FDA and CMS nominations move ahead under the Trumpcare fog

Pharmaceutical CommercePharmaceutical Commerce - March/April 2017

Scott Gottlieb, a former FDA and CMS executive, brings an experienced hand

Fireworks will be going off for weeks if not months to come over the American Health Care Act, aka Trumpcare, the “repeal and replace” substitute for Obamacare that was presented by Speaker of the House, Paul Ryan, on March 6. A Congressional Budget Office review, released on March 13, projected that 24 million fewer Americans would have healthcare insurance by 2026 (through a combination of individuals dropping out of insurance programs, and restrictions on funding of Medicaid), while a 10-year estimate of government costs showed a $337-billion reduction. Also on March 13, Seema Verma, a healthcare consultant characterized by the New York Times as a “protégé of Vice President Mike Pence,” was voted in as head of CMS. Verma has experience in setting up Indiana’s Medicaid program, with added incentives to steer Medicaid patients toward lower-cost healthcare options. The $1-trillion Medicaid program is central to how healthcare will be delivered to the poor and disabled, either under a continuation of Obamacare, the current form of Trumpcare, or something else.

Meanwhile, Verma’s nomination was preceded by a few days by the nomination of Scott Gottlieb as FDA Commissioner, and initial reactions were that his nomination would be approved by the Senate. Gottlieb was a deputy commissioner in FDA under President George W. Bush, and previously had worked as an advisor to CMS when the Part D drug discount program for seniors was being implemented in the early 2000s.

Adam Fein, an industry consultant and blogger, jumped on Gottlieb’s recent testimony to the Senate Committee on Health, Education, Labor and Pensions (HELP), where Gottlieb floated the idea of changing how rebates and discounts are administered by wholesalers and PBMs as a means of corralling rising drug costs. In what he characterizes as a potential “black swan” event for those drug purchasers, Fein follows Gottlieb’s notion of reducing or eliminating back-end rebates (i.e., financial incentives given to purchasers after a drug has been sold) while opening up the opportunity for discounting on the front end—the point where reimbursements are tied to mechanisms like Maximum Allowable Cost (MAC) rather than wholesale acquisition cost (WAC). For manufacturers, this could mean the end of rebating as a means of gaining favorable formulary placement. For patients, this would mean costs like coinsurance could be linked to the discounted cost rather than the list price, saving them money; other effects would ripple through drug-distribution channels. “Dr. Gottlieb’s suggestion implies a radical shakeup of the current system. While the risk of change seems small, it would represent a profound industry disruption for the drug channel.”

Organizations like the Pharmaceutical Care Management Assn. are highly vocal monitors of federal drug policies; PCMA has aggressively defended its position against manufacturers and others; for their part, the leading wholesalers have the advantage of handling drug sales through multiple channels (straightforward wholesaling; group purchasing for select clients; supplying independent pharmacies and others), and have their own lobbying efforts. But, as a potential shakeup of today’s increasingly antagonistic drug-distribution and reimbursement system, the idea might have legs.

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