Ford: It’s Time for Real Health Care Reforms, Not Those That Stymie Life-Saving Advances

The U.S. is the world’s leader in the development of life-saving biopharmaceutical advances and breakthroughs, and Texas plays a significant role in fueling that innovation. Thousands of life science and biotech companies call Texas home, supporting tens of thousands of jobs and delivering billions of dollars in economic impact.

But a new plan from the Trump Administration could undermine this progress and the innovation driven by our market-based economy. Worse, it could threaten patient health.

The administration is backing a “most favored nation” price-setting model for pharmaceutical drugs. Through this process, the government would tie the price of medications to the lowest prices paid by specific foreign countries, which rein in drug costs by imposing artificial price caps and restricting patient access to new or breakthrough treatments.

While such a drug pricing system is intended to bring down costs – a goal we all, no doubt, can agree must be achieved – importing foreign price controls is not the solution.

First, government price caps fail to address a primary reason patients pay more for their medications: middlemen in the health care system, including pharmacy benefit managers (PBMs).

PBMs manage drug benefits for payers, such as insurers or the government. Today, six PBMs control over 90% of all U.S. prescription drug prescribing. These middlemen use their control of drug benefits to steer patients to costlier medicines that generate – for the PBMs – greater revenues, while limiting patient access to more affordable generics and biosimilars.

Multiple Congressional committees, media investigations, and a report by the Federal Trade Commission have shown that PBMs “make formulary decisions to maximize profits (for themselves [PBMs] and their health plan clients).”[1]

Further, research has found that up to 50 percent of every dollar spent on brand name drugs is pocketed by PBMs, insurers and hospital systems.[2] In other words, middlemen who don’t develop medicines take up to half of every dollar spent on branded medications. That’s more than what some European countries pay for the same medicines. In short, PBMs’ excessive fees and questionable practices drive up the price Americans pay for their medicines.

A “most favored nation” drug pricing model could also limit patients’ access to needed medicines, just as many medications are delayed or denied in the countries this proposal would benchmark against.

In the U.S., 87% of new medicines are available to patients within three months. But in the U.K. and Germany, only 63% of new medicines are available to patients, with delays of 10 months or more. It’s worse in Korea (35%) and New Zealand (20%), with delays that can go beyond two years.[3]

What’s more, government price controls would destabilize the competitive market-based economy that drives biopharmaceutical innovation. It would undermine U.S. investment in the industry at a time when projects are ramping up. And it would weaken our competitiveness in the life sciences.

Given the damage that price controls would inflict, Congress should reject any attempt to implement “most favored nation” drug pricing – including in the budget package that the U.S. Senate is now considering.

Instead, Washington should support reforms that focus on affordability without sacrificing patient access, quality of care or innovation. This should include comprehensive changes to the way PBMs operate.

For instance, Congress could require greater price transparency from PBMs and that they pass on to patients the discounts PBMs negotiate with drug manufacturers. Such legislation could also mandate that PBMs be paid a flat but fair fee for their services.

Given the many challenges we face when it comes to health care, reining in anti-competitive and anti-consumer PBM practices should be a top priority for the administration and Congress. This will do more to curb costs without risking development of the next generation of cures and treatments or a patient’s ability to access them.

Editor’s Note: The above guest column was penned by Victoria Ford, MPA, president and CEO of the Texas Healthcare and Bioscience Institute (THBI). The column appears in the Rio Grande Guardian with the permission of the author.

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