Senate Dems Test Out 'Reasonable' Price Criteria With Antibiotic Incentive

A major drug pricing proposal sponsored by Senate Democrats led by Al Franken (D-Minn.) could be best described as a mix of very interesting nonstarters with one very attractive incentive for the drug industry to come the table in the form of copay caps.

The drug industry has been trying for years to get substantial copay reform. In fact, at the 2009 PhRMA annual meeting in San Antonio, then-CEO of AstraZeneca PLC David Brennan (now on Alexion Pharmaceuticals Inc.’s board) offered a list of priorities for the pharmaceutical industry if the Obama Administration wanted support from manufacturers for a major health reform effort. Co-pay reform was one of the five and just behind IP protections in terms of importance.

The drug industry received many concessions from the Affordable Care Act (just don’t ask Pfizer Inc. CEO Ian Read based on recent remarks at the National Press Club) in exchange for helping to prop up the ACA in its first years. But one thing it never got was co-pay reform.

Democrats are offering it now.

“For plan years beginning in 2019 or later, the cost-sharing incurred under a health plan with respect to prescription drugs covered by the plan shall not exceed $250 per month for each enrolled individual, or $500 for each family,” the Franken bill, known as the Improving Access to Affordable Prescription Drugs Act, says concisely.

Hillary Clinton had made a similar proposal during the presidential campaign, and the copay cap is one of the areas of regulation where brand pharmaceutical sponsors and Democrats are in alignment. Rx firms are wary of many donkey politicians' ideas to restrict pricing and promotion, but see a lot of value in the policies that would limit what insurance companies could do.

Getting Pharma To The Table

Frankin's provision is being dangled out there to possibly, just maybe, get the drug industry to approach the negotiating table on a drug pricing bill that President Donald Trump has said many times he is interested in passing.

The problem from the industry’s perspective is the rest of the bill is a mix of more than a dozen price control measures, reductions in exclusivities, and transparency requirements. For example, the bill would impose the VA price in Medicare Part D if the government were unable to reach an agreement with a manufacturer within a one-year negotiating period.

It would also rollback 12 years of market exclusivity to seven years for biologics, open up drug importation from Canada and other countries, and impose rebates in Medicare Part D for dual-eligibles.

Of course, the legislation should be considered more as a portfolio of options, any number of which could be added to some kind of legislative package down the line. One of those options is an NIH prize fund for new antibiotics.

The bill would create three prizes from a $2 billion NIH fund over 10 years for qualifying antibiotic products “that provide added benefit for patients over existing therapies in the treatment of serious and life-threatening bacterial infections demonstrating in superiority trials.” The bill sets aside 5% to reward breakthrough research in the area as well. That leaves about $633 mil. per award winner – not bad.

But there’s a catch.

Cocktail Party Conversation Starters

The prize would be tied to an agreement with the manufacturers that the new antibiotic would be sold at a “reasonable price.” The bill says a recipient may satisfy the requirement to offer a qualifying product or contribution at a ‘reasonable price’ by meeting one of a set of standards.

A manufacturer could provided “open licensing” of all necessary rights to patents, manufacturing processes, rights in data, and other intellectual property rights needed to make and sell the product to manufacturers of the generic version of the qualifying antibiotic product.

The sponsor could sell the qualifying antibiotic at a price that is “no more than twice the price of a generic antibiotic” approved with “similar manufacturing costs.”

Third, the manufacturer could sell the qualifying antibiotic at a price “that is not higher than the median price charged, at the time of such sale, based on a calculation derived from seven applicable countries."

NIH is directed to identify annually the countries that have a per capita income that is not less than half the per capita income of the US. NIH should select the seven of such countries that have the largest GDP, and “determine the median price charged for each qualifying product for which an award has been granted.”

It is difficult to think that a manufacturer would agree to price controls no matter the drug class, not to mention the precedent it would set for expanding the concept out.

But two of the three standards are cocktail party conversation starters because they set potential targets: double the price of a generic or median price of seven countries with the largest GDP not less than half that of the US.

Tying a price control mechanism to an incentive is an odd way to spur and maintain interest in the field. But the concept deserves some monitoring, particularly in the context of the Prescription Drug User Fee Act reauthorization working its way through Congress.

From the editors of the RPM Report