On February 9, 2018, the Council of Economic Advisers released a report looking at drug pricing proposals entitled “Reforming Biopharmaceutical Pricing at Home and Abroad.” The report highlights two goals: reducing the price that Americans pay for biopharmaceutical products and raising innovation incentives as a way to reduce the overall price of health in the future.

The report includes the following policy suggestions and options. Most of the suggestions would require Congressional action, or could only be implemented in a limited way absent of Congressional action. Policies that could be implemented absent of Congressional action – depending on specific details that the report does not include – are marked with an asterisk (*).

Medicaid

• CMS could specify how manufacturers calculate best prices determined after the drug is sold. CEA states that this would encourage competition and lower prices while incentivizing better drug adherence and lowering the risk the government pays for something that is less effective than anticipated.*
• CEA suggests that CMS provide additional guidance about the impact of value-based contracts and price reporting on other pricing regulations. The report indicates that this will encourage drug purchasers to negotiate, which will increase competition and lower prices.*

Medicare

• Part B Physician Administered Drugs- the report lists the following policy options:
  1. Introducing physician reimbursement that is not tied to drug prices.
  2. Moving Part B drugs into Part D- CEA believes that this could remove the economic incentive from prescribing decisions, which would encourage prescribing low-cost drugs over higher prices ones.
  3. Changing the way pricing data is reported in an effort to increase transparency.
• The report suggests the following Part B policy options as ways to increase transparency and reduce the incentive for more spending:
  1. Require better and more accurate sales data from drugs that are six months past their launch date.*
  2. Cut doctor payment for new drugs that have less sales data.
• Part D Outpatient Drugs policy suggestions included:
  1. Require that plans share drug manufacturer discounts with the patients*
  2. Allow plans to manage formularies in a way to negotiate better prices
  3. Lower co-pays for generic drugs*
  4. Discourage formulary design that hurries patients to catastrophic coverage*

340B Program

• The report suggests that reimbursement could be restricted to only “uses the purchased drugs are intended to treat.”
• Eligibility for the drugs purchased through the program could be restricted to the “intended” population of lower income patients.
• Another suggestion in the report is that a single agency could set the price at which an eligible entity can purchase a drug

Overall, most of the policy suggestions highlighted in this report are touted as ways to increase competition and transparency, which would then drive down prices. In addition, many of the policy options have been put forward by the Medicare Payment Advisory Commission (MedPAC), the Government Accountability Office (GAO), and the Office of the Inspector General (OIG) as sometimes indicated within the CEA report. The report also does not always specify where these actions must originate. While some of these policies could be adopted in regulation, others such as moving Part B drugs to Part D could take action by Congress. Drug pricing will continue to remain a topic of interest at all levels of the government, especially with a new Secretary of HHS, Alex Azar, who has made drug pricing a priority.