Top 5 Takeaways from the White House White Paper on Drug Pricing

On February 9th, the White House released a white paper on the causes and potential solutions to high drug prices. There are several important takeaways from the report, and we've compiled the top 5 for you here (just in case you don't have time to read 28 pages!). If there's a theme to this report, it's dreams; the report is very aspirational, but does not give a lot of concrete steps to how these dreams would be accomplished.

1. There was plenty of blame to go around.

The White House was quick to point fingers at who may be responsible for high drug prices. According to the White House, the biggest culprits are:

1. the U.S. government, because there are too many regulations that hinder competition,
2. foreign governments that set pricing guidelines for drug manufacturers, because their guidelines give them a competitive advantage that the U.S. does not have,
3. pharmacy benefit managers, or PBMs, because there are not enough of them, and the lack of competition means they can inflate prices, and
4. the FDA approval process, which hinders competition in the drug market because it takes too long.

It's not clear that all of these factors actually contribute to the drug pricing problem, and if they do, it might not be for the reasons the White House claims. For example, regarding PBMs, the report claims that:

“Policies to decrease concentration in the PBM market and other segments of the supply chain, i.e., wholesalers and pharmacies, can increase competition and further reduce the price of drugs paid by consumers.”

But the report does not say how to actually reduce the concentration in power. The government could block acquisitions that would increase the power of the largest PBMs, but that would not reduce the already-present imbalance. For most things proposed in this report, there are ideas, but no directions on implementing them.

2. The White House thinks other countries are "free-riding."

The report attacks the way European countries reimburse drug manufacturers. It says the U.S. is hurt by "unfairly low" drug prices in those countries, and that they are relying on the U.S. to subsidize drug development. The report states:

“Meaningful reforms could address the free-riding that takes unfair advantage of American innovation, whether through enhanced trade policy or policies that tie public reimbursements in the United States to prices paid by foreign governments that free-ride or other methods.”

It isn't clear what that language actually means. It would be difficult for the U.S. to get other countries to spend more on drugs, so there's no obvious way to develop the reforms the report calls for.

3. Changes to Medicare and Medicaid are Proposed

The report suggests several changes to Medicare drug reimbursement. It targets Medicare Part B and Medicare Part D. For Medicare Part B, the report says we should eliminate payment policies that are price-based and give doctors more money for prescribing more costly drugs. For Medicare Part D, the report claims that the requirement which guarantees coverage of certain drugs causes higher prices because it limits the ability of Part D insurance companies to negotiate for lower prices. These programs have been called out before, by the Obama administration, but the it didn't go anywhere. The administration backed off due to public outcry.

4. The White House Wants to Speed Up the FDA Drug Approval Process

Last year, the Food and Drug Administration (FDA) approved over 1,000 generic drugs, the highest amount approved in one year in the history of the FDA's drug approval program. The agency accomplished this by expediting applications for certain drugs that are the second or third drug in a particular drug category. The report proposes expanding this practice to drugs that are second or third drugs in a class that does not have a generic alternative. There are differing views as to whether this proposal would actually lower drug prices or if the approved drugs would simply cost the same as their "leader" drug. But speeding up the approval process could also have safety implications for patients - something that the report does not discuss.

5. Notable: What's Missing from this Report

There is a lot in this report, but perhaps what is most surprising is what is not in it. The report gives a full 28 pages on how to reduce drug costs through public programs, but does not give any recommendations or policies focused on lowering the costs for patients who get their health insurance through their employer. Over half of U.S. citizens get their insurance through their employer than through any other method, yet those people are not addressed by this report.

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