Pricentric Insights: What a Biden Presidency Could Mean for Drug Pricing in the U.S.

WASHINGTON D.C., United States – With the final presidential debate looming tonight, October 22, and Election Day two weeks away, Democratic presidential nominee Joe Biden’s drug pricing proposals hang primarily on one overarching focus: Leveraging and reinforcing the federal government’s power to more stringently control drug prices.

Drug Pricing

Biden has detailed plans to put a stop to “runaway” drug prices, by removing the current exception allowing drug companies to avoid negotiating with Medicare over drug prices, as Medicare covers so many Americans, and as such has significant leverage to negotiate lower prices for its beneficiaries.
To mitigate high drug prices set by manufacturers who do not face competition in their market areas, Biden proposes repealing the existing law explicitly barring Medicare from negotiating lower prices with drug companies.
Further, his proposal suggests that as a condition of participation in the Medicare program, all brand, biotech, and “abusively” priced generic drugs will be prohibited from increasing their prices more than the general inflation rate, including a tax penalty on drug manufacturers that flout this rule.

Generic Supply

The U.S. Center on Budget and Policy recently published a document recommending ways to reduce prescription drug spending as opposed to cutting Medicaid benefits or provider reimbursement rates, which could reduce access to care.
Almost all states have policies that promote the use of generic drugs, such as requiring pharmacies to substitute a generic drug for a brand name drug when available.
However, only about half of states that contract with MCOs reported that they consistently require the MCOs to align their generic substitution policies with the state’s fee-for-service requirements.

Biden’s healthcare plan supports a number of proposals to accelerate the development of and increase access to safe generics, which in turn would reduce drug prices and the strain on the healthcare budget.

One of the Biden-endorsed actions, The Creating and Restoring Equal Access To Equivalent Samples (CREATES) Act, contains plans to reduce anti-competitive practices by:

• Allowing the Purchase of Samples: The first delay tactic addressed by the CREATES Act occurs when brand-name drug companies prevent potential biosimilar and generic competitors from obtaining samples of the branded product, which are necessary to develop more affordable alternatives and prove that the medicine is equivalent to the brand-name product, a prerequisite for FDA approval.

• Ensuring FDA Safety Standards Apply: The second delay tactic addressed by the CREATES Act occurs when brand-name drug companies whose products require a distribution safety protocol (known as a Risk Evaluation Mitigation Strategy with Elements to Assure Safe Use, or “REMS with ETASU”) refuse to allow biosimilar and generic competitors to participate in the safety protocol with the explicit intent to delay competition.

In response, the Congressional Budget Office has estimated that the CREATES Act would lower federal spending on prescription drugs by $3.9 billion.

Keeping an Eye on Innovative Therapy Prices

It’s not new news that the future of healthcare and pharmaceuticals lies in personalized treatment, such as cell and gene therapies, or advanced therapy medicinal products (ATMPs).
With this in mind, Biden has announced intentions to set up a government-run, Institute for Clinical and Economic Review (ICER) -style Health Technology Assessment (HTA) body, as ICER is currently an autonomous body to the U.S. government.

The details of the organization are yet to be finalized and unveiled, but it has been suggested that Biden will look to the European system as an influence for the Assessment system, in particular Germany.

Germany is a pharmaceutical policy leader in Europe, and currently operates drug pricing under the Institute for Quality and Efficiency in Health Care (IQWiG) – a data-driven HTA agency – as well as national drug pricing negotiations.

Similarly, it has been suggested that Biden’s plan would enable the government to negotiate for “ceiling prices” applicable for all payers. However, it has not been disclosed whether the ceiling price would be the final price, or whether negotiated discounts would apply to bring prices lower, according to Bernstein analyst Ronny Gal.

A lot of Europe also operates on a quality-adjusted life-year (QALY) basis, determining the worth of a drug according to the amount of QALYs it brings to a patient. As it stands, ICER’s models also incorporate QALY figures but can go as high as $150,000 per year, whereas countries in Europe tend to keep the figures much lower. For example, the UK’s National Institute for Health and Care Excellence (NICE) sets QALY at £30,000 ($38,873), a significantly lower threshold.

Support and Reception

So far, the pharmaceuticals and health products industry has donated more than $6.9 million to Biden’s presidential campaign, making him the leading party for pharmaceutical endorsement at this stage in the game.

Trump’s donations, in comparison, stand at approximately $1.7 million, according to a political donations tracker run by the Center for Responsive Politics.

This is a surprising U-turn from the industry’s usual stance, as according to the same source, Republican candidates have received 64% of pharma industry contributions since 1990.

This could be in part due to the criticism that Trump’s “most-favored-nation” pricing scheme received, which fell short on his initial promises of an immediate cut to drug prices, lowering patients’ out-of-pocket costs. Rather, it starts the process to test the impact of this change.

Back in July, Trump announced that he signed four Executive Orders on prescription drug pricing, one being the Order just announced by Trump on Twitter. At the time, he gave Congress 30 days to provide an alternative drug pricing plan to his most-favored-nation plan; he also gave pharmaceutical companies the opportunity to meet to discuss the plan.

Although pharma company CEOs turned down Trump’s offer to meet, they put forth a counteroffer to the President’s plan to introduce an international pricing index (IPI) to base the prices of Medicare-covered drugs off those found in other countries. Their proposal sought to save Medicare in excess of $100 billion over a decade and avoid rulemaking by relying on voluntary demonstration programs within Medicare.

Critics suggested that implementing the order could “harm patients, innovation, and could ironically increase overall healthcare spending.”

Kamala Harris’ Contributions

As Biden’s running mate, Senator Kamala Harris’ policies and goals also have to be factored into the equation. When Harris was a 2020 candidate for president last summer, she released a plan titled “People Over Profit,” which utilizes an international price index to regulate U.S. pharmaceutical prices.

In other words, the Department of Health and Human Services would set a price for any drug when a company hikes its price by more than inflation or when the drug is sold at a lower price in economically comparable countries, including United Kingdom, France, Germany, Japan and Australia, CNN reported.

Harris also said, according to CNN, that she would add a tax of 100% on all profits drugmakers earn from selling a drug above the fair price and allow the importation of drugs from Canada.
This scheme is not entirely dissimilar to Biden’s own proposal, under which a reasonable price based on external reference pricing would be recommended, or if the drug is launched in the U.S. market first, the price would be based on an evaluation by the independent board members.

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