While pharmaceutical innovation has resulted in treatments—and in some cases, cures—for debilitating diseases, high prescription drug prices have precluded access for many people in the U.S. This fall, Congress and the administration are poised to consider many policies to reform the prescription drug market and reduce prices paid by consumers as well as public and private payers. During this briefing, panelists discussed components of policy proposals under consideration and explored evidence about their implications for the health care system.
Kirsten Axelsen, M.S.
Visiting Fellow, American Enterprise Institute
Kristi Martin, M.A., MPA
Senior Vice President, Waxman Strategies
James C. Robinson, Ph.D., MPH
Leonard D. Schaeffer Endowed Chair in Health Economics and Policy; Director, Berkeley Center for Health Technology; Division Head, Health Policy & Management, UC Berkeley School of Public Health
Lovisa Gustafsson, MBA
Assistant Vice President, The Commonwealth Fund (Moderator)
This event was made possible by The Commonwealth Fund.
12:00 p.m. – 12:10 p.m. Welcome and Introductions
- Sarah J. Dash, MPH, President and Chief Executive Officer, Alliance for Health Policy
- Lovisa Gustafsson, MBA, Assistant Vice President, The Commonwealth Fund
12:10 p.m. – 12:45 p.m. Panelist Opening Remarks
- Kristi Martin, M.A., MPA, Managing Director, Waxman Strategies
- Kirsten Axelsen, M.S., Visiting Fellow, American Enterprise Institute
- James C. Robinson, Ph.D., MPH, Leonard D. Schaeffer Professor of Health Economics and Director, Berkeley Center for Health Technology, University of California at Berkeley
12:45 p.m. – 1:30 p.m. Question and Answer Session
Key Resources (listed chronologically, beginning with the most recent)
“Chart: Key Provisions of Proposals on Drug Price Negotiation, Inflation Rebates, and Medicare Part D Redesign.” Wynne Health Group. September 27, 2019. Available at http://allh.us/86fD.
“Looking Ahead: Policy Options for Addressing High Drug Prices.” Gustafsson, L. To The Point (blog). The Commonwealth Fund. July 30, 2019. Available at http://allh.us/vmhY.
“Use Real-World Data, Not International Reference Pricing, to Set US Drug Prices.” Axelsen, K. AEIdeas (blog). June 25, 2019. Available at http://allh.us/m4UQ.
“How Drug Prices Are Negotiated in Germany.” Robinson, J., Ex, P., and Panteli, D. June 13, 2019. To The Point (blog). The Commonwealth Fund. Available at http://allh.us/mYV8.
“Getting to the Root of High Prescription Drug Prices.” Waxman, H., Corr, B., and Martin, K. The Commonwealth Fund. July 2017. Available at http://allh.us/9vu4.
Additional Resources (listed chronologically, beginning with the most recent)
“Considerations for Expanding International Reference Pricing Beyond Medicare Part B.” Adler, L., Lieberman, S., Linke Young, C. et al. Health Affairs Blog. September 9, 2019. Available at http://allh.us/xRrd.
“Medicare Price Negotiation—Why Now…and How.” Frank, R. and Nichols, L. The New England Journal of Medicine. September 4, 2019. Available at http://allh.us/gy8Q.
“Trends in Retail Prices of Prescription Drugs Widely Used by Older Americans: 2019 Year-End Update.” Schondelmeyer, S. and Purvis, L. AARP Public Policy Institute. September 2019. Available at http://allh.us/qpDC.
“The Economics of Biologic Drugs.” Brill, A. and Ippolito, B. Health Affairs Blog. August 8, 2019. Available at http://allh.us/tcWY.
“Senate Finance Committee Proposes Reforms to Medicare and Medicaid Drug Policy.” O’Neill Hayes, T. American Action Forum. August 6, 2019. Available at http://allh.us/4BY8.
“What’s the Latest on Medicare Drug Price Negotiations?” Cubanski, J., Neuman, T., True, S., et al. Kaiser Family Foundation. July 23, 2019. Available at http://allh.us/C9rX.
