CMS Kicks Off Drug-Price 'Negotiation.' Here's Why Industry and Advocates Are Nervous About Access. (Plus the 10 Best Stories of the Week)

Well, this has been quite the week, with the CMS “selected drug” announcement. If you’re not getting my daily newsletter, this is how I set things up on Monday. Here’s my gut take from Tuesday. I had more considered thoughts on Wednesday. Thursday included some pushback on emergent narratives and some fun with ChatGPT. Friday took a deeper look at insulin politics.  

The announcement of the 10 medicines on which the Centers for Medicare & Medicaid Services will impose price controls made this the biggest week in the drug-pricing world in months, and it resurrected nearly every argument around the topic. 

On the industry side, it meant a lot of the usual discussion about innovation and how price-setting will change pharma decision-making. But that's an increasingly tired argument. Not a bad argument. Just one that everyone has heard, and everyone has their opinions. 

But this week also saw the elevation of a more novel objection to the Inflation Reduction Act: slashing drug prices through forced negotiations might not actually help the patients taking those medicines. 

BMS CEO Giovanni Caforio made the case in his Wall Street Journal op-ed, arguing "there is no requirement that the insurance companies that administer Medicare benefits will pass any new savings to patients." PhRMA highlighted the risk in this blog post. 

It wasn't just industry. The Partnership to Advance Cardiovascular Health said, "We are concerned that any savings achieved from negotiations will not directly affect the price patients pay at the pharmacy counter.” The American Cancer Society’s Cancer Action Network said, "Medicare enrollees taking Imbruvica should benefit from a price negotiation ensuring they pay less for negotiated drugs than they were previously paying."

And that brought out an army of skeptics. Memorial Sloan Ketterings' Peter Bach said the idea that patients wouldn't benefit was not "anywhere close to accurate." 

All of this suggests that the basic argument around access needs to be unpacked. Here's the idea, in a nutshell: The law is very specific around which medicines need to be subject to price controls, but it gets vague about how the insurance companies that administer drug-benefit plans should act. 

There is a requirement that price-controlled medicines be placed on formularies, but no additional guidance around where on formulary the medicines fall or what kind of utilization management may be used. 

That creates the possibility that insurance plans take the lower, "negotiated" prices and don't change patient cost-sharing one bit. Yes, the "system" still saves, but the patient at the pharmacy counter is not necessarily better off. 

The lack of guardrails around insurance plans has not gone unnoticed. In constructing the regulations, CMS asked for feedback, and multiple groups suggested a requirement that price-controlled medicines be placed on the most generous formulary tier or that utilization management be curtailed. 

The government rejected the idea of well-defined standards and instead said they’d just keep a real close eye on plans. (See pages 83 to 85 in the CMS guidance for an example of CMS’ refusal to set explicit standards.)

If you want to be charitable, it may be that this is less a debate than both sides talking past one another. 

The point made by industry and advocates is that patients whose medicines are given new, lower prices should benefit directly. Those who reject that argument suggest that we need to think bigger. The system savings created by price controls is helping to fund other patient benefits, such as the widely supported $2,000 out-of-pocket cap in the Medicare Part D benefit. (Dusetzina lays out that take, in brief, here.)

But the idea that whomping Eliquis on price mostly benefits non-Eliquis patients suggests that the benefit is more attenuated than most Americans think. I’m curious about whether Jardiance patients are OK with underwriting savings for their neighbor. Or -- to carry the “attenuated benefits” idea even further -- I’m curious about whether Jardiance patients are OK with underwriting Tesla purchases (as this WSJ op-ed argues). 

This is, of course, all speculative. Maybe insurance plans will pass savings directly to patients, eliminating formulary and utilization management games, rendering this whole argument moot. Maybe Americans do understand that price controls aren’t designed to reduce costs directly as much as create benefits elsewhere. 

Indeed, and ironically, the confusion and finger-pointing around access probably means this is a dialogue that needs to be louder. 

The Top 10 Stories of the Week (All-IRA Edition)

1. Read the CMS fact sheet on price controls, if you haven’t already. There isn’t a whole lot to the announcement, and the government pretty much covers it here as clearly as any of the coverage.
2. The next interesting element of this story kicks off on Oct. 30, when CMS begins “listening sessions” for each of the selected drugs. Eliquis is first. Check this CMS page for more about the process or sign up for one of the 20 three-minute speaking slots allotted for each medicine. 
3. I didn’t have a newsletter last weekend, so I didn’t have a chance to say anything about the AstraZeneca lawsuit. It’s absolutely worth a read, because it makes a radically different legal argument from any of the eight other cases filed, focusing on the way that CMS is implementing the law, rather than the constitutional foundation of the law itself. 
4. I would expect that we’ll see a suit from Novo Nordisk that also goes at CMS for violating statutory language: CMS included a whole family of the company’s insulins on its list, raising eyebrows about the process CMS used. 
5. While we’re talking lawsuits, Novartis filed their objection last night. It’s not particularly novel, mirroring previously lodged concerns around First Amendment, Fifth Amendment (takings) and Eighth Amendment (excessive fines) violations. 
6. One of the weirder inclusions on the list was Janssen’s Stelara, which will absolutely have biosimilar competition ahead of 2026, when price controls are actually imposed. STAT explains the loophole that snagged Stelara. 
7. Politico looked at how the Republicans plan on weaponizing the IRA against Joe Biden. This feels like a longshot approach. The polling is pretty clear that, in theory, Americans like policies that take aim at drug prices. What’s unknown is whether the bloom will be off the rose when price controls go from theory to practice. 
8. I liked this piece, by STAT’s Bob Herman, about why hospitals -- which are reliable pharma opponents -- are keeping quiet about the IRA. Turns out docs aren’t fans of the idea of government-set prices in medicine, either. 
9. The stock market didn’t remotely punish the drugmakers whose medicines made the CMS list, as the Washington Post pointed out. I’m on the record as thinking that share price is not a meaningful marker of long-term risk, but the reality is that market impact will be a part of the narrative. 
10. Here is a JAMA Viewpoint about the implications of the First Amendment claims in the IRA.