again it was a simulation study and what they did was they looked at minimum savings that would be achieved by these Medicare negotiations and again they had to kind of guess a little bit or make an educated guess about which drugs were going to be selected and what the discount or negotiated prices might be. So I mean kind of keep that in mind, but they wanted to take a look at the overall price savings, what type of drugs would be, what kind of classes, etc. Etc. So they actually looked at, they projected that there might be 40 drugs and this was before the drugs were announced. That might be the ones that are targeted for entry. The most common classes were endocrine and again you might imagine, were both STL2 drugs and GOP drugs, and then psychiatric and neurologic, so my guess would be mostly anti-psychotic drugs. They looked at several biologics and then they looked at cardiovascular medications, including dolax and intresto, and what they basically found in their net projections is that the decrease in savings, or the basically the savings that the federal government would get, would be about $26.5 billion Yep, that's billion with a B which represented about 5% of all estimated net Medicare drug spending during the three years for the window of the study. So I mean, not a big surprise. I think what that study kind of assesses for us, or at least estimates for us, is that the savings from this is going to be substantial and we'll talk a little bit here and a little bit about how is that money going to be passed on. As far as savings to patients are concerned, we'll talk about that in a second.

Speaker 2:

So again, there's some rules associated with this. One of them is it's not like a medication that's approved in 2023 can be eligible for this negotiation in 2025. In fact, one of the rules with the program is that a drug product needs to be out for at least seven years if it's a small molecule drug or 11 years if it's a biologic after its FDA approval before it can be eligible for this negotiation. I have to admit, I'm hoping that means just its original approval, for its original indication, because of course, one of the things I can certainly see happening is, oh, you know, a drug gets approved for, say, hypertension in 2023 and then they do a study in 2027 that finds it's helpful in heart failure. So they get an approval in 2027 or heart failure, and they go to look at trying at price reduction and of course the drug companies like, oh, no, no, no, no, no, they we are. Last approval was 2027. You know.

Speaker 2:

So I have no doubt some shenanigans like that are probably going to go on, because that's you know, kind of kind of how those things work. I mean even now that that's how things work as far as patent holding and things like that. So I'm really hoping that in the rules they say you know, you know this is from your first indication, so basically, the first time you're actually on the on the market to be prescribed by positions. Basically, they obviously don't want drugs that have generics, and so drugs that are closer to losing their patent or drugs that have lost their patent won't be eligible, which again makes sense. Why would you need to do this if the drug already has a multi source generic out? That's going to cause a competition in the price to drop. As it is, they did take a look at medications that basically cost the most post money and I suspect that's why, when you look at the list, at least initially, we've got you know, multiple drugs in a single class.

Speaker 2:

I'm sure, if you take a look at the numbers, that for example, both Zarellto and Eloquus and both Farksiga and Giardians have got to be among the highest drugs that are costing CMS money. So that really doesn't surprise me. There they go into some detail about the biologics, and I mean again, anyone who has to deal with biologic, specialty pharmacists or subspecialty physicians know how unbelievably expensive these drugs are. We know that as part of the Affordable.

Speaker 1:

Care.

Speaker 2:

Act there came out in an entirely separate way for biosimilars to come out in the market not really generics, but basically drugs that are very similar to the innovator product and that was again a way to try and introduce, you know, what I would call generic competition into the biologic sphere. We've certainly seen that in drugs like Infliximab, where we now have three or four biosimilars out on the market, and it has definitely dropped costs. Unfortunately, it's so quite expensive. It's not like you're going to, you know, get this as a $4 med anytime soon, but it's definitely decreased total costs to patients and to payers. And so you know. The other thing that the inflation reduction that goes into some detail about is how these drugs are going to be negotiated. And you know they say you know basically they're going to, like everything else, send out kind of a bid and say, okay, you know, in this therapeutic class we hear the drugs that we seem to be using a lot. You know we will. You know we will pick one over another. If you know if the price is right and the clinical data is pretty much the same, which is another very interesting key piece and I suspect this was really negotiated behind the scenes pretty heavily is that the act explicitly directs that that CMS cannot and this is a quote cannot use evidence from comparative clinical advocacy research in a manner that treats extending the life of an elderly, disabled or terminally ill individual as a lower value than extending the life of an individual who is younger, not disabled or not terminally ill. So you know, one of the things that that that they are not going to allow is health outcomes or evidence which, again, if you're a, if you're an outcomes clinician or data analyticist or a pharmacopharmacoeconomic specialist, that had to be kind of a blow because you know we can.

