6 Policies To Reduce Prescription Drug Prices, Boost Competition

The Alliance of Community Health Plans (ACHP) is urging the federal government to take action and lower prescription drug prices with a set of recommended actions.

The costs of prescription drugs continue to rise each year, but policymakers have done little to address it. ACHP’s list of suggestions ranges from increasing drug pricing transparency to expanding the use of biosimilars.

Catastrophic Medicare Part D prescription drug spending has been on the rise for over a decade. Seniors do not have an out-of-pocket cap for Medicare Part D, which can leave them with high costs in the catastrophic phase.

ACHP’s first recommendation is to redesign the Medicare Part D benefit including creating an out-of-pocket healthcare spending cap for seniors and to ensure that consumers will not owe anything during the catastrophic phase. Drug companies should also have to assume financial responsibility for each Part D phase and take some of the pressure off of Medicare.

Medicare should also receive resources to allow the program to negotiate lower drug prices for their beneficiaries, ACHP suggested.

ACHP’s next recommendation was for the federal government to allow the US Department of Health and Human Services (HHS) to negotiate prices for expensive prescription drugs that have no generic or biosimilar competition. These drugs were responsible for 60 percent of Part D spending in 2019, the fact sheet noted.

Currently, HHS has no power over competitive drug pricing.

Policymakers should also extend price negotiation to the commercial market to keep drug companies from shifting costs to non-Medicare consumers.

High-cost drugs that face no competition should also have an International Pricing Index applied that will limit the price to no more than 120 percent of its average international market price. The previous administration supported a similar approach through its Most Favored Nation model, but the Biden administration has proposed to rescind that model.

ACHP also urged the federal government to increase the use of biosimilars by informing clinicians and patients of the products and by persuading the Federal Trade Commission to increase biosimilar presence on the drug market. There are 29 FDA-approved biosimilars that are more affordable than other prescription drugs, but less than 12 are available on the market.

Increasing reimbursement rates for biosimilars could also improve utilization, the fact sheet stated.

ACHP’s suggestions also targeted drug companies’ unjustifiable raising of drug prices. At the beginning of 2021, 735 drugs prices increased up to 10 percent without reason.

Prescription drug prices often increase faster than the inflation rate, therefore ACHP recommended that drug manufacturers should have to provide rebates for drug price increase above the inflation rate.

Drug companies should also have to follow a price transparency rule that would require manufacturers to report and justify price increases, ACHP stated.

One example is the FAIR Drug Pricing Act, introduced in the Senate in 2019 and referred to the Committee on Health, Education, Labor, and Pensions. This Act would require drug manufacturers to notify HHS and submit a transparency and justification report 30 days before increasing the price of certain drugs by more than 10 percent.

Lastly, the ACHP recommended that the federal government encourage the use of transparent fee-based pharmacy benefit managers (PBMs). Traditional PBMs are typically not transparent about rebates, which can encourage high-cost drug use, whereas transparent fee-based PBMs pass rebates and discounts onto payers and earn revenue through a clear administrative fee.

Payer organizations have turned to the federal government to get prescription drug prices under control, as pharmaceutical companies are not budging.

In January 2021, AHIP called on the Biden Administration to focus on solutions that would protect Americans from higher drug prices.

The issue is pressing, not only for the seniors on whom some of ACHP’s recommendations focused but for all Americans. AHIP reported that the highest portion of commercial health insurance premiums goes toward prescription drug costs, making prescription drug pricing a widespread concern.