CVS wants to eliminate 'pay-for-delay agreements' among drug makers, while the pharmaceutical lobby calls for 'delinking supply chain payments from the list price' for PBMs.
CVS Health and PhRMA are blaming each other for high drug prices.
In separate letters this week to Health and Human Services Secretary Alex Azar, the pharmaceutical lobby and one of the nation's largest pharmacy benefit managers offered diametrically opposite explanations—and remedies—for the high drug prices that have left consumers reeling.
"Until drug manufacturers reduce the high price they set for these drugs, we know this problem is not going away," CVS said, in response to a request for information by the Trump administration's blueprint to lower drug prices.
Among its suggestions, CVS urged HHS to improve competition in the pharmaceutical industry by reducing artificial barriers to cheaper generic alternatives.
"More must be done to make generics available, including expanding the use of biosimilars, and eliminating tactics that stall competition," CVS said.
"We believe the Administration should support shortening the exclusivity period for biologics from twelve to seven years, and finalize interchangeability guidance, which is key to expanding adoption of these lower cost alternatives," the letter said.
CVS called for a ban on "pay-for-delay agreements" that it said would limit anticompetitive schemes by drug makers and bring generic equivalents to the market more quickly.
PhRMA's Version
In its letter to Azar, PhRMA pushed for reforms that prevent PBMs and other supply chain middlemen from calculating their compensation as a percentage of the list price of a medicine, instead of a charging a fee based on the value of their services.
PhRMA CEO Stephen J. Ubl said that the way drugs are paid for in this country "has evolved into a complex system of list prices and rebates that move through an opaque supply chain. A medicine's rebate—rather than its actual price—often determines if it is covered or where it sits on a formulary."
Because rebates are based on a percentage of a medicine's list price, Ubl said PBMs have incentives to want higher list prices.
"This creates an unfair system in which patients are often paying higher list prices regardless of the discount their insurer receives," Ubl said. "Reforms to prevent PBMs and others in the supply chain from being paid off the list price of a medicine can fix broken incentives and make the system work better for patients."
PhRMA claims that more than one-third of the list prices that are set by drug companies is rebated back to supply chain middlemen, which it said totaled $150 billion in discounts last year.
Ubl conceded that "delinking supply chain payments from the list price will be disruptive and requires our companies and others to adapt, but it is necessary to improve patient affordability."
"We hope realigning these incentives will result in a greater shift toward value and lower costs for patients," he said.
FTC Weighs In
Federal Trade Commission Chairman Joe Simons, in comments to HHS, complained about "regulatory barriers and abuse of government processes that delay and constrain competition," which he said "lead to higher prices and reduce access to those medicines – all to the detriment of consumers."
The FTC said the Blueprint should focus on the "misuse" by the pharmaceutical industry of Risk Evaluation and Mitigation Strategies programs, using regulatory or legislative action.
"REMS programs can protect the public from pharmaceutical abuse, but they can also be misused to disrupt competition and innovation," FTC said in its remarks to HHS. "Branded manufacturers may abuse REMS programs by refusing to make product samples available to generic manufacturers and by denying access to shared REMS systems, both of which are necessary for generic firms to obtain approval for biosimilars from the U.S. Food & Drug Administration."
The FTC also called for removing barriers to competition for biologics, which the commission said has become the "fastest-growing and one of the most expensive segments of prescription medicine."
"Certain FDA regulations create unnecessary barriers to biosimilar and interchangeable competition," the commission said. "The FTC recommends that the FDA reconsider its naming guidance for biologics and expedite the approval process for interchangeable biosimilars, which likely would increase market acceptance and competition for lower cost biosimilar products."
John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.