Business Group Blog

Recommendations to Promote Sustainable, Affordable Pricing for Specialty Pharmaceuticals

Specialty Pharmacy

The Business Group is pleased to roll out a Public Policy Issue Brief that offers public policy recommendations to create a more favorable environment for financial sustainability and affordability of specialty medications. 

This is the first in what will be a series of blog posts, to break down the comprehensive issue brief into bite-sized pieces. 

At the outset, understanding the challenge is important.  With specialty drug expenditures trending at an all-time high and all indicators pointing to sustained increases over time, employers are strategizing on how best to manage growing pharmacy expenditures for this subset of drugs. 

With that in mind, the issue brief explores the dynamics of the specialty pharmacy market—including the growth in specialty pharmaceutical development; price and price inflation; increases in utilization for an expanding list of conditions; and the impact of vertical consolidation on specialty drug prices. 

To contain prices, the Business Group recommends fostering a more competitive pricing environment for specialty pharmaceuticals, which should track more closely with the rate of economic and wage growth. 

To help achieve this goal, the Business Group believes it is necessary to review public policies that influence the pricing, prescribing and administration of specialty medications and recommends adopting and reinforcing policies that would create more sustainable, affordable pricing and modifying or eliminating policies that stifle competition, raise prices, and increase unnecessary spending.

Below is a summary of policy recommendations from the Business Group. Download the complete issue brief for greater detail on each of the below recommendations.  The second in this series of blog posts will do a deep dive into policy recommendations proposed by various other stakeholders that the Business Group would not support, which could include out-of-pocket caps, price controls, and negotiations in Medicare Part D. 

If you have any questions, would like more information, or would like to schedule a meeting to discuss this important issue and our recommendations, please contact Tiffany McCaslin (mccaslin@businessgrouphealth.org) or Steve Wojcik (wojcik@businessgrouphealth.org). 

 

SUMMARY OF POLICY RECOMMENDATIONS

 

Remove Uncertainties Surrounding Risk-based and Value-Oriented Contracting and Implement Indication Specific Pricing and Reference Pricing in Public Programs
  • Consider exemptions for value-based contracts from Medicaid best price requirements and clarify how drug makers and payers can conceive of value-based contracts without triggering broader Medicaid best price program implications.
  • Allow for variable pricing, where the price better reflects the evidence for benefit.
  • Evaluate the usefulness and application of the existing developed value frameworks and their potential to impact drug pricing in public programs, as well as their overall utility to the health care system.
  • Directly link reimbursement and improved patient outcomes.
  • Consider how drug makers and payers can enter into other types of innovative VBP arrangements, such as indication-specific pricing.
  • Implement reference pricing policies supported by clinical evidence consistently across public programs, where possible.
Limit Reach of Medicare Part D Protected Classes
  • Following the independent committee’s recommendations, the Congress and CMS should limit legislative and regulatory restrictions on formulary design within protected classes by modifying the Medicare Part D rules to remove those protected classes where sufficient generic competition exists, a change that would give private plans more freedom to control their formularies and negotiate for expanded manufacturer rebates.
  • Specifically, CMS should resubmit its proposal to remove antidepressants, antipsychotics, and immunosuppressants for transplant rejection from the list of protected classes because, in these classes, price reductions have been more closely linked with the availability of generics than to their status as “protected” and stand firm against industry-funded campaigns that seek to undermine the agency’s data-driven proposal to increase competitive pricing.
  • At a minimum, policy makers should evaluate the potential anticompetitive influence of protected classes on the commercial market, and specifically, evaluate the limitations imposed on private payers’ ability to negotiate competitive prices for drugs in the protected classes due to market spillover.
  • Policy makers should work with stakeholders, including employers, to gain consensus around policy changes that would remove additional private payer hindrances to effective pricing negotiations of these drugs. Then policymakers should work to implement those changes.
Eliminate Perverse Payment Incentives Under Medicare Part B
  • Eliminate financial incentives for prescribing more expensive medicines, in more expensive settings.
  • Establish direct links between reimbursement and improved patient outcomes.
  • Encourage providers and manufacturers to assume financial risk regarding high-priced drug utilization.
Encourage the Uptake of Biosimilars
  • Accelerate the definition of a dedicated regulatory pathway for biosimilar interchangeability.
  • Work with stakeholders to disseminate provider and patient education to firmly establish the safety and efficacy of biosimilar drugs to their reference products, recognizing that key successes to the uptake of biosimilar medicines in other countries was predicated on the creation of trust and confidence among all the stakeholders involved, such as prescribers, pharmacists, and patients.
  • Maintain payer autonomy to implementing utilization management tools for specialty pharmaceuticals, including tools that pertain to biosimilar products.
Reform Permissive Patent and Exclusivity Protocols
  • Reduce the market exclusivity for biologics from 12 years to 7 years.
  • Eliminate or limit additive patent extensions and exclusivity periods that serve only to extend monopoly power, especially where there is limited or no additional company investment or patient value produced.
  • Develop sound policy that would discourage patent abuses such as “evergreening” and “product hopping.” These policies may include financial penalties, loss of exclusivity periods and/or reduced patent terms for other products.
  • Refine the biosimilars patent dance to effectively incentivize the use of the section 351(l) patent dispute resolution provisions.