Speaker 2:

We've been using cost effectiveness and cost utility data supposedly now for 40 years to help us try and pick which drugs are our important medications to be used, and so that you know I I suspect that I'm sure that was as the result of some kind of you know, you know back room dealing. I'm sure, again, if you're in managed carrier, you're that's kind of a bad thing as well, because it's like, well, you know, we've long wanted to use qualities and other sort of quality of life measures to help us, help, you know this pick basically the most cost effective medication, and so, unfortunately, you know that that part of the act explicitly throws out, you know a cost effectiveness data and other sort of data. Again, I it's a shame, in my opinion, because I think that would at least help pick. You know, especially in a therapeutic class where you've got four or five medications, if you were able to say, you know, based on costs, here's what, here's what the qualities were would be associated with that. So that you know. I think it's probably overall a bad thing. I think there are people who, kind of you know, I would say, look down at but don't give a lot of credence to pharmacoeconomic studies. I'm not one of those people, but I've talked to people who you know they say, well, you know, these are all kind of you know simulation studies and you know, I don't know how much that works in the real world and things along those lines. I don't know about all that, but it is kind of a shame, in my opinion, that they're not even going to consider any of that data as part of it. So so that's, you know that they go into some detail about that.

Speaker 2:

As I said, they do talk about the rules for biologics and interestingly, they do have a small biotech exception and again, I think this is the point of this is to help stimulate innovation, looking for new medications.

Speaker 2:

So from 2026 to 2028, the act basically says that so-called small biotech drugs will not be eligible for negotiation and to qualify, basically the drug itself has to be 1% or less of total part of the expenditures for all the medications in that group and 80% or more of total expenditures under Part D for all the medications.

Speaker 2:

Drugs where a coverage gap discount program agreement wasn't effective for 2021. So basically what that means is that for companies that may only have one or two medications and you know they're trying to come up with innovative medications again usually biologics or something along those lines that they will not be immediately subject, even if they meet that seven-year or eleven-year mark, they won't immediately be eligible for be a subject to negotiation. And I suspect that the reason that kind of came through as part of the act is, you know, you've got all these little tiny biotech companies that again have one drug that they're, you know, hoping to get on the market and, frankly, you know, usually hoping that one of the big pharma companies will go and buy them out and start using it and marketing it. That allows that to kind of occur. So that's that. That's kind of an interesting thing.

Speaker 2:

The the, the guy, the act goes into detail saying you know there isn't a set price, reduction or negotiated price they're trying to do they, they really don't, they really don't kind of go into much detail about that. It is worth noting that that a lot of the, the money that that drug companies make, actually goes back not to pharmacists. Even now, I think there's some patients who think that pharmacists must be driving around in Lamborghinis because of all the money that that they're paying. You know the, you know the, the community pharmacy they're going to and you know I think most community pharmacists are quick to disabuse patients of. That notion is like, yeah, you know, if I was making even five percent of this money, I would be riding around in a Lamborghini. But the bottom line is that you know the pharmacists aren't making this money, the doctors aren't making this money. You know it goes basically to drug companies and fortunately, a lot of that money, through rebates and other mechanisms, actually isn't going to pbms. And you know, again, you, you could do, you could do multiple podcasts talking about pharmacy benefit managers and what they do.

Speaker 2:

I think on my side of the fence, which is, you know, firmly with, with, with community-based pharmacists and other pharmacists. You know, it seems to me that the pbms are largely middlemen that don't seem to do very much except, you know, take their, take their, their cut of the pie. And they certainly put the screws to to community pharmacists, in in in things like clawbacks and stuff that make it, you know, especially if you're an independent pharmacist, almost impossible to to have an have an operable and profitable business. And so you know, I'm not a big fan of pbms, as you could probably tell most pharmacists, I know art, there are some people who defend what they do, but but I, I it's. It's sobering to me that when people talk about the outrageous profits that that big pharma makes and they do make good profits, you know there's reason that many of these companies are are in the fortune 500 list that a lot of that money ends up trickling back down. And you think, well, it trickles back down to the pharmacy or to the patients or to the pay payers, and no it, it ends up getting back to the pbms, unfortunately. So.

