LAWS: New Drug Pricing Model Hurts Medical Innovation

Through my experience working in the policy arena at the state d federal level, including during my time at NAMI-NC and in Washington, I have seen many different policy proposals come across my desk. Many of the proposals on the surface appeared, and for the most part, were sound and well thought-out proposals with the intent of improving health and social well-being of some of our nation’s most vulnerable populations.

However, I have also witnessed policy proposals that sounded good on the surface but in fact, would have or did have adverse consequences on the target population, including in some instances for persons receiving critical and necessary public services.

The latter outcome may very well be the case for the Center for Medicare and Medicaid (CMS)’s proposed mandatory demonstration Internal Pricing Index (IPI) model, which could significantly impact future medical innovation and deliver a major blow to patients, the biopharmaceutical sector and ultimately our economy.

The proposed International Pricing Index (IPI) model would change the way medicines covered by Medicare Part B are priced, replacing our current system with price setting and payment policies from selected foreign governments with socialized health care systems.

Here’s why that’s a bad idea:

In the market-based system we use now, the Average Sales Price (ASP) actually works pretty well. It takes into account negotiated manufacturer rebates and discounts, and by the Department of Health and Human Services’ (HHS) own admission, has successfully decreased prices for the most common Part B drugs. Switching to a methodology that relies on the systems of 14 foreign countries that are known to mandate lower prices would set Medicare patients up for the same problem many patients in other countries face — reduced access to the most effective treatments because their health-care systems won’t pay a fair price.

In addition to access issues, another major problem with price controls affecting how Medicare pays for Part B drugs is what it would do to the sectors that help make us the world leader in medical innovation and drug development. Unfairly cutting reimbursements would discourage innovation and the private-sector R&D that is key to finding new treatments.

It would also put additional financial pressure on individual medical providers and small clinics, potentially forcing them out of the Medicare market. Fewer providers and stalled bio initiatives would obviously hurt patients who need access to cutting-edge drugs, but it would also diminish investment and employment in an industry that plays a big role in the North Carolina economy.

While questions are sometimes raised about the biopharmaceutical industry, the reality is that sick patients who rely on medicines to live and to heal rely on the biopharmaceutical industry to continue to research and develop the best life-saving drugs possible. The biopharmaceutical sector is a $92.6 billion industry in North Carolina. It directly and indirectly supports more than 314,000 jobs and generates over $4 billion in tax revenues to pay for public services like first responders and schools.

Furthermore, the cost of Medicare Part B medicines is a relatively minor part of total Medicare expenditures. Drug therapies made up just 8 percent of Part B spending in 2016 and Part B drug spending accounts for only 3 percent of total Medicare spending. That small sum is hardly worth implementing a risky experiment that could have very serious consequences for beneficiaries, especially those who are among the most medically fragile.

While we, as patient advocates, should continue to support initiatives to reduce healthcare costs; these efforts must not result in policies that undermine the scientific advancements that we have made and continue make in drug research and development. I urge all North Carolinians to oppose the HHS Medicare Part B IPI demonstration.

Michelle Laws is the Director of Policy and Public Advocacy for the National Alliance On Mental Illness-North Carolina