The White House's Council of Economic Advisers on Friday released a report on drug pricing, suggesting changes to the Medicare and Medicaid programs and reforming the US Food and Drug Administration (FDA) could encourage more robust price competition.
On the FDA front, the report calls for expedited reviews of 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.
"This would serve as a new pro-competition pathway that would enhance therapeutic price-competition by providing expedited entry into monopoly markets. To avoid imposing policies retroactively on the industry, this policy change could be phased in slowly so that current drug manufacturers of single-source drugs would retain the value of their efforts to be the first in a given therapeutic space," the report says.
At least part of the reason for this change would be because, according to the report, "the Breakthrough Therapy designation may no longer be available for new but similar drugs because they cannot demonstrate significant clinical improvement over the initial Breakthrough Therapy drug. Moreover, Accelerated Approval and Fast Track are only available to fill 'an unmet medical need,' which has already been met by the initial drug."
But, as Forbes' Matthew Herper points out, "if everyone is special, no one is," and the change may not actually have a robust effect on US drug pricing. For instance, a recent report from ICER on rheumatoid arthritis drugs notes that second and third class drugs for the same indication are not necessarily less expensive than the first market entrant.
Rachel Sachs, associate professor of law at Washington University School of Law, told Focus: "We've seen many examples where more branded drugs on the market has not led to a decrease in prices," but actually to "lock-step increases."
However, hepatitis C brand-name drug competition is an example of "prices that were available to public payers dropping quite quickly." She also suggested that such an expedited review pathway could be tied to the pricing of products, but without that, she said she "would not be confident there would be a benefit."
More Expensive Drugs Abroad Equals Lower US Prices?
The nonprofit Knowledge Ecology International noted in a statement: "One extended theme in the report was that foreign countries that take measures to curb high drug prices are free riding on the United States, an argument that seems at odds with the possibility that the United States would emulate those price moderating measures."
But it's unclear from the report as to how the US would push other countries to raise prices for drugs and how that would impact domestic prices.
Sachs noted: "There is a lot of rhetoric in this report about things like over-pricing and under-pricing, suggesting that there is a 'right price' but no where do they say what that is."
Despite this lack of specificity about what's an acceptable way to price drugs, she noted that the report does acknowledge that "there's a correct or constrained amount of profit that's optimal for these companies to reap," which is "not something we've seen from many administrations."
But she expressed skepticism on the part of the report related to the raising of prices abroad leading to lower prices in the US. Though if "companies could charge higher prices elsewhere, it might reasonably lead to more innovation," she said. One current feature of the US system, she added, is that a lot of companies "are innovating for the US market, so you could imagine if more profits were derived from other countries, the balance of diseases might matter more for companies deciding what to invest in."
Faster Approvals, Biosimilars
The report also touches on faster approvals of generics, biosimilars and more guidance from FDA, though Boehringer Ingelheim pushed back on the report's suggestion that interchangeable biosimilars "must be able to be switched for the reference biologic without risk of an adverse event."
Molly Burich, associate director of public policy at Boehringer Ingelheim, told Focus in a statement that the report "misrepresents the requirements for proving interchangeability. An interchangeable biologic is a biosimilar that produces the same clinical result as its reference product in any given patient. Interchangeability is a designation by the FDA that means a biosimilar may be substituted by a pharmacist for the reference product without the intervention of the healthcare provider who wrote the prescription, subject to individual state law.”
Last summer, Boehringer announced the first patient was enrolled into an interchangeability study, the first study in the US to investigate an interchangeability designation for a Humira (adalimumab) biosimilar candidate.
Under a section entitled, "Reducing the Cost of Innovation through change at FDA," the report discusses the cost of bringing drugs to market, FDA efforts to speed generic approvals and that FDA review times falling with each successive reauthorization of the user fee deals with industry.
Sachs noted that FDA Commissioner Scott Gottlieb has been at the forefront of several efforts mentioned in the report on reducing drug prices with generic drug competition, and "he acknowledges that these reforms will take time…I think we could see some effects from his activities this year but there is not a silver bullet, and I appreciate that the FDA is seen as one of many pieces to the drug pricing puzzle."
Reforming Biopharmaceutical Pricing at Home and Abroad