Drug Pricing Under the Trump Administration

Recently, President Donald Trump met with executives from the Pharmaceutical Research and Manufacturers of America (PhRMA) to discuss issues in the development of new drugs and the issue of drug pricing, which was discussed extensively during the presidential campaign.  Business Inside reporter Lydia Ramsey summarized the meeting very well this week.

Having a blog gives me an overinflated sense of self-importance, but if you would permit me, I would like to take a moment and opine on issues brought up during this meeting and provide my opinions on how this might play out for various stakeholders.

Bringing Down Drug Prices

Let’s tackle the simple issue of bringing down prices…if anyone thinks this is simple then this blog isn’t for you.  First, we should consider drug prices in two compartments: branded (innovator) and generic products.  Brand name drugs are purposefully provided patent exclusivity for a set time period which allows a legal monopoly in the United States.  This monopoly potential is a major carrot for companies to invest in developing and bringing new drugs to market (and through FDA review).  Generic drugs refer to the products brought to market through an abbreviated FDA application based on bioequivalence studies, enabling many companies to produce and compete in the market.  Under this scenario, brand products will always come with “high” price points, but controversy seems to surround how high is too high.  That controversy is the whole reason I decided to pursue a PhD with a pharmacoeconomics focus and I doubt I can cover it appropriately in a blog post.  Maybe one day before I finish my career we will have that answer.

As for generic drugs, we have seen an interesting shift in business strategy by several companies who are the sole distributors of a particular molecule or device and a subsequent price increase ensues (see my other blog posts on this topic and my comments on NPR).  Personally, I believe for the United States to keep generic prices low, we have to have a vibrant system of generic manufacture that are able to ramp up production of a product when the number of manufacturers get low and prices escalate quickly.  Without an elastic market for generics, we can expect some generics to spike.  I have thrown the idea around our campus of starting a small-scale non-profit manufacturing company to service the patients of Baltimore, but I’ve yet to gain buy-in from the right people.  This makes me think that one policy strategy might actually be to support incentives for generic manufacturers to maintain flexibility to add product lines when there is a steep increase.

Manufacturing in the United States

This is an issue for folks stronger in macro-economic policy than me.  I will say that I don’t think the location of manufacturing has any real impact on drug pricing.  I think this comment from President Trump is more political to demonstrate his campaign promise to return jobs to the US.

Other Countries Paying “Their Fair Share”

This is interesting on several levels.  First, how on Earth do we define what a “fair share” is in terms of drug pricing?  This sort of goes back to my earlier comments.  Without a real definition of how we all assess the “value” of a drug, it is hard to determine who should pay what.  Secondly, how is this statement interpreted by our foreign relations folks?  This either means the US will pay less and/or other countries will pay more (that’s how you would increase the share of the burden of innovation).  Other countries are surely not pleased to hear the US President using phrases that would suggest leveraging our power to use treaties or other means to raise their prices for drugs.  I’m not smart enough to know what this could mean over the next four years, but I am not optimistic that our international friendships will be strengthened by this sort of policy maneuver.

Streamline the FDA Drug Approval Process

This last one has me extremely torn.  On one hand, I have heard the patient advocacy push for more access to experimental therapies or for faster drug approval.  My family has been impacted by rare disorders and I definitely empathize with those who suffer with no treatment or cure in sight.  On the other hand, I am a big fan of history and have recently spent quite a bit of time reading about the life of Senator Estes Kefauver (famous in pharmacy for his amendments following the thalidomide tragedy of the 1960s).  Following the Kefauver Amendments, we have had a standard of practice for drug approval requiring 2 randomized clinical trials.  Over the past 50 years, additional legislation and changes in regulation at the FDA has allowed expedited approval pathways.  In fact, recently the FDA approved a drug for Duchenne muscular dystrophy despite the criticism that the evidence didn’t support its approval (and there was additional drama related to internal conflict between administrators at the FDA regarding its approval).

While I don’t know how I feel about expedited approval processes, I do fear the cutting or slashing of FDA resources to do its job under this administration.  I also worry that there is this false sense of “if we cut the time to drug approval, drug prices will go down” percolating in the US.  I personally do not believe these two variables are directly related and evidence would suggest that drug pricing is WAY more complex than “well it takes $2 billion” to get a drug approved.  If we diminish the strength of the FDA, do we face the risk of returning to a pre-Kefauver era where snake oil salesmen appear from the weeds in the form of legitimate medicine?

These are significant challenges and I hope we can continue to have open dialogue that isn’t destroyed by partisan politics.  I’ll end this post here and turn the laptop off (I’m currently thousands of feet in the air en route to Las Vegas to relax with some of my best friends, but I’m such a dork that I felt like writing this post).

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Joey Mattingly, PharmD, MBA is an assistant professor at the University of Maryland School of Pharmacy located in Baltimore, Maryland. Joey has managed retail and long-term care pharmacy operations in Kentucky, Illinois and Indiana. Leading Over The Counter is a blog of Joey's views and opinions on the topics of pharmacy leadership and management and do not represent the University of Maryland, Baltimore. Joey can be followed on Twitter @joeymattingly.

2 Responses to “Drug Pricing Under the Trump Administration

  • Excellent article Joey. I would add the following points to the discussion

    1) Big Pharma is in the “Vulture Capital” mode.
    Almost all big pharmaceutical companies have down sized their R&D activities. Most R&D now happens in small companies and when the money and resources of the small companies are all exhausted on the “Pipeline” and a promising drug candidate emerges, the small companies are preyed upon and acquired by the giants. This leads to the talent pool in R&D shrinking. Mergers and acquisitions in pharma is leaving very few players in core research.
    2) Cost of therapy can be managed if pharmacists have a say in the drug therapy. The cost of managing multiple complex health issues can be lowered if the push on advertising by pharma is reduced (I have advised patients that come to me asking about a newly advertised medication a simple solution – when the ad is on close your eyes. The visuals are misleading, not everyone lives in 72 degree weather by the beach). We still see 15-20% prescriptions for newly advertised products which shows a prescriber bias based on rep. visits and dinner meets.
    3) Generic pharmaceutical companies are becoming too big by mergers as well. Initially when the sole generic approved lost its exclusivity and a pharmacist searched the database for available generics there were at least 25 -30 different manufacturers that would show up. Now it’s limited to the top 5-8. This takes out competition and drives prices up.
    4) Medicare/ medicaid common marketplace: I have seen this implemented in many countries. If Medicare and Medicaid floats tenders (Mostly for a 2 year contract) for commonly used drugs and supply them to pharmacies (with a 2-3% profit for distributors and a 10-15% profit for the pharmacies) the cost of therapy will go down.
    5) Central Electronic master record with access given to healthcare (Including E.R.’s, hospitals, pharmacies and LTC facilities) for medicare and medicaid patients. The compartmentalization of services in my opinion increases the costs.
    6) PBM’s: reimbursement to PBM’s must be based on outcomes instead of fee for service. This is in progress but at snails pace.

    • Thank you so much for your thoughtful comment! I take it you are a big fan of this issue?

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