Drug price tussle will end in court
As the midterms draw closer, things are cooling off on the policy front – but not when it comes to drug pricing.
As President Trump notches up 17 Most Favored Nation (MFN) agreements with drug companies, voluntary deals are in theory about to give way to mandatory rules.
The issue was part of the policy outlook discussed in the U.S. healthcare policy panel at RBC's Global Healthcare Conference, featuring Hunter Hammond and Will Humphrey of Capstone's healthcare group.
As Will Humphrey points out, the administration has yet to finalize either of its mandatory models, and the industry is lobbying strongly for changes, especially to licensing agreements.
Humphrey sums up the potential predicament: "As a U.S. company, you have control over your U.S. price, but not over your European price for the same drug, and so you have no ability to raise the ex-U.S. price to offset some of these hits."
But while the individual cost implications are significant, Capstone has calculated that exclusions mean only a small percentage of drugs would be exposed in practice. And there is little likelihood of the Democrats joining forces to codify MFN pricing: "Assuming they finalize these models, the next battle is going to be in the courts," Humphrey says.
FDA moves to modernize
Turning to recent turmoil in the Food and Drug Administration, Hunter Hammond sees the appointment of Acting Commissioner Kyle Diamantas as an attempt to drive the body away from contentious issues such as vaccine policy and autism treatments.
He expects Diamantas to focus on food safety and nutrition: "The White House is looking for a messenger who keeps his head low and plays the hits."
Under the previous leadership, the FDA has launched initiatives designed to accelerate drug development, including the Commissioner's National Priority Voucher program, and drug approval based on a single pivotal trial rather than two.
"I don't view either of these initiatives as truly transformative independently, but together I think they matter," Hammond says.
"For drugmakers who are able to position themselves to capture some of the upside, I think there could be a benefit in terms of getting to major decision points more quickly or lowering the cost or time of clinical development.
"It also matters because it's a directional signal that the FDA is looking to modernize – they are making an effort to reduce R&D opex."
"The FDA is looking to modernize and making an effort to reduce R&D opex."
Hunter Hammond, Co-Head of Global Healthcare, Capstone
Block on China in-licensing unlikely
An administration that has built its brand on being tough on China is unlikely to welcome the trend for U.S. pharma companies to pick up low-cost drug development candidates there, Hammond acknowledges.
However, he doesn't believe the administration will seek to outlaw the practice. "I think rather than using a legislative or regulatory cudgel to block in-licensing, you're more likely to see continued efforts to incentivize onshoring of early-stage clinical development," he says.
More generally, Humphrey believes the pharmaceutical industry needs to work harder to educate policymakers on its global supply chain issues.
"If you ask your average member of Congress, they can articulate the vulnerability of the semiconductor supply chain and the importance of Taiwan," he says. "I don't think we're anywhere near there on biopharma."
"Your average member of Congress can articulate the vulnerability of the semiconductor supply chain and the importance of Taiwan. I don't think we're anywhere near there on biopharma."
Will Humphrey, Vice President, Healthcare, Capstone Group
GLP-1 program could be replicated
Efforts to extend access to GLP-1 therapies via Medicare are being pursued through the Bridge agreement with the Centers for Medicare and Medicaid Services (CMS). Hammond sees this as positive for producers Lilly and Novo Nordisk.
"They are able to retain the increase in access that they were promised, in exchange for meaningful price concessions they offered as part of voluntary MFN agreements," he says.
He sees the move as bringing the U.S. system closer to the European health technology assessment model, while enabling wider access to a drug that has captured the collective imagination.
"CMS owns all the risk, and is paying a negotiated price for a drug that opens the door to an edge case that I don't think is likely," Hammond adds. He believes this raises the prospect of future administrations stepping in on similar blockbuster launches to negotiate a price and disintermediate insurers.
Midterm outcomes could shield hospital funding
As the midterms approach, Hammond expects the Republicans to focus on cracking down on waste or fraud in Medicare and Medicaid, while avoiding issues such as Medicare cuts and the expiry of Affordable Care Act subsidies.
He believes hospitals would be the winner if Democrats won the House or Congress, since Chuck Schumer and Hakeem Jeffries would be unwilling to entertain additional hospital cuts.
However, he sees no prospect of reform of the 340B drug discount program to better serve patients. "If you're a lawmaker, you see the 340B program as a net $60 billion-plus subsidy to the hospitals that cost the federal government nothing," he explains.
