2021: The Fall of Prescription Drug Pricing?

Drug Price Graph

Over the past few decades, health care spending has gained national attention as prescription drug prices, especially specialty medications, and health insurance costs exponentially increase year to year.

Since 2000, national health care spending has experienced varying cycles of growth: sharp steady growth, slow stable growth, and moderately fast growth.

NAtional Health Expenditure Graph

In recent years, health care spending has slowed, as was evident in 2019 when the annual increase was 4.6%.1,2 The COVID-19 pandemic has further exacerbated the health care spending dilemma.

On average, prescription drug costs account for a 10% share of the national health expenditure.3

A recent study found that 2018 prescription drug prices in the United States were 256% higher compared with 32 other countries when considering all drugs together.4 Prices for brand name drugs in the US were found to be significantly higher, while prices of unbranded generics were, on average, 84% of those in other countries.4 By volume, unbranded generic medications account for 84% of the drugs sold in the US.5 As prescription drug prices in the US rise, much of the financial burden is borne by the patient, especially for medications that are subject to coinsurance.

This raises the question of how a shift in political leadership will impact rising drug costs and how changes in policies will attempt to combat the continued rise in health care cost.

The Trump administration made several attempts to reduce drug prices while in office.6–8 The executive orders signed by Trump include:

  • Access to Affordable Life-saving Medications,9 which directs federally qualified heath centers to pass discounts received from drug companies for insulin and epinephrine to some low-income Americans.
  • Increasing Drug Importation to Lower Prices for American Patients,10 which aims to promote the importation of certain prescription drugs from other countries.
  • Lowering Prices for Patients by Eliminating Kickbacks to Middlemen,11 which seeks to prohibit secret deals between drug manufacturers and pharmacy benefit managers, ensuring that patients directly benefit from available discounts at the pharmacy counter.
  • Most Favored Nation,12 which aims to lower the cost of some prescription drugs in the Medicare program; Medicare would pay the same negotiated price for certain expensive drugs as other developed nations.

The fate of these rules partially depends upon the Biden administration and Congress who have options to continue the previous administration’s policies, modify them, or withdraw completely; judicial branch rulings will be another important factor.

In fact, some orders have already witnessed a halt in action. A temporary freeze on a final ruling requiring federally qualified health centers to pass discounts for insulin and epinephrine has been delayed for 60 days.13 The kickback/rebate rule has been pushed out even further to January 1, 2023; a federal district court issued a ruling on a lawsuit filed by the Pharmaceutical Care Management Association that delays implementation, giving the Biden administration time to evaluate their position.8

Pill and Gavel Image

Two other orders are in a holding patten. President Biden supported prescription drug importation from countries outside the US during his campaign, and some states are moving ahead with efforts to import prescription drugs from Canada. The final ruling authorizing states to create importation programs is the subject of an ongoing lawsuit filed by PhRMA. It remains unclear how the Biden administration will proceed.8 As for the ‘most favored nation rule’, Biden’s campaign supported the use of international reference prices for setting prices of newly launched specialty drugs; this is a slight modification to Trump’s proposal of using the lowest price in other selected countries. This model, which was slated for a January 1, 2021 implementation, has been temporarily blocked by several US district courts.8

Ultimately, the future of drug pricing in the US remains uncertain while current proposals are held up in federal court.

In the coming months, the Biden administration’s plan may become apparent as they decide how to approach the current rules. As with any federal legislation, navigation through the court system takes significant time. Consequently, we may not see any changes to drug pricing until later in President Biden’s first term. While there have been many attempts to address drug pricing in the United States, it remains a key national issue, and many are eyeing how the current administration will attempt meaningful change.

References

  1. Trends in health care spending | American Medical Association. Accessed February 26, 2021. https://www.ama-assn.org/about/research/trends-health-care-spending
  2. NHE Fact Sheet | CMS. Accessed February 26, 2021. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet
  3. FastStats. Published November 10, 2020. Accessed February 19, 2021. https://www.cdc.gov/nchs/fastats/health-expenditures.htm
  4. Mulcahy AW, Whaley CM, Tebeka MG, Schwam D, Edenfield N, Becerra-Ornelas AU. International Prescription Drug Price Comparisons: Current Empirical Estimates and Comparisons with Previous Studies. Published online January 28, 2021. Accessed February 19, 2021. https://www.rand.org/pubs/research_reports/RR2956.html
  5. Here’s How Much More the U.S. Spends on Rx Drugs | MedPage Today. Accessed March 17, 2021. https://www.medpagetoday.com/special-reports/exclusives/90925
  6. Luhby TL. Trump unveils controversial drug price rules in a last-ditch attempt to fulfill campaign promise. CNN. Accessed February 19, 2021. https://www.cnn.com/2020/11/20/politics/trump-unveils-controversial-drug-price-rules/index.html
  7. Luhby TL. Trump finally releases controversial drug price executive order. CNN. Accessed February 19, 2021. https://www.cnn.com/2020/09/13/politics/trump-drug-prices-executive-order/index.html
  8. Freed M, 2021. A Status Report on Prescription Drug Policies and Proposals at the Start of the Biden Administration. KFF. Published February 11, 2021. Accessed February 19, 2021. https://www.kff.org/medicare/issue-brief/a-status-report-on-prescription-drug-policies-and-proposals-at-the-start-of-the-biden-administration/
  9. Implementation of Executive Order on Access to Affordable Life-Saving Medications. Federal Register. Published December 23, 2020. Accessed February 26, 2021. https://www.federalregister.gov/documents/2020/12/23/2020-28483/implementation-of-executive-order-on-access-to-affordable-life-saving-medications
  10. Increasing Drug Importation To Lower Prices for American Patients. Federal Register. Published July 29, 2020. Accessed February 26, 2021. https://www.federalregister.gov/documents/2020/07/29/2020-16624/increasing-drug-importation-to-lower-prices-for-american-patients
  11. Lowering Prices for Patients by Eliminating Kickbacks to Middlemen. Federal Register. Published July 29, 2020. Accessed February 26, 2021. https://www.federalregister.gov/documents/2020/07/29/2020-16625/lowering-prices-for-patients-by-eliminating-kickbacks-to-middlemen
  12. Most Favored Nation (MFN) Model. Federal Register. Published November 27, 2020. Accessed February 26, 2021. https://www.federalregister.gov/documents/2020/11/27/2020-26037/most-favored-nation-mfn-model
  13. Simmons A. President Biden Freezes Insulin/Epipens Regulation Harmful to Community Health Centers and Patients. NACHC. Published January 25, 2021. Accessed February 26, 2021. https://www.nachc.org/president-biden-freezes-insulin-epipens-regulation-harmful-to-community-health-centers-and-patients/