Meant to cut US prescription drug prices, proposed Medicare policies may do the opposite—with global implications
Mary Van Beusekom, MS48 minutes ago.
Resilient Drug Supply
The Trump administration’s proposed Medicare “Most-Favored Nation” pricing policies could drive up prescription drug prices and slow drug launches around the world, a modeling study published this week in The Lancet concludes.
The policies are aimed at lowering the prices of drugs in the United States, which are an estimated three to five times higher than in European countries. But manufacturers’ ability to strike confidential deals with the Trump administration and challenges in implementing the policies could cancel out any savings, the study authors say.
Manufacturers would have to pay more rebates
A team led by researchers from Brigham and Women’s Hospital analyzed the potential effects of the Most-Favored Nation payment models for Medicare part B (GLOBE) and part D (GUARD). GLOBE covers drugs provided in hospitals and clinics, and GUARD covers those bought at pharmacies.The team assessed 195 patented drugs that account for $87.9 billion of Medicare's annual spending ($32.7 billion through GLOBE and $55.2 billion through GUARD). Because drug makers’ rebates and discounts are confidential, the researchers estimated Medicare's net prices for the drugs and then compared them with prices in 19 reference countries under the proposed rules to estimate savings.
They linked Medicare spending and prices with estimated current rebates, ex-manufacturer prices, and international sales data using Medicare data and commercial databases of sales and pricing from the reference countries for all potentially model-eligible brand-name drugs.
“Under these payment models, manufacturers would be required to pay Medicare additional rebates for net drug prices exceeding the lowest international list price in a basket of 19 reference countries adjusted by gross domestic product per capita on purchasing power parity basis,” potentially reshaping global pharmaceutical markets, the researchers wrote.
Drug prices may rise outside of US
For three in four prescription drugs studied, the resulting Medicare savings would be worth nearly four times that drug's entire annual sales in the country used to set its price. In response, manufacturers could raise prices outside the United States or delay drug rollouts to avoid losing that much money.In addition, the authors said, the initial 17 drug companies were reported to have reached confidential agreements with the Trump administration. If the drugs from these manufacturers were excluded from those rules, the researchers estimated a 71% reduction in the policy's potential savings, leaving just $3.3 billion (28.7%) in savings.
“The latest round of deals announced on 31 August brings the reported tally to 26 companies,” lead author Thomas Hwang, MD, of Brigham and Women’s, said in a Lancet news release. “By our updated estimate, exemptions would push savings lost from an estimated 71% in our study to nearly 80%.”
In its initial phase, without any confidential Medicare-manufacturer deals, the policy could cut Medicare's prescription drug spending by $5.2 billion (16%) under GLOBE and $6.4 billion (18%) under GUARD, which would cover about 25% of the Medicare program.
If expanded to all Medicare beneficiaries, these savings could increase to about $21 billion under GLOBE and $25.5 billion under GUARD.
People living in the United States have long paid more for medicines than virtually anywhere else in the world.
Aaron Kesselheim, MD
Medicare wasn’t allowed to negotiate drug prices directly with manufacturers until the 2022 Inflation Reduction Act permitted it for a small number of expensive drugs. Under the GLOBE and GUARD models, a randomly selected 25% of Medicare beneficiaries would be covered for five years.
“People living in the United States have long paid more for medicines than virtually anywhere else in the world,” coauthor Aaron Kesselheim, MD, of Brigham and Women’s, said in the release. “The Most-Favoured-Nation pricing models were meant to address this gap, but their scope is limited by various exemptions and will likely face legal challenges.”
Hwang said that the US government and industry are pressing referenced countries and industry to raise drug prices and spending, "but this is colliding with the reality that other countries have limited budget room to give.”
Policies must meet strict set of criteria
In a commentary on the study, Jeromie Ballreich, PhD, and Gerald Anderson, PhD, both of Johns Hopkins, called out several study limitations, which the authors also recognized. They include difficulty determining international prices and a lack of accounting for secondary effects of the proposed policies.The commentary also noted previous opportunities the Trump administration had, but didn’t take, to lower US prescription drug costs. Among them, it “could have strengthened the part D marketplace to increase competition by providing subsidies to the part D plan,” Ballreich and Anderson wrote. “Without the subsidies, many part D plans exited the market.”
“It could also have worked with Congress to shorten the time a drug can be on the market before price negotiation begins in the Medicare programme or to extend reference pricing to the commercial market, which covers about half of the US population,” they added.
The GLOBE and GUARD programs cover only 25% of the US population because the Centers for Medicare and Medicaid Innovation (CMMI) are permitted to conduct only demonstration projects. CMMI was charged with benchmarking Medicare part B drug prices to international prices as part of the Most-Favored Nation policies.
“Under the legislative authority establishing CMMI, if the projects are deemed to be successful, then they can automatically enter the Medicare programme in all localities,” Ballreich and Anderson wrote. “There is a strict set of requirements and financial goals that the projects must meet. If they can show savings, the GUARD and GLOBE models can be implemented nationwide.”
It is important to note Ballreich disclosed he receives consulting fees from RTI International related to requests for CMMI proposals.