4:55 PM
Feb 09, 2018
 |  BC Extra  |  Politics & Policy

CEA recommends pricing reforms at home and abroad

The Council of Economic Advisers issued a white paper proposing ways that the U.S. government can reduce drug prices while also fostering innovation. The paper included recommendations to reform policies that hinder price competition at home and implement policies to limit "free-riding" abroad.

The group said ex-U.S. drug developers and governments rely on U.S. patients and tax payers to finance R&D. It said that because most ex-U.S. governments -- as their markets primary buyers -- “force” drug manufacturers to comply with pricing rules to gain market access, they are able to set drug prices below that of the U.S., which erodes returns to innovators. The group estimated that among Organization for Economic Co-operation and Development (OECD) countries, Americans pay more than 70% of patented biopharmaceutical profits, despite the fact that the U.S. accounts for 34% of OECD GDP at Purchasing Power Parity.

CEA suggested that reforms could address this through either enhanced trade policy or policies that tie public reimbursements in the U.S. to prices paid by foreign governments. Actions should “change the incentives for these countries to price drugs at levels that appropriately reward innovation, rather than disproportionately putting that burden on American patients and taxpayers,” the group wrote.

The report also provided recommendations for lowering domestic drug prices, including moving Medicare Part B drug coverage into Part D, where price competition is better structured. In January, HHS Secretary Alex Azar also suggested that government apply lessons from Part D to change Part B. While Part D prices are negotiated by private plans, Part B prices are set by the average sales price (ASP) plus a 6% fee (see BioCentury Extra, Jan. 9).

Other suggestions for U.S. reform included changing FDA’s criteria for expedited reviews to include new molecular entities that are second or third in a class, or second or third for a given indication for which there are no generics; allowing Part D plans to manage formularies to negotiate better prices for patients; implementing policies to decrease concentration in the PBM market and other segments of the supply chain; expediting the review of generic applications; and speeding up the issuance of guidances on biosimilar regulations.

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