Drugmakers Sue To Block Federal Rule Requiring Drug Prices In TV Ads (#GotBitcoin?)
Lawsuit says rule will create unnecessary confusion, may discourage patients from seeking treatment or medical information. Drugmakers Sue To Block Federal Rule Requiring Drug Prices In TV Ads (#GotBitcoin?)
Three pharmaceutical companies sued the federal government Friday to block a proposal requiring drug manufacturers include the list price of prescription drugs in television ads, the latest volley by the industry as it faces criticism over escalating cost of its products.
The lawsuit against the U.S. Centers for Medicare and Medicaid Services, filed jointly in U.S. District Court by Amgen Inc., Merck & Co., Eli Lilly & Co. and the Association of National Advertisers, alleges that the proposed rule violates the First Amendment by compelling drugmakers to communicate list prices in TV ads.
The companies and trade organization allege the agency lacks the authority to enact the mandate, according to the complaint. And they say the rule will create unnecessary confusion among patients and may discourage them from seeking treatment or medical information. The complaint says that few of the 65 million Americans on Medicaid pay more than an $8 copay for prescription drugs.
The proposed rule was finalized in May by the U.S. Department of Health and Human Services and is set to take effect in July. It is among the efforts by the Trump administration to make health care more affordable in the U.S. Officials also want to stop billions of dollars in annual rebates that drugmakers give middlemen in Medicare that are known as pharmacy-benefit managers.
The government has said the proposed rule would increase transparency around prices and allow patients to make informed decisions based on cost. Government officials also have said the rule could spur drug companies to reduce prices.
President Trump and Health and Human Services Secretary Alex Azar are committed to providing patients the information they need to make their own informed health-care decisions, agency spokeswoman Caitlin Oakley said in response to the lawsuit. “If the drug companies are embarrassed by their prices or afraid that the prices will scare patients away, they should lower them,” she said.
The lawsuit wasn’t entirely a surprise given the resistance the industry signaled last year when the rule was proposed. The Pharmaceutical Research and Manufacturers of America—the industry’s main trade group, or PhRMA— had said the rule could lead some patients to think they have to pay the full list price, rather than a copay or coinsurance if they have insurance.
The trade group announced its own initiative in which major drugmakers would voluntarily include price-related information in television ads by directing consumers to websites where they can find information on list prices and costs. Few patients pay “list” prices, which don’t take into account rebates, discounts and insurance payments, but some pay the full price at times, such as when they haven’t met their deductible.
Johnson & Johnson , the world’s largest health-care company, adopted the PhRMA principles but went a step further. The New Brunswick, N.J.-based firm has been airing a television ad for its Xarelto blood thinner by briefly showing its list price at the end of the ad.
Pharmaceutical ads on television have become a common occurrence since they began airing two decades ago. The spots have also become a lightning rod in attacks on the drug industry, its marketing and pricing. Critics say the commercials encourage use of expensive medicines, when less-costly generics may suffice.
Indianapolis-based Lilly said in a statement that it has already taken steps in its TV ads and website to share more pricing information. It said focusing on the list price “creates confusion because it’s not the price most patients will pay.”
Merck, which is based in Kenilworth, N.J., said in a statement that the new requirements may cause patients not to seek treatment because of a perception they can’t afford treatments.
Drugmakers, Worried About Losing Pricing Power, Are Lobbying Hard
Pharmaceutical industry attacks proposals in Washington that could cut deeply into companies’ sales.
Worried drugmakers are stepping up efforts to blunt proposals in Washington that they view as some of the most serious threats to their pricing power in recent years.
Pharmaceutical industry trade organizations and outside groups are spending millions of dollars on advertisements attacking the proposals, which would peg drug prices in the U.S. to prices paid overseas and force companies to pay rebates if a drug’s price increases by more than the rate of inflation. For instance, one trade group’s radio ad decries “foreign price controls” imposed by European bureaucrats.
Industry executives and lobbyists are urging friendly lawmakers to pass legislation blocking the plans. They are also pushing administration officials to pursue measures that would pressure industry middlemen such as pharmacy-benefit managers to provide some relief on patients’ costs without directly curbing drugmakers’ pricing power.
The pricing proposals, if enacted, could reduce companies’ sales by billions of dollars, analysts say. The industry is trying to hold off passage of the plans it opposes through the end of this year, people familiar with the matter say, as it is unlikely that Congress would be able to act during election campaigning next year.
Yet drugmakers don’t have the political clout they used to largely because of rising public dismay over high drug prices. Even some Republicans, who typically have been more sympathetic to the industry, have joined criticism of high prices.
The industry lost a key ally when Utah Sen. Orrin Hatch, a Republican, retired last year. Also, Iowa Sen. Chuck Grassley, long a skeptic of the pharmaceutical industry, returned to the chairmanship of the Senate Finance Committee last year.
In July, the Finance Committee approved a bill that would require drugmakers to rebate to the federal Medicare program any list price increases that exceed the rate of inflation. Mr. Grassley was a co-sponsor of the bill along with Sen. Ron Wyden of Oregon, the top Democrat on the committee.