“Setting the Record Straight on International Reference Pricing.” Haninger, K. The Catalyst (blog). Pharmaceutical Research and Manufacturers of America. July 16, 2019. Available at http://allh.us/x7VG.
“CMS’s International Pricing Model for Medicare Part B Drugs: Implementation Issues.” Lieberman, S. and Ginsburg, P. Health Affairs Blog. July 9, 2019. Available at http://allh.us/AeWR.
“Sending the Wrong Price Signal: Why Do Some Brand-Name Drugs Cost Medicare Beneficiaries Less than Generics?” Dusetzina, S., Jazowski, S., Cole, A., et al. Health Affairs. July 2, 2019. Available at http://allh.us/TuVc.
“Reconciling the Seemingly Irreconcilable: How Much are We Spending on Drugs?” Kleinrock, M., Westrich, K., Buelt, L., et al. IQVIA Institute for Human Data Science and The National Pharmaceutical Council. July 2019. Available at http://allh.us/tA6w.
“Medicare Part D: Use of Pharmacy Benefit Managers and Efforts to Manage Drug Expenditures and Utilization.” GAO Highlights. July 2019. Available at http://allh.us/YTdC.
“Here’s How We Can Control Drug Costs While Spurring Innovation.” Goldman, D. The Hill. June 14, 2019. Available at http://allh.us/ra8G.
“Prescription Drug Pricing: Striking the Right Balance.” Haislmaier, E. and Owcharenko Schaefer, N. The Heritage Foundation. June 7, 2019. Available at http://allh.us/xGbk.
“Six Drug Pricing Models Have Emerged to Improve Product Access and Affordability.” Comer, B. PwC. May 29, 2019. Available at http://allh.us/cqpm.
“Improving Drug Pricing Transparency and Lowering Prices for American Consumers.” Holtz-Eakin, D. American Action Forum. May 21, 2019. Available at http://allh.us/PFCh.
“Is Arbitration an Answer for High Drug Prices?” Rother J. To The Point (blog). The Commonwealth Fund. May 3, 2019. Available at http://allh.us/KvR8.
“Pharmacy Benefit Managers and Their Role in Drug Spending.” The Commonwealth Fund. April 22, 2019. Available at http://allh.us/nj4h.
“Biologics Are Natural Monopolies: Why Biosimilars Do Not Create Effective Competition.” Atteberry, P., Bach, P., Ohn, J., et al. Health Affairs Blog. April 15, 2019. Available at http://allh.us/VkdU.
“The Gross-to-Net Bubble Reached a Record $166 Billion in 2018.” Fein, A. Drug Channels. April 3, 2019. Available at http://allh.us/BxFJ.
“A Closer Look at International Reference Pricing for Prescription Drugs.” Capretta, J. RealClearPolicy. March 29, 2019. Available at http://allh.us/p4fB.
“Single-Payer Drug Pricing in a Multiplayer Health System: Does Germany Offer a Model for the US?” Robinson, J., Ex, P., and Panteli, D. Health Affairs Blog. March 22, 2019. Available at .
“Prices for and Spending on Specialty Drugs in Medicare Part D and Medicaid.” Congressional Budget Office. March 2019. Available at http://allh.us/UK3V.
“What Medicare Can Learn from Other Countries on Drug Pricing?” Roy, A. The Foundation for Research on Equal Opportunity. January 11, 2019. Available at http://allh.us/hAC3.
“The Contribution of New Product Entry Versus Existing Product Inflation in the Rising Cost of Drugs.” Hernandez, E., Good, C., and Gellad, W., et al. Health Affairs. January 2019. Available at http://allh.us/qkMP.
“Balancing Innovation and Competition in the Biologics Marketplace.” Korn, D. The Catalyst. Pharmaceutical Research and Manufacturers of America. October 11, 2018. Available at http://allh.us/HCrk.
“Understanding the Drivers of Drug Expenditures in the U.S.” QuintilesIMS Institute. September 2017. Available at http://allh.us/aUx4.
