One of the services that W2O provides clients is a weekly newsletter that wraps up news about drug pricing, access, value and reimbursement. (It is meant for a specific audience, so we’re kind of quiet about it. Ping me if you want in.) At the end of each year, we try to figure out what the coming 12 months will bring. Here is our best bet for 2019, with the caveat that we only hit .400 in 2018. Thanks to Leah Nebbia and Courtney Tyne for their input. The predictions that will be right come from them. The wrong ones are mine.
1. Now is the Winter of Our Discontent
The first 90 days of 2019 will be the roughest news cycle ever for pharmaceutical pricing. Blanket coverage of price increases is now standard, and it will hit right as larger-than-ever deductibles reset for patients. State lawmakers will begin their legislative sessions, Democrats in the new House majority will take their gravels (with a promise of bringing industry executives to testify), and the CREATES Act, easing the process of bringing generic drugs to market, is likely to pass.
Oh, and don’t sleep on the Institute for Clinical and Economic Review, which has pledged to tackle “unsupported price increases”… in the first quarter.
2. The End of Rebates: The Administration Finds a Way to Shake Up the System
In July, the Trump Administration published a tiny squib of a new rule: “Removal Of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection.” That was it. It’s been “pending regulatory review” for six months.
But the language of the title couldn’t be clearer, and our prediction is that the rule will come out of review in 2019 as the Administration’s signature move on drug pricing. It would (appear) to kneecap PBMs and could force the prices on highly rebated products down almost immediately. Indeed, we wouldn’t be surprised if the rule were held up until the government can coordinate some price-drop announcements with drugmakers.
3. PBMs Get Reinvented
The PBM, as we know it, is dead. The 2018 mega mergers mean that the largest benefit managers are now folded into insurance companies, and the once-reliable business of profiting off of gross-to-net spreads – especially with state contracts – is over. And if #2 comes true, that day will only accelerate.
What comes next? PBMs will continue to live under the microscope as states mount investigations into how benefit managers “operate in the shadows.” But beyond the legal rigamarole, we expect new, fee-based – and perhaps less antagonistic – lines of business to emerge. The most obvious new approach for the companies will be finding a role in smoothing the financial transition to expensive one-time therapies, and we expect that PBMs (and their new corporate overlords) will also lead the charge on the technological approaches to drive patients toward lower-priced therapies.
4. ‘Value’ Takes a Hit
The biopharmaceutical industry has now largely accepted that a mathematical definition of value is not only possible, but a reasonable way to calculate drug prices. Which means that it’s time to move the goalposts. ICER’s work notwithstanding, we believe that 2019 will be the year where “value-based” approaches to pricing come in for new criticism.
We’ve already seen shots across the bow. Media already judge “value” with a healthy dose of skepticism. The Journal of the National Cancer Institute editorial, “Cost-Effective But Unaffordable: The CAR-T Conundrum” is likely to be a model for a dozen new papers on the subject, and the New York Times included this line in a piece last month: “But we wouldn’t want to pay a value-based price for aspirin. Doing so would cause us to pay a lot more for it than we do today.”
The upshot? Drugmakers will have to not only defend value, but also sustainability and innovation, when talking price.
5. Transparency Comes of Age
When it comes to drug pricing transparency, we are well past the day where ignorance is bliss. Instead, we are in a new age where there is general consensus that knowledge is power, both inside the political arena with Trump administration’s proposals to include drug prices in DTC ads (and the PhRMA counter-proposal) and among big business with, for example, the introduction of new tools giving patients on demand access to pricing information. And thanks to the California Department of Corrections and Rehabilitation via Reuters we were able to take an early look at price hikes in the state with the most electoral votes.
We anticipate the movement to continue, not matter the questionable fate of the DTC legislation. In the short term, we will be keeping an eye on hot to trot Senators Cory Booker (D-NJ) and Ron Wyden (D-Ore.) who are calling for greater transparency in Medicaid drug board payments and price increases in Medicare, respectively. More broadly, murkiness around pricing will no longer be considered acceptable. The aforementioned ICER price hikes report will be sure to create ripples provoking a strong industry response. Reuters-like stories will continue to push cost information in the public domain. And consumers will continue to awaken and require cost information before they make it to the pharmacy counter.