Testing A Hypothesis: Can We Promote Both Innovation And Affordability Of Drugs?

This week’s announcement by the Centers for Medicare and Medicaid Services (CMS) to test new payment models which promote both pharmaceutical access and affordability is noteworthy.

Public polling has long identified the costs of prescription drugs as a top concern for both Democrats and Republicans. A recent Kaiser Family Foundation poll found that about three in ten adults say they haven’t taken their medicine as prescribed due to costs. A more recent Washington Post-ABC News poll found that only thirty percent of the public believes that President Biden has made progress on lowering prescription drug costs (several of the provisions of the recently passed Inflation Reduction Act are just going into effect while others will not be felt for a few years). This makes the recent announcement by the Centers for Medicare and Medicaid Services (CMS) to test new payment models which promote both pharmaceutical access and affordability even more noteworthy.

To be fair, while the public focuses the most on prescription drugs as a measure of health care affordability, its contribution to overall national health care expenditures is lower compared to hospitals or physician services. Nevertheless, there are numerous opportunities to improve efficiency, three of which CMS, through its Innovation Center, proposes in a new report.

First, CMS proposes to test a model for Medicare beneficiaries reducing co-payments for “high-value” generic drugs. The majority of our nation’s seniors have multiple chronic conditions such as high blood pressure and high cholesterol, and many of these conditions have low-cost, effective generic medications that are often underutilized. CMS is interested to learn whether standardizing the Medicare Part D benefit for these high-value drugs will increase access and affordability while improving outcomes and reducing costs. While there’s no specific timeline for the effort, this should be implemented with relative swiftness.

Second, pharmaceutical innovation has led to us being on the cusp of developing cures for conditions such as sickle cell disease and cancer through cell-based and gene-based therapies. The cost of these therapies, especially for state Medicaid agencies, are often prohibitive and therefore, CMS would like to test whether facilitating multi-state outcomes-based partnerships with manufacturers improves access to these therapies while reducing costs. The idea is that by working on behalf of states, CMS could pool bargaining power to obtain discount pricing. Payment would also be contingent upon improved outcomes, a strategy known as value-based pricing which has been previously embraced by health policy thought leaders on both sides of the aisle.

Third, CMS would like to test whether paying a little less for promising drugs that have been granted an accelerated approval by the Food and Drug Administration (FDA) without the availability of full clinical effectiveness data will incentivize manufacturers to complete confirmatory trials. In the status quo, more than a third of drugs with accelerated approval have not adhered to confirmatory trial schedules, though they continue to be fully paid for by Medicare and Medicaid. On a related note, the Bipartisan Policy Center will soon be starting a project on how to better coordinate FDA and CMS processes to maximize access to evidence-based treatments, especially for rare and severe diseases.

CMS’ report also highlights additional areas of research and one that deserves special attention. Biologics, or large molecule pharmaceuticals, are currently helping millions of Americans treat complex medical conditions; however, their costs are substantial. Biosimilars, which are essentially generic versions of biologics, have not significantly increased competition and lowered costs because of a lack of provider and patient incentives to utilize them. While CMS noted its interest in investigating this area, it should move much more rapidly into testing a model to realize the promise of biosimilars similar to other countries around the world.

This issue relates to another potential market failure which is the increasing role of excessive pharmaceutical patenting to seemingly stymie competition and keep prices of biologic and brand medications high. Last week, the Senate Judiciary Committee passed a number of bills on a bipartisan basis that would empower the FDA, Patent and Trademark Office, and the Federal Trade Commission to regulate tactics used to deter competition without any meaningful innovation which improves patient health. This is an important area that deserves more attention and should be considered a top health policy reform priority by both sides of the aisle.

An important principle moving forward is that innovation and affordability should not be considered mutually exclusive goals; stakeholders must commit to promoting both.