“Rising Costs for Patented Drugs Drive Growth of Pharmaceutical Spending in the U.S.” Blue Cross Blue Shield. The Health of America Report. May 3, 2017. Available at http://allh.us/gCTk.
“Fact Sheet: How Much Money Could Medicare Save By Negotiating Prescription Drug Prices?” Committee for a Responsible Federal Budget. April 11, 2016. Available at http://allh.us/4Kqx.
|Kirsten Axelsen||American Enterprise Institute, Visiting Fellow
|Lovisa Gustafsson||The Commonwealth Fund, Assistant Vice President|
|Kristi Martin||Waxman Strategies, Managing Director|
|James C. Robinson||University of California Berkley, Leonard D. Schaeffer Professor of Health Economics and Director of Berkeley Center for Health Technology|
Experts and Analysts
|Gerard Anderson||Johns Hopkins University Center for Hospital Finance and Management, Director and Professor of Health Policy and Management
|Juliette Cubanski||Kaiser Family Foundation, Associate Director of the Program on Medicare Policy
|Stacie Dusetzina||Vanderbilt University Medical Center, Associate Professor of Health Policy and Ingram Associate Professor of Cancer Research
|Adam Fein||Drug Channels Institute, Chief Executive Officer|
|Lance Grady|| Avalere Health, Vice President of Market Access and Reimbursement
|Tara O’Neill-Hayes||American Action Forum, Deputy Director of Health Care Policy
|Jack Hoadley||Georgetown University Health Policy Institute, Research Professor Emeritus
|Benedic Ippolito||American Enterprise Institute, Research Fellow in Economic Policy Studies
|Elizabeth Jungman||The Pew Charitable Trusts, Director of Public Health Programs
|Mark Miller||Arnold Ventures, Executive Vice President of Health Care|
|Ameet Sarpatwari||Harvard Medical School, Instructor in Medicine; Brigham Women’s Hospital, Assistant Director of the Program on Regulation, Therapeutics, And Law in the Division of Pharmacoepidemiology and Pharmacoeconomics in the Department of Medicine
|Avalere Health, Senior Vice President of the FDA Practice
|Anna Abram||U.S. Food and Drug Administration, Deputy Commissioner for Policy, Planning, Legislation and Analysis|
|John Brooks||U.S. Department of Health and Human Services, Senior Adviser to the Secretary for Drug Pricing Reform
|John Coster||Center for Medicaid and CHIP Services, Director, Division of Pharmacy
|Kate Goodrich||Centers for Medicare & Medicaid Services, Chief Medical Officer and Director of the Center for Clinical Standards and Quality
|Paul Masi||Medicare Payment Advisory Commission, Assistant Director
|Lauren Aronson||Campaign for Sustainable Drug Pricing (CSRxP), Executive Director
|Holly Campbell||Pharmaceutical Research and Manufacturers of America, Deputy Vice President of Public Affairs|
|Robert Dubois||National Pharmaceutical Council, Chief Science Officer and Executive Vice President
|Pharmaceutical Care Management Association, Vice President of Federal Affairs
|Eleanor Perfetto||National Health Council, Senior Vice President of Strategic Initiatives
|OptumRx, General Counsel of Policy and Regulatory Affairs
|Leigh Purvis||AARP Health Policy Institute, Director of Health Services Research
|Murray Ross||Kaiser Permanente Institute for Health Policy, Director|
|Lori Shoaf||Blue Cross Blue Shield Association, Managing Director of Federal Relations|
|Judith Stein||Center for Medicare Advocacy, Executive Director
(This is an unedited transcript. For accurate quotes and presentations, please refer to the full-event video.) SARAH DASH: Well, good afternoon, everybody. Oh, the energy in this room is amazing already, I love it. Thank you for joining us on this week when absolutely nothing of substance is going on. We appreciate you joining us today. My name is Sarah Dash, I’m President of the Alliance for Health Policy, we’re thrilled to be here in partnership with the Commonwealth Fund to bring you today’s briefing on unpacking policy options to promote prescription drug affordability. For those who don’t know, both the Alliance and the Fund are a non-partisan organizations. The Alliance is dedicated to advancing knowledge and understanding of health policy issues such as the one today. We don’t advocate for any policy or regulatory solutions, we are here to just do our best to give you the information. So as we wrap up a week that was full of hearings, legislation, and — and reports, on the subject of prescription medicines. Today’s panelists are going to discuss components of policy proposals under consideration and explore evidence about their implications for the healthcare system. Thank you, I apologize. All right, so I’m going to go over a couple quick housekeeping notes and then introduce our moderator for today and our panel. So a couple of quick housekeeping notes before we begin: If you like to tweet, you can follow us today using the hashtag #allhealthlive, and then after our panelists give their opening presentations, you will all have an opportunity to ask questions. We encourage audience participation and questions. There are going to be several ways for you to do that. You have green question cards in the