Speaker 2:

So that's kind of what the what, what the act implies it, like I said, if you know, if, if you are having a hard time sleeping some night, you could certainly pull the whole act itself and read it. I'm sure that would work pretty good for anyone's insomnia, but I think you know it. Basically, the, the, there is some information that I think you can, you can access, that that really doesn't even go into a lot of detail but gives you, like you know, just what you need to know, the nuts and bolts of what you need to know. There is a, a upper limit on the maximum fair price. So again, I'm sure that was kind of some some dealing to try and get this drug, get the, the act approved, and and and again, they, they take a look at a kind of a formula that looks at the average price, including a net of all price concessions and rebates, for a part d drug, the average sale price for a part b drug, and and there is a, there is a cap on basically how much of a discount that the, the, the company that the government can shoot for. Again, you know, I don't think that's a great idea, kind of a kind of short circuits.

Speaker 2:

The whole reason why we're doing this but I suspect that was, you know the way, the only way the story was actually going to get approved.

Speaker 2:

What it ends up being is is that that? You know the. You can certainly look at the, the formula, but but basically the theory is that it means that that the longer the drugs been on the market, the lower the ceiling on the maximum fair price, which I guess kind of makes sense because you're you're heading toward, hopefully, generic competition pretty quickly. So there are going to be more medications and there's actually another set of 15 and then another set of 20 medications that are going to be implemented. You know, years down the road 2028, 2029 but you know again, I think, that that on the whole this has been. You know, I give some hope, I think, to a lot of patients that some of their medications will become a little more affordable. Now there are arguments against this, this program, and what they are and kind of what I think some thoughts about those arguments are. We're going to discuss as soon as we hear from our sponsor, cdm, back.

Speaker 1:

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Speaker 2:

We're back talking about the Inflation Reduction Act and the list of 10 drugs that was just announced. September 1st, that will be among the first medications that are going to be negotiated for lower prices by Medicare, part D and CMS. There are some arguments against this. The one that has been used really since I was a pharmacist, you know, probably 25-30 years now is that if you do this, it's going to harm innovation and result into your life-saving drugs. And it's certainly true that it is quite expensive and quite risky to try and bring a drug to market. They say that for every 100 or 200 medications or compounds that some medicinal chemists working in a drug company says you know, eureka, here's a treatment for X that only one of them actually makes it to market. And so it is true that the issue of research and development is extremely pricey. Large randomized control trials that get drugs FDA approved are often millions of dollars and take years to accomplish. And so you know there is some truth to the fact that drug companies, do you know, put a lot of money on the line when it comes to R&D. But it is worth also noting that there have been some projections that suggest that that fear is probably a bit overblown. The congressional budget often actually did a projection study that estimated that if they were to do this, if this were to come about, that the impact as far as the least the big pharmaceutical corporations would be whether it be 13 fewer drugs coming to market in the next three decades so not next year, not even the last 10 years, that over 30 years, that 13 fewer drugs would make it to market, and normally they, you know, during a 30 year period, somewhere between a between a thousand and 1300 new medications are expected to be approved during that period. So it really is a very, very small, small percentage of them. And of course, you know, not all of those medications are life saving treatments. How many of them are really me to drugs, right, you know? Do we really need the seventh or eighth SGO to drug or the you know you know fifth or sixth DPP for drug or things along those lines? So I mean, you know there's no way to really know what you would count as life saving saving medications.

Speaker 2:

Certainly, the biologic revolution has has has transformed our treatment of a wide variety of medications and I don't think anyone would say that we don't want more innovation along those areas. But I think you know the argument that you know well, if, if, if we, if we force a negotiation with drug companies to decrease costs, we're not going to have the money to do these big studies. I think is is largely overblown in my opinion. I think there's still going to be plenty of money to do our R&D and and, and you know again, the profits are still there. I don't think, you know, any of the big pharmaceutical companies are going to go out of business because they have to negotiate, because, remember that you know the United States is not the only country that does this.

