How the Biden Administration Could Revive Plans to Lower Drug Prices

The Trump administration’s attempts to lower prescription drug costs may have been a no-go, but the Biden administration could still enact certain targeted measures to achieve that goal, experts said at a Kaiser Family Foundation (KFF) online panel Monday. Panelists also shared their view of the lessons learned from public-private partnerships for vaccine development during the pandemic.

In October 2018, the Trump administration introduced the “International Pricing Index” that would have replaced the average sales price, a benchmark for determining what Medicare beneficiaries pay for physician-administered Part B drugs. The plan proposed a payment scheme based partly on prices charged in other countries, explained Rachel Sachs, JD, MPH, the Treiman Professor of Law at Washington University in St. Louis.

Prescription drug spending in the U.S. is nearly twice what many other comparable countries pay, according to KFF.

That Trump plan was derailed because the administration introduced the model as a final rule, without allowing for the usual public notice and comment period, and was “quickly enjoined by multiple federal courts on procedural grounds,” Sachs explained.

Another rule that the Trump administration proposed was scrapping back-end rebates to pharmacy benefit managers and allowing upfront discounts to patients instead. That proposal also ran into problems and was eventually withdrawn. Not surprisingly, the proposal was unpopular in the industry: Rebates are a set percentage of a drug manufacturer’s list price, so “the bigger the list price, the bigger the rebate,” noted Richard Frank, PhD, director of the USC-Brookings Schaeffer Initiative on Health Policy in Washington.

He pointed out that rebate negotiations are often done in private. “That was the problem with the Trump proposal,” Frank said. “It brought [those negotiations] all out into the daylight.”

While none of those plans came to fruition, “there’s every reason to think that an administration that was motivated to focus on exactly how these [policies] were being implemented could avoid many of those pitfalls,” Sachs said.

She outlined other policy options for lowering prescription drug prices, such as leveraging provisions of the little-used Bayh-Dole Act from the 1980s, which allows universities and businesses to patent products based on their research, as a way to spur new development and technologies. However, the act includes a march-in clause that allows the federal government to grant a license to a new applicant if a product is not put to market for public use.

Another similar “compulsory licensing” provision, is “Section 1498,” which also allows an applicant to make and sell a patented product without the permission of the initial patent holder, Sachs explained. But the provision has been leveraged mostly “in the defense context” for non-drug products, she noted.

However, neither provision would infringe on the “exclusivity period” of a new drug, she said. “So at a minimum … after a company has had 5, 7, or 12 years of exclusivity, only then can these compulsory licensing provisions really be effective.”

Kirsten Axelsen, a visiting scholar at the American Enterprise Institute, added that pharma invests a lot in their products. If the use compulsory licenses or march-in rights were to increase, she said, “you would find companies not being as interested in developing those drugs that might fall under the domain of those practices.”

As for pandemic-related vaccine development with private-public partnerships, Axelsen said: “when there is a need, private companies are able to deploy capital in a way that is effective, and efficient, and solve major health crises.”

“I think the lesson is that when government gets involved in an important issue in partnership with the industry, that everybody can win,” Frank said.

Sachs noted that Moderna and Pfizer worked with government regulators and policymakers to bring COVID-19 vaccines to market at nearly the same speed. Pfizer did not rely on government investment upfront to develop its vaccine, although it did sign advance purchase agreements, and “this is really an interesting case where sustained, significant efforts by the government to choose targets upfront of where to invest was really a key element of success,” she said.