Drug Price Interim Final Rule Order – Two Reasons It Is the Wrong Approach

The President, through the Centers for Medicare and Medicaid Services (CMS), issued an interim final rule after the election that finalizes his prior approach to dealing with the cost of prescription drug prices. It is called the Most Favored Nation approach and amended earlier EO’s, one of which used the term International Price Index. All of these EOs were attempts to lower drug prices by using the prices that foreign countries pay for specific Medicare Part B drugs. You can read some more background on these EOs or rule changes in some of my earlier blogs, here and here.

It only seems fair that we shouldn’t pay more than foreign countries for some prescription drugs, but this new regulation will set the price based on countries with single payer healthcare systems, where the government dictates who gets what medicine. The patients in these countries wait years for new medicines. Of the 74 cancer drugs launched between 2011-2018, 95% are available in the United States, compared with 74% in the UK, 49% in Japan, and 8% in Greece. These facts bring me to the first reason this is the wrong approach.

Foreign countries use many methods to negotiate lower prices, they lower competition by telling the competition that only one class of drug will be available in their country and that one will be the one with the lowest price. There’s no thought to those in their country who may do better on another drug in that class. They may even delay the entry of a particular drug, sometimes for long periods of times, until the manufacturer lowers the price. One of the ways governments dictate the rules and use of healthcare is through rationing, controlling patient access. If we import these foreign countries prices, we are importing their practices of price fixing, rationing, and controlling access. The Executive Order’s own language recognizes this fact. The first notice of this approach to lowering drug prices was released over two years ago with the promise that the new approach would operate “without any restrictions on patient access.” The government’s own advisory group, the Medicare Payment Advisory Commission, expressed doubts this could be accomplished without making some products unavailable to patients. The latest regulation finalized the government’s approach, with the actuary at CMS stating that their estimate is that 19% of the Part B drugs (the drugs that this EO targets) will be unavailable to the patients. The final recognition of denying access comes from the EO itself which states, “a portion of the [Medicare] savings is attributable to beneficiaries not accessing their drugs through the Medicare benefit, along with the associated lost utilization.” This approach saves money by denying access, which is one of the ways foreign countries save money. When we import their prices, we import their ways of doing business.

The second reason this regulation is the wrong approach focuses on a much larger and more troubling scenario, the use of healthcare proposals for political reasons. Why was this approach unveiled two years ago just prior to the med-term elections? Why was this again released in an unfinished state hoping for negotiations, two months before the presidential election and then finalized after the negotiations failed and then released after the election, by a lame duck President. Some have indicated that the release of this EO was solely as retribution for drug manufacturers not releasing the results of the vaccine trials until after the election. Whether these accusations are true or not, just the optics of the releases troubles me. Executive Orders, rule changes and legislation should only be done for the betterment of the American people. The timing of these actions leads one to conjecture that these actions were taken for political reasons. Do we want to give our government more control over our healthcare when we see these types of questionable actions?

There are many ways to make our healthcare more efficient and less costly, it’s my belief that giving more power to the government is not the path to either of these outcomes. I’m a believer in the free market with the umbrella of government oversight accomplished through the checks and balances established in our Constitution. Look how our country responded to the COVID-19 pandemic. I don’t think it’s a coincidence that the first company that completed successful COVID-19 vaccine trials and will most likely get the first emergency authorization, was one of a few, if not the only company, that didn’t take any government funds.

This proposal imports the methods of foreign countries that uses government controls to set prices and limit access. I think we need to rethink how to tackle this problem, because giving more power to the government is not the solution.

Best, Thair