KAISER HEALTH FOUNDATION
President Donald Trump repeatedly talks tough about reining in the pharmaceutical industry, but his administration’s efforts to lower drug prices are shrouded in secrecy.
Senior administrative officials met Friday to discuss an executive order on the cost of pharmaceuticals, a roundtable informed by Trump’s “Drug Pricing and Innovation Working Group.” Kaiser Health News examined documents that shed light on the workings of this working group.
The documents reveal behind-the-scenes discussions influenced by the pharmaceutical industry. Joe Grogan, associate director of health programs for the Office of Management and Budget (OMB), has led the group. Until March, Grogan served as a lobbyist for Gilead Sciences, the pharmaceutical company that priced its hepatitis C drugs at $1,000 per pill.
To solve the crisis of high drug prices, the group discussed strengthening the monopoly rights of pharmaceuticals overseas, ending discounts for low-income hospitals and accelerating drug approvals by the Food and Drug Administration. The White House declined to comment on the working group.
The group initially met May 4 in the Eisenhower Executive Office Building and has since met every two weeks. In addition to OMB, the working group includes officials from the White House National Economic Council, Domestic Policy Council, Health and Human Services, the FDA, the Federal Trade Commission, the Department of Commerce, the Office of the U.S. Trade Representative and the Department of Justice.
According to the documents — the latest of which is dated June 1— the working group focused on the following “principles” and “talking points”:
- Extending the patent life of drugs in foreign markets to “provide for protection and enforcement of intellectual property rights.” This will ensure “that American consumers do not unfairly subsidize research and development for people throughout the globe.”
Extending monopoly protections for drugs overseas has been one of the pharmaceutical industry’s top priorities since the Trans-Pacific Partnership was defeated last year.
That policy would push up global drug prices, according to Médecins Sans Frontières.
- Promoting competition in the U.S. drug market — both by “modernizing our regulatory and reimbursement systems” and limiting “barrier to entry, including the cost of research and development,” according to the documents.
The working group also discussed two broad policy ideas that have been championed by the pharmaceutical industry, according to sources familiar with the process:
- Value-based pricing, when pharmaceutical companies keep the list prices of drugs unchanged but offer rebates if patients don’t improve. It’s unclear who would audit the effectiveness of the drugs, what criteria they would use to evaluate them and who would receive the rebates. Grogan invited Robert Shapiro — an adviser for Gilead and former secretary of Commerce under President Bill Clinton — to brief the working group on value-based pricing on May 18. Shapiro is the chairman and co-founder of Sonecon LLC, a Washington, D.C., firm that consulted with Gilead, Amgen and PhRMA, according to his curriculum vitae.
- Grogan and Shapiro also discussed issuing 10-year U.S. Treasury bonds to drug manufacturers to pay for expensive, hepatitis C drugs like Sovaldi and Harvoni under Medicare and Medicaid, to avoid rationing drugs to the sickest patients. The 2015 Senate investigation, for example, found that though Medicaid spent more than $1 billion on Sovaldi, just 2.4 percent of Medicaid patients with hepatitis C were treated.
After the working group’s first meeting on May 4, Grogan distributed detailed policy recommendations on expediting generic drug approvals, creating a new tax credit “of up to 50 percent” for investments in generic drug manufacturing, distribution and research and development. The documents also propose scaling back the 340B program, which requires drug manufacturers to provide some medicines at a discount to hospitals that treat low-income patients.
Most of these policies would not ease patient costs, and at least one would increase prices, say experts who reviewed the documents at the request of Kaiser Health News.
“This six-page document contains the kind of solutions to the cost-of-drugs problem that you would get if you gathered together all the executives of pharma and asked them ‘What sort of token gestures can we do?’ ” said Vinay Prasad, a professor of medicine at Oregon Health and Sciences University who studies the costs of cancer drugs.
The pharma-friendly recommendations appear to clash with earlier press reports indicating that OMB Director Mick Mulvaney was considering requiring drugmakers to pay rebates to Medicare patients, a measure the pharmaceutical lobby fiercely opposes.
Brand-name drug prices — which account for 72 percent of drug spending — go untouched in the handouts, said Fiona Scott Morton, a Yale economics professor and former attorney with the Justice Department’s antitrust division.
“The changes to generic markets to promote competition look helpful, but there need to be some more ideas to create more competition for branded drugs or consumers aren’t really going to notice this,” Scott Morton said.
Some of the text in the document is cribbed directly from policy papers published by the pharmaceutical industry’s powerful lobby — Pharmaceutical Research and Manufacturers Association (PhRMA).
Under the subtitle, “Encourage Use of 21st Century Tools for Drug Evaluation, Review and Approval,” one handout proposes the FDA use less rigorous clinical trial standards to speed drug approvals.
The handout cites a PhRMA paper from March 2016 that includes an identical subtitle, “Encourage Use of 21st Century Tools for Drug Evaluation, Review and Approval,” and recommends the FDA implement less rigorous clinical trial standards.
These recommendations would not lower drug prices, experts say.
Such measures “would be like a firefighter spraying gasoline on your burning garage,” Prasad said.
Another section — which recommends giving the FDA more discretion to evaluate generic copies of complex drugs — closely resembles a National Law Review article written by two lobbyists in the pharmaceutical division of Foley & Lardner, whose clients include generic drugmakers.
The handouts further recommend allowing drugmakers to supply data and off-label information to insurers and pharmacy benefit managers during the clinical trial period, before they secure FDA approval.
That’s a “terrible idea,” said Jerry Avorn, a professor at Harvard Medical School and the chief of the Division of Pharmacoepidemiology and Pharmacoeconomics at Brigham and Women’s Hospital. “That’s why we have the whole approval process, to determine what’s actually true,” he said.
KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.
Kaiser Health News, a nonprofit health newsroom whose stories appear in news outlets nationwide, is an editorially independent part of the Kaiser Family Foundation.