Rumblings of US pharma price controls flare up

Obama's Precision Medicines initiative could re-open the door

National controls on drug pricing—which is routine in much of Europe and other parts of the world—was kept off the table, mostly, when the Affordable Care Act was passed in 2010, as part of a bargain between the Obama Administration and the pharma industry, in return for its support of the law. Through the mechanisms of Medicare and Medicaid mandated discounts, the 340b program and other measures, however, the federal government does exert downward cost pressure on drug pricing. Nevertheless, the issue is by no means put to rest, and frequently comes up in discussions about health insurance, patients’ out-of-pocket payments, and every time a new, high-priced pharmaceutical enters the market.

Two newspaper articles, both appearing on April 27, hint at the rumblings of price controls. The New York Times reported that deep in the current White House budget proposal, which includes the Precision Medicine initiative announced in President Obama’s State of the Union address, there is language seeking Congressional approval for CMS to negotiate drug pricing with manufacturers. (The draft document is likely to be significantly revised and in the meantime, the Precision Medicine initiative, which includes expanded federal funding of NIH research, might become its own law.) “Five years after passage of the Affordable Care Act, drug prices are again emerging as a political issue,” including among politicians campaigning for the presidency in 2016, notes the article.

In the Wall Street Journal, an article entitled “Pharmaceutical Companies Buy Rivals’ Drugs, Then Jack Up the Prices,” sums up the ongoing trend of branded and generic price rises, many of which are tied to changes in company ownership. On Feb. 10, as an example, Valeant Pharma purchased the rights to Isuprel (isoproterenol) and Nitropress (nitroprusside) and immediately raised the prices of each drug by 512% and 212%, respectively. “Neither of the drugs … was improved” as a result of the change in ownership, according to the article; and that’s just one example. Over time, a number of companies, including generics producers, have located relatively small-volume (in sales) drugs with one or a limited number of suppliers, and applied an eye-popping price increase. Some payers are shielded from the immediate effects by means of annual contracts for drug purchases, but the cumulative effect is to inflate drug prices well above the Consumer Price Index and other measures of price inflation. “It seems like highway robbery,” was one comment in the WSJ article.

So far, the debate over price controls is in the background, but as the 2016 election cycle advances, the issue looks to become a prominent campaign theme.