A Shift in Party Majority, a Shift in Priority? What the Pharmaceutical Industry Can Expect

The 2018 midterm elections are a few months behind us, with the Democrats now in control of the House of Representatives and the Republicans maintaining their hold on the Senate. Hence, the future of the pharmaceutical industry—at least until the 2020 presidential election—is unclear. A split Congress does not necessarily offer any legislative certainties for the next 2 years, but it will shape the next 2 years of Mr Trump's presidency and provide the foundation for federal candidacy platforms in the 2020 presidential election.1

The general elections also resulted in the highest voter turnout rates since 1966, with 48.8% or 115 million eligible voters participating, demonstrating an increase in engaged citizens motivated by the social and healthcare issues that dominated this election.2

Drug Pricing Reform

With a split Congress, a number of reforms will likely be introduced in the Democrat-controlled House and blocked in the Republican-dominated Senate. Although both parties favor lowering drug prices, Republicans opt for boosting competition and increasing price transparency, whereas Democrats will likely begin to introduce bills in the House to advance the fight to bring drug prices down.

President Trump's American Patients First blueprint, which includes a number of proposals introduced in May 2018 to lower the cost of prescription drugs, could result in more compromise on drug price reforms between the 2 branches.3 Without awaiting an act of Congress, barely 3 weeks after the midterm elections, the Centers for Medicare & Medicaid Services (CMS) proposed a rule—“Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses”—aimed at amending the Medicare Advantage program, as well as Medicare Part C and D regulations.4 This was in support of the blueprint, with the overall goal of reducing out-of-pocket costs for Medicare Part C and D enrollees and lowering drug prices.

For the pharmaceutical industry, amendments to Medicare Advantage and Medicare Part C and D could mean formulary exclusions for protected class drugs, along with increased price transparency. As part of the proposal, health plans could exclude protected class drugs from their formularies, along with excluding new drug formulations that are not deemed significantly innovative over the original drug.4 Health plans will also be allowed to use prior authorization and step therapy for this class of drugs, leading to delayed access for patients.

The American Medical Association already believes that prior authorization is an overutilized technique dictated by health plans, and with this new proposed rule, patients and physicians may experience even greater access roadblocks.5

Within the Medicare Part D program, CMS proposes the adoption of a real-time benefit tool, which enables prescribers to make beneficiary-specific drug coverage and cost data decisions at the point of prescribing.4 With this tool, physicians have access to lower-cost alternative therapies that are specific to the individual patient and will ideally increase medication adherence.

Cost has been a major factor in medication adherence, with patients opting to forgo treatment or to stretch their prescriptions when faced with high out-of-pocket costs. Although the goal is to introduce such a tool in January 2020, a standard benefit tool has not been provided at this time, which means physicians could be overwhelmed with a variety of technologies, which may not all be successfully integrated into their current electronic medical record.4

Many of the provisions outlined in the CMS proposal are expected to come into effect as early as 2020, and with the shift in party majority as a result of the November midterm elections, drug pricing reform is taking precedence. Nancy Pelosi, Speaker of the House, “indicated that Democrats were open to working with President Donald Trump to reduce drug prices.”6 Ms Pelosi has already emphasized reducing the cost of prescription drugs as a legislative priority. With already strong support to reach a compromise, the CMS proposed rule will be among the first opportunities to test that commitment within the newly structured Congress.6

State Transparency Reform

Several Democratic-led states are now likely to pass laws requiring drug manufacturers to be more transparent in drug price increases as part of new progressive governorships in 7 states. In 2018 alone, 27 state bills have been introduced that are aimed at pricing transparency by requiring drug makers to report the reasons behind a 10% or more price increase during 12 months.7

In addition, with several Attorney General offices flipping from Republican to Democrat, more health policy challenges may lead to further support of transparency in drug prices.8 What we have learned to date from states that have advanced transparency legislation is that the interpretation of transparency has varied, even for pharmacy benefit managers.

New Political Battlegrounds

Although it may seem that there is much healthcare noise as a result of the elections, action at the state level can be expected. Healthcare is local, and the majority of regulations are at the state level. As candidates for the 2020 presidential election begin to announce their campaigns, healthcare will again take the spotlight. Proposals for a “Medicare for all” system, drug price reforms, and implications to the Affordable Care Act will be center stage. The split Congress will be challenged to develop and pass any legislative certainties for the next 2 years.

With drug pricing emerging as a bipartisan issue, however, we will keep a close eye on the movement of any bipartisan legislation that could affect the pharmaceutical industry. We may have gridlock leading up to the 2020 presidential race, but with the continued electorate's disgust with the partisan divide and the bickering legislators, Congress may seek common ground for action in drug prices and in the ability to demonstrate a lasting resolve that the voters will find favor with in making pharmaceuticals more affordable for voters.

Finally, we will continue to monitor regulatory versus legislative authority to implement change. The US Department of Health & Human Services (HHS) Secretary Alex Azar has been vocal regarding the regulatory authority of the HHS. As mentioned earlier, action by CMS posting a proposed rule on November 30, 2018, has started the ball rolling.4

Comments on the rule must be received no later than 5 pm on January 25, 2019, and its implementation will be forthcoming. One wrinkle could come from Congress, if any of the elements of the proposed rule are viewed as legislative.

One item in President Trump's blueprint that has received curious tension is the “measures to restrict the use of rebates, including revisiting the safe harbor under the anti-kickback statute for drug rebates.”3

Although not included in the current proposed rule, Mr Azar believes that rebates could be eliminated with regulatory policy1 that could be pursued by the Trump administration as a run-up to the 2020 elections.

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