The Trump administration’s plan for an international reference pricing scheme for Medicare Part B drugs has provoked vituperative opposition from BIO, PhRMA and their allies who have branded it as an attempt to impose socialism.
Others see the opposite side of the coin. The proposal for an International Pricing Index (IPI) has received qualified support from unexpected quarters, including Avik Roy, a prominent free-market advocate who says a tweaked version of the scheme would inject a healthy dose of capitalism into a flawed government-controlled payment system.
The debate goes beyond philosophical disputes over the nature of capitalism and exposes differing views on the appropriate role of the U.S. government in shaping markets for drugs, especially biologics, to treat serious and life-threatening diseases.
Biopharma companies and their trade associations oppose attempts by CMS to use coverage decisions as leverage in price negotiation, or to benchmark prices based on those obtained by countries that refuse to purchase drugs they consider over-priced. PhRMA and BIO support payment formulas that create financial incentives for providers to use the most expensive treatments.
The Trump administration, with agreement from both sides of the aisle, asserts that the existing Part B payment structure is at best anachronistic and at worst amounts to corporate welfare. It argues that government should have the kinds of tools that the private sector uses to extract price concessions from drug companies.
This logic holds that importing prices from countries that are willing to make explicit coverage decisions based on value is not socialism, it is a reasonable way to achieve market-based pricing.
The controversy is heating up because both sides want to influence Congress.
The Trump administration does not need congressional approval to implement the IPI as a mandatory pilot affecting half of Part B drug spending.
Congress could, however, block the program, which was proposed in October 2018 and, if HHS moves forward with it, is slated to launch in 2020 (see “Trump’s Divide and Conquer Part