middle of your tables, and you can write your question down and a member of the Alliance team will come around and pick it up. Or you can walk up to one of those two mics on either side of the room, or if you can’t get to it, raise your hand and one of us will come over to you with a hand mic, so you can ask your question. And finally, before you head out into the beautiful afternoon today, please do fill out a blue evaluation form before you go and return it to our staff at the registration table. So now I’m so pleased to introduce our moderator and our panel — for today’s panel. The moderator today will be Lovisa Gustafsson who is Assistant Vice President at the Commonwealth Fund. Prior to joining the Fund, Lovisa held positions with the Marwood Group, McKesson, Kaiser Permanente, the Massachusetts Office of Medicaid, and Avalere Health. So she has a breadth of knowledge to bring to today’s conversation. We will also hear from an expert panel of speakers on today’s topic. Kristi Martin is Managing Director of Waxman Strategies where she leads their healthcare practice. Prior to joining Waxman, Kristi was a Senior Advisor in the Office of Health Reform at HHS. Earlier in her career she held positions in the U.S. Office of Personnel Management, (indiscernible) and the GIO, as well as American Cancer Society, and Eastern Seals. Next we’ll hear from Kirsten Axelsen. Kirsten is a visiting fellow at the American Enterprise Institute where she focuses on domestic and international pharmaceutical drug policy. Prior to joining AEI, Kirsten worked for Pfizer for almost 20 years and as Vice President for Strategy and New Business Assessment and Pfizer’s Innovative Health and Essential Health Units, her work included the oversight of business development evaluations in the field of rare disease, oncology, inflammation, immunology and primary care. Finally, I am very pleased to introduce James Robinson, who is a Leonard D. Schaeffer professor of health economics and Director of the Berkeley Center for Health Technology at University of California, Berkeley. He has published three books and over 140 papers and peer reviewed journals such as the New England Journal of Medicine, JEMA and Health Affairs. He teaches classes on public policy, health insurance, and the economics of the life sciences industry. So we’re thrilled to have you all here, thank you. And without further ado, I will now turn it over to Lovisa. LOVISA GUSTAFSSON: Well, thank you everyone for joining us today. I’m going to start off with a few remarks, just a little bit of context for why drug pricing and drug spending overall is such a hot issue right now for policymakers as well as for the public. So increases in prescription drug spending and prices in particular are contributing to unsustainable healthcare costs in the United States with negative impacts for patient affordability, for Medicare and state budgets, as well as for employer’s bottom lines. Spending on retail drugs in the U.S. grew 275 percent from 2000 to 2017. That’s 121 billion to 333 billion. Drug spending is an issue for all payers, both public and private, although we have seen the most growth in the public sector, especially after the implementation of Part D in 2006, when for the first time, Medicare started covering outpatient prescription drugs. In Medicare, drug spending has been growing very quickly at over 10 percent per year, both in Medicare Part D, which covers outpatient, as well as in Medicare Part B, which covers physician administered drugs such as chemotherapies. This increase in spending offsets the savings efforts that we’ve seen at other parts of Medicare, such as reducing hospital stays. While rising drug utilization is a product of many factors such as population growth, an aging population and chronic disease burden, recent drug spending growth has largely been due to high prices and a lack of competition. This is the result of expensive new drugs and biologics coming to market, excessive unjustified price increases of existing products, and fewer patent expirations due to patent evergreening that leads to monopolies beyond intended or justified timeframes. Specialty drugs are a primary driver of drug spending. From 2013 to 2016, per capita, specialty drug spend increased by 55 percent. In the coming years, spending is expected to be exasperated even further with higher cost drugs, biologics and gene therapies coming to market that will carry price tags higher than what we’ve seen so far. As a result of this increase in drug prices, consumers are having a hard time affording their medication. Almost one-fifth of the under 65 year old adults didn’t fill a prescription due to cost and each year more and more Medicare beneficiaries are hitting catastrophic threshold, indicating they have very high out-of-pocket spending. At the end of the day, the public wants to see action on this issue. They overwhelmingly think that prices are too high and close to half list lowering drug costs in the top priorities for improving healthcare regardless of political party. Beyond