The Trump administration last October proposed basing how much Medicare pays for cancer, eye and certain other drugs on the prices charged in other countries, including in Europe, where drugs are less expensive.
And House Speaker Nancy Pelosi, a Democrat, introduced legislation Thursday that would allow the government to directly negotiate prices for up to 250 expensive drugs that don’t have generic competition.
“We’re facing the stiffest political headwinds in the history of the industry,” James Greenwood, president of the trade group Biotechnology Innovation Organization, said in an interview. BIO’s member companies include Amgen Inc., Johnson & Johnson and Pfizer Inc.
In response to the drug-pricing efforts, Mr. Greenwood, a former Republican congressman from Pennsylvania, said he and his staff have visited dozens of members of Congress, White House adviser Joe Grogan, who formerly lobbied for drugmaker Gilead Sciences Inc., and deputies to Health and Human Services Secretary Alex Azar, a former Eli Lilly & Co. official.
“We want to be proactive in terms of making sure our position is heard down in Washington,” Pfizer Chief Financial Officer Frank D’Amelio said at an investor conference this month. “And many of us, including myself, get down there and make sure we have the conversations that need to be had.”
The drug industry does support one key provision of the Senate bill—capping annual out-of-pocket prescription expenses for people covered by the Medicare Part D drug benefit.
And companies are willing to negotiate on certain other legislation such as a bill pushing makers of pricey brand-name drugs to share samples with rivals developing lower-cost copycat versions, people familiar with the matter say.
However, the industry is opposed to the more far-reaching pricing measures, arguing such steps would restrict patients’ access to medicines, and could reduce funding to research and develop future drugs.
Analysts say the Trump administration’s international pricing proposal poses an especially strong threat because it would lower the prices paid by the Medicare Part B government health-insurance program with private health insurers possibly following suit. The proposal, if put into effect, would reduce Medicare spending on the affected medicines by 30%, or $17.2 billion, over five years, the administration estimates.
Aside from forcing companies to pay rebates on above-inflation price increases, the Senate bill would raise the maximum for rebates that drugmakers already pay to federal-state Medicaid programs for insulin and certain other drugs.
“Potentially we would be selling to Medicaid at a negative price. It’s not reasonable to expect companies to sell at a negative price,” AstraZeneca PLC Chief Executive Pascal Soriot said in an interview.
Together, the Medicare inflation-based rebate and increased Medicaid rebate would save the government programs about $70 billion in spending over 10 years. Much of the sum would be lost revenue for industry, according to Moody’s Investors Service.
The industry’s biggest trade group, the Pharmaceutical Research and Manufacturers of America, has spent $16.3 million on lobbying during the first six months this year, after spending $28 million for all of 2018, according to the Center for Responsive Politics, which tracks lobbying spending. BIO spent $6 million on lobbying during the first half of 2019, after spending $9.9 million in 2018.
Outside groups supportive of the drug industry are also weighing in. Americans for Tax Reform, which advocates for lower taxes, has run newspaper ads in some states either thanking or opposing senators for their votes on the Senate Finance bill.
One ad thanked Sen. Pat Toomey, a Pennsylvania Republican who proposed an unsuccessful amendment to block the inflationary rebate, “for leading the charge to stop price controls and protect the free market in Medicare.” A spokesman said Mr. Toomey supports reducing out-of-pocket drug costs for seniors, but that the inflationary rebate would cause high launch prices for new drugs.
PhRMA, the trade group, provided funding to Americans for Tax Reform in 2015 and 2016, according to tax records. PhRMA declined to say whether it provided more recent funding.
Conservative-leaning advocacy group American Action Network launched a $2.5 million advertising campaign in August that targets 35 congressional districts and attacks what the group calls “socialist price controls” in the Medicare Part D program. A mailer from the group warns about House Speaker Pelosi’s “Rx Drug Takeover Plan.”
In 2017, the most recent year for which tax records were public, PhRMA provided $1.5 million to American Action Network. Both groups declined to comment on whether PhRMA has provided donations more recently.
To counter the pro-industry ads, groups such as AARP—which has endorsed the Senate Finance Committee bill—are running their own ad campaigns. AARP’s “Stop Rx Greed” campaign includes a red van emblazoned with slogans attacking high drug prices and a TV ad showing people walking around with over-sized images of $100 bills covering their faces, while the narrator says: “The big drug companies don’t see us as people. They see us as profits.”
Trump Administration Drops Plan To Curb Drug Rebates
The proposal had aimed to drive down the prices consumers pay for prescriptions.
The Trump administration dropped a major piece of its plan to curb drug prices, the latest sign that central planks of President Trump’s proposal are faltering amid legal challenges, high costs for taxpayers and feuds between the White House and government agencies.
The White House said Thursday that the administration won’t proceed with a proposal to curb industry rebates that drugmakers give to middlemen in Medicare. It comes after a federal judge blocked on Monday a separate rule that required drugmakers to put list prices in television ads. Both proposals aimed to tamp down sharply rising drug costs for consumers and the federal government.
