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Group calls for government negotiation of drug prices, prevention of 'pay-for-delay' agreements

Report says U.S. could achieve lower prices for prescription drugs by consolidating its bargaining power and providing greater flexibility in design.

Jeff Lagasse, Associate Editor

Consumer access to effective and affordable medicines plays a key role in public health, social equity and economic development, but that need isn't being served adequately by the biopharmaceutical sector, according to a new report from the National Academies of Sciences, Engineering and Medicine.

The report offers several recommendations, along with actions for their implementation, to improve the affordability of prescription drugs without discouraging the development of new and more effective drugs for the future.

[Also: Why soaring drug prices aren't on Congressional to-do list right now]

The biopharmaceutical sector has been fairly successful in developing effective drugs, but high and increasing costs of prescription drugs are unsustainable, especially in light of the fact that overall medical expenditures account for 18 percent of the country's gross domestic product, the analysis said.

As defined in the report, the "biopharmaceutical sector" encompasses a wide range of participants, including researchers, physicians and other care providers who can prescribe medications, public and private payers, intermediaries such as pharmacy benefit managers, healthcare organizations, and patient advocacy organizations.

[Also: Epic, CVS hope analytics partnership will rein in drug prices]

According to the report, Congress should modify existing legislation to allow the U.S. Department of Health and Human Services to directly negotiate prices with producers and suppliers of medicines, including acting on behalf of any relevant state agency that elects to participate in the process. Because prices tend to be lower when the purchaser has bargaining power that is at least comparable to that of the seller, the U.S. could achieve lower prices for prescription drugs by consolidating its bargaining power and providing greater flexibility in formulary design.

Another recommendation offered by the report is that The U.S. Department of Justice and the Federal Trade Commission should vigorously deter manufacturers from paying other producers for delayed entry into the market -- known as "pay-for-delay agreements" -- of generics and biosimilars. DOJ and FTC also should expand the enforcement of policies that preclude mergers and acquisitions of firms among companies with significant competing generics and biosimilars and commanding a significant share of the market, as these strategies reduce access to reasonably priced drugs.

[Also: Educating doctors on drug prices, cost-effectiveness key to curbing drug costs]

Various participants in the biopharmaceutical supply chain point to other participants as the main contributors to high and rising drug costs, the report said. So to help understand the root causes of price increases and when they are appropriate, Congress should require disclosure of information from insurance plans about the average net prices paid for prescription drugs, including patients' cost-sharing among plans, and from biopharmaceutical companies about average net volume of and prices paid for drugs across each active sales channel.

As far as reimbursement is concerned, the report said current insurer reimbursement policies for clinician-administered drugs in the outpatient setting minimize incentives for providers to select treatments and settings for patient care that are the most cost effective. These policies may serve to inflate the prices of these drugs charged by manufacturers and other members of the supply chain who profit from the current system, and put patients at clinical and financial risk.

Because of that, payers should establish payment policies for drugs administered by clinicians in medical practices and hospitals that do not differentiate for the site of care, the report said. Hospitals, vendors of electronic health records, insurers, and professional societies should ensure that clinicians have readily accessible and routinely updated information regarding drug cost and efficacy -- including relative clinical benefits of alternative treatment regimens and the relative financial costs of treatment settings to both patients and payers, to support sound prescribing decisions at the point of care.

The report also contains a dissenting viewpoint, which says the report's set of recommendations as a whole would reduce prices too much and diminish future investments in innovation, and a minority perspective, which says that even stronger actions are needed to make prescription drugs more affordable.

Twitter: @JELagasse
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