government payers and patients, employers have difficulty affording the cost of insurance for their employees due to rising healthcare costs. It’s impacting their bottom lines and reducing the wages that they are able to pay their employees. In the report we recently published by one of our grantees, the cost of providing healthcare coverage was a top problem that small business owners reported when we asked them what their top two biggest business concerns were. This was more than attracting new customers and more than the cost of doing business. And very relevant to today’s conversation, the biggest challenge they face regarding providing health coverage to their employees was the rising cost of prescription drugs. They feel this both directly in terms of the premiums that it costs to cover their employees, as well as indirectly in the struggles they see their employees go through to afford the drugs that they need. Throughout the Commonwealth Fund, we’re working in a number of areas with the goal of getting to rational drug pricing that assures accessibility and affordability while still rewarding innovation. First, we need to incorporate value. Currently, we don’t know if the prices that are in the market actually reflect the value that the drugs provide. Launch prices need to reflect the clinical value that they provide patients. Second, the prescription drug market needs to be more competitive, so that market forces can bring down prices over time. This includes ending patent evergreening and eliminated unwarranted patents. We also need to make easier for companies to produce and bring to market generic drugs and biosimilars. So with that, I would like to turn it over to Kristi. KRISTI MARTIN: Can you guys hear me? Okay. So Lovisa did a very nice job laying out why this is such an issue and why people are so worked up about it. And it’s not just from a voter standpoint. We know healthcare was the top issue coming out of the 2018 elections, but it’s also a major issue that a lot of people want to take on here on the Hill, on both sides of the aisle. And I think because it’s a kitchen table issue when it comes down to it. You know, everyone needs drugs at one point or another. Most of the time it’s during the year, somebody needs drugs. Most people are on drugs on a daily basis, and so how do we make those drugs affordable? So I want to spend a little bit of time just kind of walking through what is causing the cost of some of these drivers and how did we get here? And so first I think it’s a really important point to note that Congress created this marketplace. That they shaped it along the way. And so this really started in the ‘80s with Hatch Waxman Act, which created the generic drug market and provided a set of incentives to the FDA to support innovation and reward companies for bringing innovative new products to market by protecting their monopoly, so that they could recoup their costs for R&D. Along with the Orphan Drug Act, it was known that there was not a lot of therapies out there for rare diseases, so Congress intended for — put together some incentives that would encourage companies to go and look for cures for these diseases and effective treatments. Then we moved on into the coverage phase and we were expanding coverage. So first we provided incentives to help balance innovation with affordability, then we moved on to expanding coverage. First with Medicaid by providing the Medicaid drug rebate program, so drugs were affordable in the Medicaid program, and Medicaid beneficiaries. Then we expanded with Part D so that seniors could have access to retail pharmacy, and finally the Affordable Care Act where we required it to be essential health benefit for most health insurance plans. And we’re still working on creating the right incentives. 21st Century Cures was the latest major bill where we working on ensuring that there were the right incentives in place for innovation. So when you think about drug pricing as an issue, or the pharmaceutical markets, you really have to think about what Congress’s role has been along the way, and their role has really shaped how these markets function, what the incentives are, and how do we get to affordably? And so, Lovisa talked a little bit about this, but I know that Congressman Waxman, when he was working with Senator Hatch at the time in the ‘80s to really think about how do we create the right incentives. They were thinking about how do you balance these incentives for innovation with affordability. And so one of those was to make sure that there was appropriate price competition coming to the market at a point in time when we thought brand names would be recouping all their costs for R&D, and would be rewarded for their return on investment. And so it’s always been a balance. It’s always been a difficult balance. And I think we’re at a point now where this is — this balance is really off-kilter and we need to really think about like, how do these incentives and line up with these affordability needs. And so, I’m supposed to talk a little