• Based on President Trump’s recent 2020 State of the Union address, the Trump administration remains focused on federal drug pricing legislation reinforcing the idea that the long stalled International Pricing Index draft rule is meant to force congressional action versus becoming a reality.
  • Introduction of the draft rule has remained controversial with numerous concerns raised over the last year from provider organizations, especially in the oncology space where many cancer therapies are paid for through Part B, and from life sciences companies about potentially negative impacts of the proposal to practice sustainability and innovation, respectively.
  • The goal of the potential IPI demonstration is to reduce cost-sharing for Medicare patients who receive Part B therapies, as cost-sharing would be linked to an international index price that in most cases would be lower than the U.S. average sales price.

Drug pricing priorities shift to legislation

On Feb. 4, 2020, in a move that signaled decreasing executive pressure on releasing the International Pricing Index draft rule, President Trump focused a portion of his State of the Union healthcare remarks on advancing congressional action to reduce high drug prices during 2020 but did not mention IPI. The IPI as proposed in 2018, would create a demonstration program linking Part B drug payments to an international benchmark price that would typically be lower than the U.S. average sales price, with the goal of lowering cost-sharing for patients.

Among numerous current federal healthcare bills aimed at reducing drug costs, two competing drug pricing bills are driving the broader drug pricing debate at the federal level. One has already passed in the House of Representatives in 2019, the Elijah E. Cummings Lower Drug Costs Now Act (H.R. 3), which would require direct federal government negotiation of certain drug prices through Medicare utilization of an average international pricing index. The second bill is the Senate’s Prescription Drug Pricing Reduction Act (S.2543) that has not yet been voted on by the full Senate, advanced by Senators Chuck Grassley (R-Iowa) and Ron Wyden (D-Oregon). This bill does not require direct drug price negotiation by Medicare but as currently written would require drug manufacturers to provide rebates to the government for drugs and biologics covered under Medicare Part B and D if their prices rise faster than inflation.

Many have speculated that the IPI has been largely advanced by the administration to pressure Congress into considering a more moderate compromise on drug pricing. Details of a potential release of an IPI draft rule remained tenuous throughout 2019 and into 2020. Indeed, Health and Human Services Secretary Alex Azar did not mention the IPI during his 2020 annual State of the Department Address on Feb. 6, 2020.  However, its potential release remains available as a lever to direct congressional priorities on drug pricing reform.

Implications and strategic considerations for life sciences companies

Regulatory timeframes likely limit the long-term prospects for IPI to be implemented, as any draft rule to be introduced will undergo formal public comment and will trigger an increase in advocacy opposition from providers and drug manufacturers worried about potentially large cuts to Medicare Part B payments. The longer it is delayed, the more likely any proposed IPI rule will be drawn squarely into political debate surrounding this year’s national elections. Its absence from the President’s State of the Union and the HHS State of the Department Address suggest that IPI will remain a tool to spur Congress versus a near-term reality impacting the healthcare industry. It is important to track IPI in relation to the current drug pricing legislation being considered by Congress as action to reduce drug prices remains a critical issue in this year’s elections. The outcome of those elections will have major implications for the future of U.S. healthcare policy for years to come.

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