Radar on Drug Benefits

While the average price that pharmacies pay for a common hepatitis B treatment has seen a steep drop as more generics entered the market, the list price for the drug — which helps determine patient cost sharing — has stayed stubbornly high, according to new research published in JAMA. The study’s authors say their findings “highlight the need for policies that improve transparency around generic drug financing and pharmaceutical benefit manager practices,” but one industry expert points out that there are also private-sector solutions to the problem arising.

“In my view, the high out of pocket costs for entecavir and other generics is something that, given Good­Rx and companies like it…patients can do something about themselves directly, bypassing their PBM and pharmacy benefits altogether,” says Elan Rubinstein, Pharm.D., principal of EB Rubinstein Associates. GoodRx, which went public in 2020, offers an app-based drug price comparison tool, aggregates drug coupons and contracts with several PBMs, which allows the firm to offer patients the cheapest price for a drug among its partners’ negotiated network rates.

The price of the average brand-name drug has increased by 18.3% annually on average over the last five years, according to research firm GlobalData. Floriane Reinaud, research and analysis director at GlobalData, said in a statement that this price growth is unique to the U.S. “While drug list prices have only been increasing in the US, major markets in the rest of the world are seeing declines. Japan, for example, saw drug prices decline by more than 9% while Germany declined by around 7.5%,” Reinaud said.

The business strength of “speculative grade” pharmaceutical companies varies considerably, mainly due to differences in their produce concentration and drug development pipelines, according to S&P Global Data. S&P analysts Patrick Bell and David A. Kaplan also wrote that “although speculative-grade companies are frequently more aggressive in pricing and life cycle management strategies, legislators and the media primarily focus criticism on well-known investment-grade peers and their more widely prescribed blockbuster drugs. Similarly, we believe pharmacy benefit managers place more attention on controlling spending on blockbuster drugs than those with narrower patient bases such as orphan drugs. Nevertheless, with a higher proportion of revenues generated in the U.S. and higher leverage, we believe drug price reform could hurt speculative-grade pharma companies disproportionately.”

As part of a sweeping new Medicare Advantage rule, CMS recently proposed a policy aimed at reforming a reimbursement system that local pharmacies have long claimed is straining them to the breaking point. PBMs, on the other hand, argue that the proposal could hamper value-based contracting in Part D and potentially increase Medicare spending.

At issue are arrangements in which Part D plan sponsors can recoup money from pharmacies for dispensed drugs if the pharmacies do not meet certain metrics. Generally speaking, these payments to plan sponsors are known as price concessions, and when assessed retrospectively — as they currently are — they are counted as direct and indirect renumeration (DIR).

This year, PBMs will continue to face growing pressure from plan sponsors, regulators and policymakers to prove that they deliver value and keep drug costs down — and could face additional legislative or regulatory challenges to the way they do business. Meanwhile, investors are likely to put even more capital into startups that challenge the traditional pharmacy benefit paradigm, and the post-pandemic boom in risk-based contracting could expand into pharmacy benefits.

Federal and state regulators have increased scrutiny on PBMs in recent years. In particular, state efforts to regulate PBMs were buoyed by the Supreme Court’s 2020 decision in Rutledge v. Pharmaceutical Care Management Association (PCMA), a lawsuit in which the justices held that states were not in violation of the Employee Retirement Income Security Act of 1974 (ERISA) in attempting to regulate the rates at which PBMs reimburse pharmacies. According to the National Academy for State Health Policy (NASHP), a think tank and policy advocacy group, so far this year 42 states considered 111 bills relating to PBM regulation in 2021. That activity is likely to continue in 2022.

CMS on Jan. 11 issued its long-awaited proposed National Coverage Determination (NCD) for Aduhelm (aducanumab), the Alzheimer’s drug that has been the subject of controversy since the FDA approved it last June. In what officials acknowledged was an unusual decision, CMS said Medicare will cover Aduhelm — and any other FDA-approved monoclonal antibodies that target amyloid plaques — only for people who are enrolled in qualifying clinical trials.

Health insurer trade groups praised the decision, which comes after Aduhelm manufacturer Biogen cut the price of the drug approximately in half in a bid to encourage both provider uptake and payer coverage.