bit about the policy in play and what’s going on, so I just want to do a quick recap of what the administration is doing. They’ve been very active the last few years, leading with Dr. Gottlieb at the FDA who’s recently left the FDA this year, but he had a lot of activities that were focused on how to basically correct market issues, right? Where we have sole source markets and we weren’t having competition come in. Where there were anti-competitive behaviors. And so he was really thinking about how to correct these markets when they are out of balance. And so a lot of activities at the FDA has been undertaking has been focused on those areas. HHS and CMS has been putting forth some other issues and other programs to think about how do we have more responsible purchasing within our programs. And so one of those was the International Payment Index Model that was put out at an ANPRN last year. It is over at OMB right now for review. But that was looking at under the Part B program, how are we reimbursing for drugs and are we reimbursing an appropriate rate? And that model was intending to use international reference prices to set reimbursement payment in Medicare Part B. And so we’re seeing a lot of interest at that level, but also here on the Hill. And so when the Waxman group kind of thinks about areas where there could be bipartisan reform, especially in this Congress. We kind of put it into seven different categories. The first category is really about anti-competitive behaviors that are delaying or prohibiting price competition such as generics and biosimilars and interchangeable biologics from coming to market and competing. The second is, how do we get biosimilars and generics approved faster through the FDA, especially when there is a sole source market, but there is not any market protection for the brand name. How do we encourage appropriate state policy innovation? So how do we help states figure out how they can make sure that drugs that they need for their Medicaid program, for corrections, for their state employee health program, is affordable, so that they can provide access to all the medicines that their benefit — that their constituents need. The fourth is giving the federal program, such as Medicare, tools to negotiate. Tools to figure out how to better reimburse, or more appropriate reimburse for drugs. The fifth is reforming the incentives in the supply chain and increasing transparency. I think this is probably — I’ll talk a little bit more about this in a moment, but probably one of the trickiest issues, because I feel like for most people, the supply chain is a black box. And there is a lot of players within that black box, and it’s not very clear on what player’s roles are, and what they are contributing to the drug spending issue and the drug pricing issue. The sixth is rethinking government funded drug development. NIH does a lot of work where they are supporting basic research and drug development, but they are not the only ones — DOD, Department of Energy, there is a lot of other federal agencies that are contributing to the space, and so really thinking about how do we best use those funds to advance innovation. And the last is reforming monopoly protections. And we really mean patents here, which is probably the toughest issue to take on, because once you start thinking about patents — sorry about that — other industries start to come to the table, especially tech companies where their patents are a very important policy issue for them as well. And so just looking at the House bills in play, we have ENC and Ways and Means that have put out bipartisan legislations, already made through their committee process earlier this year. A lot of these were focused on anticompetitive behavior reforms, as well as improving transparency in our drug system. And then we just had last week, committee leadership put out a bill that would reform Part D as well as introduce Medicare negotiation. And pretty comprehensive program. Then we have the Senate bills that are in play. So we have judiciary that did their markup of a set of bills that were really about getting to some of the patent abuses that are going on, product hoping, issues around how they are misusing patents to hold on to monopolies much longer than Congress had originally intended. We have the Help Committee Bill that was focused on anticompetitive behaviors and transparency and enhancing PBM reporting for group health plans. And then lastly, which we just saw a bill text for this week, is Grassley-Wyden Bill coming out of Senate Finance, which was looking at modernizing Part D, includes some of the same elements that are in the House Leadership Bill with the exception of Medicare negotiation, and it’s really focused on how do we improve the program integrity and accountability in our federal health programs that are paying for drugs. So with that, I’ll just say that one of the things that we kind of see across all of these bills is this focus on transparency, program integrity, and controlling costs. And I think it’s very