President Trump championed the rebates rule starting in spring 2018, but it fizzled over many months. White House policy aides sparred with the Department of Health and Human Services over the scope and timing of the rule. Some congressional Republicans and key consumer advocacy groups worried it would raise Medicare premiums. And a recent report on the projected cost to the federal government—about $200 billion over a decade—largely knocked the wind out of the idea.
“Based on careful analysis and thorough consideration, the president has decided to withdraw the rebate rule,” said Judd Deere, a White House spokesman.
Health care remains a top concern of U.S. voters headed into the 2020 election. Taken together, the recent setbacks could leave Mr. Trump vulnerable to Democrats’ attacks that he isn’t following through on his promises to lower drug prices. Seeking to regain momentum, the Republican president sought to shift the focus last week, promising an executive order on drug pricing. He has also pledged to deliver a new GOP health plan and issued an executive order to require hospitals and doctors to better disclose pricing to patients.
“President Trump’s rhetoric on drug prices has been quite strong and has the potential to neutralize an issue that long favored Democrats,” said Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation. “The president has had challenges backing up the rhetoric with action.”
The drug-rebate effort could have upended the way drugs are priced. Under the current system, pharmacy-benefit managers, or PBMs, negotiate confidential rebates and discounts on many branded prescription drugs. Those deals aren’t always passed along to customers at pharmacies. Shares of companies that own PBMs rallied Thursday, with Cigna Corp. up 9.2% and CVS Health Corp. rising 4.7%.
The now-scuttled rebate plan would have curtailed the deals worked out between drugmakers and third parties that manage benefits for Medicare as well as Medicaid managed care, where states contract with insurers to deliver benefits. The government sought instead to redirect those discounts toward patients.
“Our plan will end the dishonest double-dealing that allows the middleman to pocket rebates and discounts that should be passed on to consumers and patients,” Mr. Trump said last year in a Rose Garden speech.
HHS Secretary Alex Azar was tasked with delivering on Mr. Trump’s drug-pricing blueprint. The former pharmaceutical executive strongly backed the rule to curb rebates. He peppered his speeches with references to the proposal and called on Congress to introduce legislation also targeting drug rebates.
The rebates that drug manufacturers pay to Medicare plans have long been permitted because they aren’t barred under statutes prohibiting kickbacks to secure federal business. The new rule would have eliminated that protection by potentially subjecting the rebates to review under anti-kickback statutes. Critics of rebates said they give incentives to pharmacy-benefit managers to pick drugs with high prices and high rebates.
“This proposal has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever,” Mr. Azar said earlier this year.
But Mr. Azar clashed with Joe Grogan, a fiscal conservative and key adviser to Mr. Trump who heads the White House Domestic Policy Council. Mr. Grogan and Mick Mulvaney, the White House acting chief of staff, both urged a more cautious approach on initiatives to lower drug prices.
Opponents also lobbied the White House. Pharmacy-benefit managers met with Mr. Grogan and warned him that premiums could rise by double digits. AARP, a high-profile advocacy group, said in an April letter to HHS that the rule could lead to higher drug prices. Some congressional Republicans also began to worry about the cost of the rule and how to pay for it, Hill staff said.
In May, the Congressional Budget Office released an analysis that showed the drug-rebate rule would boost federal spending by about $177 billion between 2020 and 2029. Medicaid spending was also projected to increase, which would have required states to contribute more of their own funding. The findings emboldened critics, including White House advisers, and the rule was pulled.
The decision was made because it would be too disruptive and could complicate bipartisan legislation progressing in Congress, a senior White House official said.
A proposal from Sen. Lamar Alexander (R., Tenn.) and Patty Murray (D., Wash.) contains a number of initiatives to lower health-care costs. The official dismissed assertions that the rule died because of internal disagreements or personality clashes.
The president is already pivoting. He surprised some members of his own administration last week when he said would issue an executive order aimed at getting the U.S. to pay the same price for drugs as other countries.
Two people familiar with the White House dismissed the idea of an executive order, saying Mr. Trump was referring to a coming proposal linking some Medicare drugs to the average costs in other countries.
But on Monday, after a judge derailed the drug prices in TV ads, agency officials were told to get to work on the executive order, according to two people outside the White House.
The pharmaceutical industry, which has faced its own criticism for setting high prices for new drugs, has argued that opaque practices, including rebates, help push up the overall cost of its medicines. The PhRMA industry group called the withdrawal of the rule “a blow to seniors who could have paid less for their medicines at the pharmacy counter.”
Drugmakers in July initiated a new round of increases in their drug prices. All told, 20 companies increased the list prices of over 40 prescription drugs by an average of 13.1%, according to Rx Savings Solutions, which sells software to help employers and health plans choose the least-expensive medicines. On July 1 of last year, 16 companies raised the list prices of dozens of drugs by an average 7.8%.
Matthew Borsch, an analyst with BMO Capital Markets, wrote in a research note that it seems likely there will be a shift in focus in the Trump administration’s regulatory efforts to the pharmaceutical companies and away from PBMs.
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