Congress

Senate bill’s drug pricing provision raises industry alarms

Provision could force drugmakers to cut patient assistance for chemotherapy drugs

A mountain of pills, tablets, gelcaps and caplets, for pain medication. (File photo by Ian Wagreich, CQ Roll Call)

A little-noticed provision of the Senate Finance Committee drug price bill is alarming some doctors, with at least one group warning it could harm patients with fragile medical conditions.

The Community Oncology Alliance, an advocacy group for cancer doctors, is raising red flags about a provision it says could prompt drugmakers to cut patient assistance for pricey chemotherapy drugs, or shortchange doctors who buy them.

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The language is tucked into a sweeping draft bill with higher-profile items that include capping patients' out-of-pocket costs in the Part D drug program, shifting more costs onto drugmakers and health plans, and requiring drugmakers to refund Medicare when their prices rise faster than inflation. The Senate Finance Committee approved the draft measure on July 25.

But the legislation also has a broad range of under-the-radar provisions, including the one causing cancer doctors concern. The provision would require drugmakers to subtract the amount of patient assistance they provide from the calculations of average sales price reported to the government. The sales price is used to reimburse physicians in another area of Medicare, the Part B outpatient program, meaning that the provision would cause doctors to be paid less for the drugs they acquire.

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Ted Okon, executive director of the Community Oncology Alliance, says the provision could lead to drugmakers scaling back or eliminating their patient assistance programs in the commercial sector because doctors might face higher costs for drugs than what Medicare reimburses for them.

Patients who take drugs administered by physicians through the Part B program frequently have more serious conditions, such as cancer or rheumatoid arthritis.

The provision is one of several in the bill aimed at doctors in Part B. Another part would cap at $1,000 a 6 percent payment that physicians get in addition to the sales price. Another would narrow the definition of service fees that are often included in a drug’s average sales price.

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While most experts contacted by CQ Roll Call focused on the effects the patient assistance proposal would have on physicians, Okon fears that patients will bear the brunt of the change. He said manufacturers would cut patient programs rather than allow oncology practices to shut down.

“I can point to individuals that this has been make or break,” he said, adding that he has seen some patients with tens of thousands of dollars in out-of-pocket costs. The problem has only gotten worse as insurers have shifted more cost-sharing onto patients, and as high-deductible plans have become more popular.

The group receives funding from a variety of players, including pharmaceutical companies, although Okon said it frequently breaks with the drug industry. The organization supports limiting price increases to the rate of inflation, for example.

The Congressional Budget Office estimated the change affecting patient assistance programs would save nearly $1.5 billion over a decade, a small but not insignificant portion of the CBO’s projection that the bill’s savings would exceed $100 billion.

Patient assistance programs allow drugmakers to keep overall list prices high, say many industry experts. By subsidizing copays, manufacturers can say they’re protecting patients while continuing to charge insurance companies high prices. Consumers are unlikely to protest high prices for insurers since their own out-of-pocket costs appear low. Copay assistance can also serve as an incentive for doctors and patients to choose a pricier medication over a cheaper alternative.

Drug industry members say the provision would artificially lower the average sales price, since the discounts are not included in negotiations between drugmakers and group purchasing organizations. The move could have an outsized impact on rural and low-income providers, they say.

Other reactions

But other experts say it’s difficult to predict how big the impact will be, or how industry behavior will change.

The provision also still allows assistance from charities — which take contributions from pharmaceutical companies — to be excluded from average sales price. A lack of reliable data on how many patients use copay assistance also contributes to the uncertainty.

Juliette Cubanski, associate director of Medicare policy at the nonpartisan Kaiser Family Foundation, said the concerns are “not unfounded,” but the drug industry often finds ways to adjust whenever its bottom line comes under threat.

“I think there are spillover effects from these provisions that we just can’t predict,” she said. “And one can imagine that one of them may well be manufacturers shift away from these coupons and these copay cards and go more in the direction of donation to patient assistance foundations or things like that.”

“When you talk about reducing reimbursement, there will be concerns raised from the party whose reimbursement will be reduced,” she added. “That’s to be expected.”

Cubanski cited as evidence the Obama administration’s attempt to overhaul payments for Part B drugs, which was ultimately scrapped in part due to concerns by doctors and drug companies. Republicans are also voicing more opposition to the Trump administration’s pending proposal to pin prices of Part B drugs to prices in other wealthy countries.

Jack Hoadley, a researcher with Georgetown University’s Health Policy Institute, said drug manufacturers could choose to lower their prices instead. He pointed to a 2017 report from the Medicare Payment Advisory Commission that found drug prices declined 1.5 percent when 2 percent sequester cuts required by Congress took effect in 2013.

“One of the responses you might expect is to lower the price in situations where their drug may not be used,” he said.

Ed Haislmaier, a senior research fellow at The Heritage Foundation, said the effect could be mitigated in certain ways, such as by excluding oncology or rheumatology therapies, which could see a larger impact because of their status as long-term maintenance drugs.

“It is a legitimate concern,” he said. “There are ways to address it in terms of the reimbursement of the physicians or by excluding certain drugs from it.”

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