Speaker 2:

Most other Western countries and countries that have so called socialized medicine I don't ever like using that term, but you know they have done this for decades they do negotiate with with drug companies to get lower drugs, and you know that's the worst when you have, basically, you know, one fairly large insurance scheme that pays for medications and you can say look, we're only gonna have one STL2 drug, we're only gonna have one stat, we're only gonna have one of these medications on the market.

Speaker 2:

It does, I think, really encourage competition, just like every other sphere of free enterprise and capitalism. Right, we have multiple cars on the market. They're gonna compete. We have multiple other products on the market. They're gonna compete for what consumers want, of course, with physicians prescribing medications, that you'd kind of take the consumer piece out of that, and I actually don't think that's necessarily a bad thing. I wouldn't be sad if tomorrow we went back to not allowing ads for prescription medications on the market. Again, it's worth noting that no other Western country does that except New Zealand. Don't allow New Zealand, and so I mean how much money would drug companies save just by not paying for what seems to me when I'm watching television, the endless psoriasis and atopic dermatitis commercials you see on the market? So, again, 13 less drugs, but how many of those are basically, yes, actual innovating drugs versus me, two medications is?

Speaker 1:

quite a. Thing.

Speaker 2:

And again, because the Inflation Reduction Act does allow this nine years. Again, it's not like the next year after the drug gets put on the market, they have to negotiate. There's quite a lot of time for the companies to basically make back the money they spent on that drug and my guess is quite a amount more. Other arguments include that this is basically price controls and again I think, as we discussed, other companies do this and other countries do this and they don't. This isn't basically we will only pay this. They're basically encouraging competition between the medications. Again, to me, no different than negotiation in the free market and in any other sphere. It's just that now you have a single customer who has got dispensed the absolute most amount of money on your medications. You're obviously gonna want to give the most attractive price to them, especially compared to your competitors, and so again, I don't really see where this is, a sort of thing where the government is telling us how much money to say no. They're basically saying we're gonna negotiate for this drug and you guys have to give us your best deal. Basically, and I don't think that's necessarily that. I don't think that argument really holds water, to be honest with you.

Speaker 2:

Another argument is that these drugs are gonna basically save the government money but we don't know how much of that's gonna get passed on to patients. I don't think again. That's true. They say that there's evidence studies that suggest about nine million Medicare and Role-E spent about $3.4 billion out of their own pockets every year on just these 10 drugs that we're talking about so not even total, but that a lot that patients do spend quite a bit of money still of their own money on these medications. And what's going to happen? Of course this is the overall lower negotiated prices. Those payments are just gonna decrease, so basically the initial amount that patients are gonna pay, or even if the donor hole stays in place, even those prices are gonna go down significantly. So I don't think that this is set up so that the government is just gonna save money but that patients aren't gonna reap the benefits as well. It's worth noting that the Inflation Reduction Act has already acted with insulin and that copays for part D patients and are going to be capped at $35 a month starting next year and then a catastrophic drug expenses will also be capped. So I don't necessarily think I buy the argument that this is only going to save the government money and not say patients money.

Speaker 2:

There are other arguments about talking about constitutionality of these medications. That's certainly beyond the scope of this. I think the bottom line is that I think this really unties the hands of the government and CMS to really help negotiate and decrease prices for patients. I don't think a lot of the arguments that say that this is a bad idea really hold water, at least from my side of the fence, and I think that we should be encouraged by this and hope that this for these firsthand drugs, that we do get successful negotiation and kind of we'll see, we'll see.

Speaker 2:

Does that projection study be? Is it true that we're gonna say billions of dollars? My guess is probably yes and it'll be interesting to see in the end and this really come out of community pharmacists how much money are they really going to save as far as patients? How are they gonna help party patients kind of navigate this stuff? All of it is gonna be very interesting to see. But I'm glad to see some movement on this because it's certainly something that has been kind of in process for many, many years at the legislative level and I'm kind of glad to see that some movement has been made in it. So that's this week of Game Changers. Again, thanks for listening. We'll see you next week. But until they remember, time flies. I don't know where it's going, but the most important day is today. We'll see you then.

Speaker 1:

Jen here. Be sure to check out our education at cempackcom. You'll find it to be your one stop shop for all the CE resources you need. Become a pharmacist by design member today to access it all for free, including CE for this podcast. Thanks for listening. We'll talk to you next week on Game Changers Clinical Conversations.