important to think through the drug pricing crisis that we’re in. It’s really — does the policy control cost? Reduce cost? And by that I mean cost to the beneficiary, cost to the system? Does it focus on reducing overall spending? So spending in the system, spending for Medicare and the program taxpayer dollars? Or does it address crisis? And I think a lot of the proposals that you’re seeing are really focused on cost in spending, but I think we’re very concerned about what do they do about pricing strategies, and for example, inflation-based rebate penalty in Medicare is in both the Grassley-Wyden Bill, but also the House Leadership Bill. And if you have that, I think there is a concern that if you just have that proposal alone without having some type of price containment on launch prices, that we could end up with higher launch prices, because they won’t be able to increase price over time. So I think it’s just trying to think through, how do all of these proposals really address those three issues: Spending, cost, and price. And the last thing I just want to say, and I think this gets back to Lovisa’s point and some of the issues that the Commonwealth has been thinking through is, you know, these reforms for the most part, there’s a couple of key missing areas. One of them is, it doesn’t really address what do we do about these new treatments coming to market, and how do federal health programs afford them? So when there’s a $2.2 million treatment, how does the State Medicare Program afford that? And that’s where the drug pricing debate really started, was around Sovaldi and how does a state government afford that for their beneficiaries and their patients? The second is solving the launch price issue and the third is what are we doing about the supply chain and thinking through issues of the wholesaler, specialty pharmacies, PBMs. How do all of the Senate incentives line up within that system to encourage higher prices and how can we change those incentives so that they’re focused on helping to make sure drugs are affordable? KIRSTEN AXELSEN: Hi, I’m Kirsten Axelsen, I’m a visiting fellow with the American Enterprise Institute. I’ll begin by saying, my views are my own. I don’t represent the — there’s not one position at the American Enterprise Institute that I’m here representing today. So I’m going to talk a bit about — having had the perspective of working in a biopharmaceutical company for 20 years and also being an economist, I’m going to talk a bit about some of the proposals that Kristi set us up with, and what I think the implications are going to be, both for patients today and into the future and look at some of the different options. I think we can start with fairly non-controversial common group. I hope. Which, living longer is generally a good thing. Most people want to do that and they want to live longer and better. I think we also have to have a realistic conversation that living longer, keeping old people alive longer is going to cost money. And people are living longer and the dramatic declines in cardiovascular disease means that we have more people now living with cancer, living with Alzheimer’s disease, typically past the age where they’re bringing in income. And it is costly to keep people alive. There are more cost effective ways to do it, but it is just part of our dynamics and demographics that we are going to be spending more money on healthcare over time. And the trick is to figure out how do you balance, so that you’re using the most efficient, effective, and pleasant form of healthcare that you can possibly do for people, whether it’s a hospitalization, a drug, or making sure that they have the nutrition and the social support that they need to stay healthy. Prescription drugs and everything from vaccines for children, up to chronic care medicines have been tremendous contributors to reducing mortality rates in this country. Think a bit about spending in context. While yes, spending on healthcare overall is going up, and going up faster than our economic growth, spending on drugs has lagged spending on other parts of healthcare. That doesn’t mean there’s not a problem. There is a problem. There are people out there who have serious illnesses, where there is not a generic option available and they can’t afford their medicines. And I’m going to focus on some of the things that I think would help address that population in particular. You know, I also think we have to realize that we’re not going to be able to — the criticality of sustaining the benefit that drugs bring. We’ve seen cardiovascular mortality go down by 30 percent in the last several decades. We see the cost of medicines to treat cardiovascular disease drop by 90 percent in many cases, including the statins and blood pressure reducers. The cost of angioplasty has gone up at the same time. And so ideally you would have a situation where you would have more people using preventative care earlier and avoiding these costly conditions. Cost is a part of it, but I also want to say, even with almost every statin being