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Increasing Competition Can Reduce Prescription Drug Prices

By increasing competition and adjusting federal drug policies, the cost of prescription drug prices can decrease for payers, stakeholders suggest.

Increasing competition can reduce prescription drug prices for payers

Source: Thinkstock

By Thomas Beaton

- Reducing prescription drug prices for payers requires market-based solutions that increase competition and deregulate federal drug policies, the Pharmaceutical Care Management Association (PCMA) wrote in a letter to HHS secretary Tom Price.  

The letter is a follow up to a meeting between Price and the PCMA earlier this year, where Price asked the organization to develop solutions that lower prescription drug costs for payers and beneficiaries. The PCMA’s major recommendations included enhancing deregulation and openness of Medicare Part D, Medicaid, and commercial drug markets.

Medicare Part D’s protected classes, rules on biosimilars discounts, and use of generics for low income subsidy (LIS) enrollees are of major concern to the PCMA’s efforts to improve drug competition.

The PCMA wants to fully remove Part D protected classes because they believe the designation of certain clinical drug classes, and their coverage requirements under Part D, allow manufacturers to name drug prices. PCMA argues that CMS already has carefully planned coverage checks to ensure proper coverage for Part D drugs, which makes other protections redundant

Other suggestions for changing Medicare Part D policies included making biosimilars, a product similar to an approved FDA substance, subject to the 50 percent Part D coverage gap discount. The PCMA thinks this could cause an unintended rise in prescription rates of more expensive products even though cheaper biosimilars are available and consumers would benefit from an even lower, discounted price.

Citing recommendations from MedPAC, the PCMA believes lowering cost-sharing on generic drugs for Medicare D LIS enrollees, and increasing cost-sharing for major brands with generic competition, would save money for enrollees and Medicare. This is based on the idea that empowering the generic drug market creates wider competition that cuts drugs prices across the industry.

PCMA also suggests the creation of a safe harbor (liability reductions) from the Medicaid Best Price Requirement for value-based price negotiations.

The Medicaid Best Price Requirement states that drug manufacturers must offer the Medicaid program the lowest price it offers to any other commercial payer. PCMA suggests that this “price floor” inhibits the creation of innovative value-based purchasing arrangements.  

PCMA believes an expansion of drug coverage options for health savings account (HSA) eligible high deductible health plans (HDHPs) can increase the amount of preventable care drugs used in HDHPs.

The PCMA argues that HDHPS with HSAs should have the option of covering prescription drugs with low or no cost-sharing prior to reaching a deductible. An expansion of drugs allowed for these plans could make this policy achievable.

Other suggestions include:

  • Eliminating the use of Risk Evaluation and Mitigation Strategies (REMS) that delay competition and competitor volume
  • Eliminating “pay-for-delay” agreements that allow drug patent holders to pay off possible competitors
  • Promoting FDA accelerated approval of brand drugs by establishing an “economic need” criteria
  • Revisiting and improving biosimilar labeling and naming so patients and providers aren’t confused on available, effective alternatives
  • Reducing innovator biological product exclusivity to seven years, which the PCMA believes will provide a significant return to manufacturers and add more biosimilars into the market at faster rates

As a supplement to the suggestions, the PCMA heavily urged the use of Pharmaceutical Benefits Managers (PBMs) to effectively navigate the prescription drug market, and lower prices for consumers and payers alike.

According to the PCMA, PBMs reduce drug costs by 30 percent because they negotiate aggressive rebates, discounts, and other price concessions on prescription drugs. This allows payers to reduce premiums and cost-sharing which adds more value to a payer’s finite dollars.

The PCMA believes their policy suggestions, and extended use of PBMs, can improve prescription drug prices and the drug purchasing landscape for all stakeholders.

“These are all common sense ideas that would improve affordability for payers, taxpayers, and consumers, and increase competition,” the PCMA concluded in their letter.”

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