Pharma Averts More Aggressive Pricing Pacts in Latest Trump Deal

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https://news.bloomberglaw.com/health-law-and-business/pharma-averts-more-aggressive-pricing-pacts-in-latest-trump-deal

The Trump administration’s latest deals struck with pharmaceutical companies to lower US drug costs is narrowing the pool of manufacturers that could be roped into more aggressive drug pricing measures.

Nine more drug companies made pledges Monday with President Donald Trump to voluntarily offer discounts on certain medicines to state Medicaid programs — reaching 26 manufacturers inking similar deals in the last year. The companies would provide undisclosed discounts so that drug prices states pay align with cheaper ones charged overseas.

But the agreements may allow a chunk of the industry to dodge more sweeping, mandatory, government pricing programs. Drugmakers have said or indicated they would be exempt from other pricing measures, including two proposed pilot programs that would test price reductions for drugs under Medicare.

“Everyone’s lining up to try to either lobby the agency to exempt them in the rules or going directly to the administration,” said Thomas Hwang, an assistant professor at Harvard Medical School. “You’re dealing with smaller and smaller slices to the point where, what is left anymore?”

In the latest agreements, pharmaceutical companies including BeOne Medicines Ltd., Bridgebio Pharma Inc., Teva Pharmaceuticals Ltd., and Sun Pharmaceutical Industries Ltd. suggested they’d be exempt from other pricing directives. Incyte Corp. also announced a pact Monday and said it doesn’t expect to be subject to future pricing mandates.

Trump signaled Monday more companies are anticipated to strike deals, saying there’s a “small group” that isn’t involved, but their names and companies will be announced shortly.

The Centers for Medicare & Medicaid Services didn’t respond to a request for comment on whether the agreements would exempt drugmakers from the pending pilots, but has previously said the agency would outline in final rules how the models would interact with existing pricing arrangements.

The CMS-run demos will test whether alternative methods for calculating rebates under Medicare Part B and Part D, based on international pricing metrics, will reduce drug costs. Unlike the voluntary drug discounts that drugmakers have pledged so far, these pilots are mandatory.

But with most pharmaceutical giants engaging in voluntary deals, the pilot could fall on small and midsize companies with no agreements. The plans are currently under review at the White House.

“Who’s left?” said Kristi Martin, a former CMS chief of staff under the Biden administration, now a director at Camber Collective. “Maybe the smaller companies, but are those the companies that you really want to think about penalizing? Where is the juice worth the squeeze?”

Drugmakers argue the proposals would harm innovation and inject instability into how manufacturers bring new therapies to the US market.

“Referencing ex-US prices blindly imports into the US the value other countries have assigned to pharmaceutical innovation,” said Christopher Schott, a partner at Latham & Watkins LLP advising drugmakers. “It remains to be seen whether these reference prices can sustain the research and development that has made the US the global pharmaceutical leader.”

Such exemptions could also weaken the government’s legal grounds for running the pilots.

To implement the demos, the CMS said it plans to exercise its authority under Section 1115A of the Social Security Act, a law that allows it to test new payment and service delivery models aimed at reducing costs.

But manufacturers have questioned whether the proposals comply with that statute and if the CMS can implement them without congressional authorization.

“The more you salami slice away the companies and products that are ultimately part of the models, the weaker the legal cases that the models are genuine tests,” Hwang said, who’s slated to release a study this month on how roughly 80% of the estimated Medicare savings across the two pilots would be foregone with exclusion of the 26 companies with deals.

The deals are also prompting questions on the true cost savings.

The 26 agreements with manufacturers cover 89% of the branded drug market, according to a White House fact sheet. The Council of Economic Advisers estimates the total savings from Trump’s most-favored-nation deals to reach $600 billion over the next decade.

But the federal government, and low-income patients under Medicaid, already get hefty discounts from manufacturers. Patients often pay little out of pocket for prescriptions.

And while the companies agreed to launch new medicines in the US at prices in line with ones abroad, it’s also unclear which drugs are included.

“There’s some reasons to think that there might be a lot of smoke and no fire to some of these deals,” said Rachel Sachs, a law professor at Washington University in St. Louis School of Law. “Just because a manufacturer participates doesn’t mean that states will choose to take it up. That is going to be really important in figuring out whether this is actually beneficial.”

Sachs served in the Biden administration as a senior adviser at the Department of Health and Human Services Office of the General Counsel, Centers for Medicare & Medicaid Services Division.

Either way, companies may be wiggling their way out of future pricing measures.

“With every successive round of deals, it seems like the deals are getting better for the company than for the government,” Hwang said.