As a follow up to our previous blog post titled “Policy Recommendations to Promote Sustainable, Affordable Pricing for Specialty Pharmaceuticals,” in which we focused on policy recommendations we think the government should examine, this post focuses on policies we think are ill-advised. These policies may include specialty drug price caps, out-of-pocket payment caps, limitations on utilization management tools and mandated disclosure of proprietary information.
As noted in the Issue Brief, employers and other payers favor policy changes that encourage solutions for managing high-priced specialty drugs that improve the likelihood for more reasonable, affordable, and sustainable pricing, and our members are simultaneously sensitive to resisting the urge for quick fixes. The short-sighted policies would only further contribute to the escalating prices of pharmaceuticals.
Price caps ignore the many needed reforms within public payment policies that contribute to high drug pricing, such as system and provider incentives to drive consumers to high-priced, low-value care and pharmaceutical options. Moreover, the big concern for employers would be that since the government is the largest purchaser and can basically set prices even if calling it negotiations, employers may be on the receiving end of higher prices as the monopsony power of the government forces manufacturers to charge everyone else more.
Employers work with their health plan and pharmaceutical benefit managers (PBMs) to craft plan designs that calculate actuarially sound benefit options for employees and assure that out-of-pocket expenses are reasonable and affordable. Government-mandated caps on out-of-pocket expenses merely provide a short-term solution to high prescription drug spending in the immediate term, but do not deal with the underlying drivers of high prescription drug prices. Ultimately, this would result in everyone else paying higher premiums.
Similar to the previous point, employers build in specific utilization management tools to keep plans financially sustainable and to encourage appropriate use. By encouraging lower cost and higher value options through utilization management steerage tools, estimates suggest that employers are able to avoid substantial expenditures. Removing the flexibility of plan design that leverages appropriate utilization management tools, particularly in drug classes where generic or lower cost alternatives of equal efficacy exist, will further stretch already thin employer budgets at a time when specialty pharmaceuticals is the number one cost driver of health care expenses.
Pharmaceutical price transparency has become a buzz phrase in an environment of unaffordable prescription drugs. Public and private payers alike are demanding to better understand how drug prices are set. While we agree that pricing methodology would be useful to understand, we oppose measures that would require disclosure of proprietary information. This type of mandate would threaten intellectual property rights and stifle innovation. Further, disclosure does not address the central issue, which is that regardless of how manufacturers can justify prices, and we know that new drug research and development is costly, they should put greater weight on affordability and sustainability in pricing.
More broadly, these types of polices could induce various unintended consequences, including overpayments for mediocre drugs, drug shortages, making drugs less responsive to price, stifling innovation, undermining payer abilities to negotiate lower prices shifting higher prices to other payers, and raising premiums and health plan costs. Finally, short-sighted approaches aimed only at immediate patient affordability miss the mark on establishing a long-term, sustainable pricing model. Therefore, we encourage the Administration, Congress and state leaders to evaluate comprehensive reforms that would have the effect of creating a more competitive market and more reasonable pricing, as outlined in the Issue Brief.