Is Trump Opening New Front in War on Drug Prices?
Pharma executives were beaming as their stock prices soared in the days after Donald Trump’s poll-defying victory, and their sentiments rose even higher with the defeat of a California ballot initiative that would have instituted price controls on state-purchased drugs.
Then Trump held his first post-election press conference last week, saying that pharma was “getting away with murder” and suggesting that Medicare should negotiate drug prices. Over the weekend, Trump doubled down in a Washington Post interview on his pledge to negotiate drug prices as part of his overall health care plan. Not surprisingly, the NASDAQ Biotechnology Index cratered more than 3% within hours of the president elect’s pronouncements and is off 4.1% in the past week. Likewise, the OIS Index is also down 4.1%.
So pharma investors might have gotten ahead of themselves in the days after the election. California’s failed Proposition 61 was a battle, but as Trump is showing in the days leading up to his inauguration, the war on drug prices is not over.
Not a Slam Dunk
Regardless of Trump’s latest comments, getting drug price controls through Congress is not a slam dunk because the pharma lobby wields great power. The Center for Responsive Politics reports that the pharmaceuticals/health products industry was the top campaign contributor in 2016, doling out $186.2 million to candidates, with House Speaker Paul Ryan the top recipient. Yet, Stat News reported that Trump’s idea is getting some traction with a few House members.
Trump’s idea is anathema for ophthalmic pharmaceutical companies that rely heavily on Medicare coverage for drugs to treat age-related macular degeneration, diabetic retinopathy and glaucoma.
Despite the defeat of California’s ballot initiative in November, expect more drug price battles to play out in the states. California’s initiative would have mandated the various state-funded programs pay the same for drugs as the Department of Veteran Affairs, the one federal agency that can negotiate drug prices. It’s an idea Ohioans will take up in a similar ballot measure in November 2017.
What States Are Doing
In six other states, drug price transparency or control bills are moving along, the National Conference of State Legislatures reports. Three passed such laws in 2016. A host of other states took up similar legislation last year before voting it down.
In California, the pharmaceutical industry raised over $100 million to defeat Proposition 61, but what may have really done in California’s ballot question were the complexities of tying drug prices to VA pricing.
Federal law requires drug companies give the VA a 24% up-front discount off a drug’s list price before VA officials negotiate even steeper discounts for specific drugs. David Gortler, PharmD, a professor of pharmacology at Georgetown University and a former FDA senior medical officer now with FormerFDA, notes that the federal government has managed to strike an especially good deal for veterans, a group that most Americans would agree are deserving of one. “You can’t apply that low-margin deal to everybody complaining about the cost of drugs,” says Dr. Gortler, who was a health care policy adviser to Texas Sen. Ted Cruz’s presidential campaign.
Moreover, using the VA as a benchmark for drug prices could eventually raise prices for the VA, and if that were to happen, who is going pay the higher prices? “The taxpayer, so that solves nothing,” Gortler answers.
Using the VA price as a benchmark for states is problematic on another level, Walid Gellad, MD, an associate professor at the University of Pittsburgh, points out. “There was no mechanism by which California could have ensured that it only pays as much as the VA,” he says.
Public Wants a Fix
R. Adams Dudley, MD, a professor at the University of California, San Francisco, who followed the California ballot question closely, doesn’t think drug companies should get too complacent. For one, public sentiment is not on their side: a Kaiser Health Tracking poll last September found that 77% of Americans think prescription drug costs are unreasonable. He says pharma should be concerned that such a deeply flawed proposition as California’s lost by a relatively narrow margin, 54% to 46%. “It wouldn’t be that hard for the authors to see what they did wrong, do another one, and fix it,” Dr. Dudley says.
As Dr. Dudley sees it, the heat is on Republicans in Congress to do something about drug prices. “If this problem persists, they can’t point their fingers at anyone else,” he says. “It’s possible something could happen at the national level.”
The president-elect’s rumblings may be turning up that heat.
Richard Mark Kirkner is a contributing editor to Eye on Innovation. He has covered eye care for more than two decades. – @rmkeditor
Other Twitter Sources – @DavidGortler, @RAdamsDudleyMD, @walidgellad