generic and being available at a co-pay often just a few dollars, about 50 percent of people quit taking their statin after a year. So we have to really think about approaches to get people to adhere to treatment that go beyond the co-pay. The co-pay is important, but we also have to support people with the behavioral nudges and the right care that they need. Unfortunately prevention has not proven to be particularly cost effective writ large. And so we can’t really count on people taking care of themselves within the current system where things are quite siloed and you’re getting probably not the full support that you need at every part of your care. So we talked a bit about the policy and the legislative history that’s gotten us to where we are. I’m going to speak a little bit about the reality that providers, the drug companies, and the insurers and the payers — payers of insurance are experiencing right now. We have policy that’s largely built on the drugs that were in the market 20 years ago. For example, the structure of Medicare Part D was done when there were very few higher cost medicines. And there were multiple options in chronic disease categories. So if you had a multi-tier copay and one drug cost $10 and one drug cost $60, if you didn’t want to pay the $60, you could go to a cheaper drug. If you have rheumatoid arthritis and you’ve already cycled through your lower cost drugs and your co-pay is several hundred dollars and you don’t have it, you don’t have a choice. Your choice is to walk away from treatment and too often we’re seeing that. At the same time, we see providers largely still compensated on fee-for-service, often compensated based on a percentage of the list price of the drug, not the discounted price of the drug. As much as there is promise and moving towards more coordinated models and paying for outcomes, that’s still been slow to materialize in part because the data is not there to support it. And we have patients who are facing higher co-pays and higher cost sharing. The — we really have a bit of an obsession with premium. The premiums have stayed low in Medicare Part D. The premiums have been largely held down on the exchanges, but at the same time, the cost sharing has gone up. So we see people having more unpredictable expenses, when you might argue that the point of insurance is to make your expenses more predictable. Again, I will raise some things at the end that might make that more predictable for patients. As an example, when we look at prescription abandonment for people taking oral anti-cancer agents — these are pills as opposed to injections. You know, once the costs get up to several thousand dollars, people walk away from their cancer treatment. Now they may be getting it from the drug company at a discount, or at another forum, but it is not uncommon with high deductibles. You can bring the cost of these drugs down, but the co-pay is still going to be several hundred, even several thousand dollars if you’re in a high deductible health plan or a plan where you have co-insurance. This is looking at the total cost of care for someone. That peak is the month of their diagnosis of cancer. So roughly 20 percent of their expenses are going to be for drugs over the period of time where they are treating their cancer. So you see, this is an example of the patient population that is insured with employer insurance. In the month you’re diagnosed with cancer, your out-of-pocket costs are $1200. And that includes your hospitalization, your outpatient care. That’s a lot for anyone to shoulder. And these are people who have good insurance. So just sort of imagine where a lot of the anger is coming from the month you get diagnosed with cancer, you’re also hit with a huge expense bill to manage in addition to everything else you’re dealing with. And as a result, you know, prescription medicines are among the top financial concerns for cancer patients. So is transportation, diagnostic tests. I think we really have to be thinking about solutions that deal with the problem for patients across their expenses. The drugs, absolutely. But also across the different expenses, because just dealing with the drugs in isolation isn’t really going to resolve the financial concerns that especially very sick people are dealing with. I think are some of the directions that we’ve seen both in the House and in the Senate and coming from MedPac, on how to deal with prescription drug costs. I’m going to talk a bit about what I see as some of the implications of these. You know, price controls, whether they be in the form of reference pricing internationally, or other types of price controls, will affect the supply of treatments. That said, more transparency around the pricing certainly. I mean, even just simply — you know, if we’re worried about list price because people’s co-pays and co-insurance are tied to it, there are simpler ways of doing it than state by state solutions where they are publishing list prices. I mean, the list price is publicly available information. We could easily see a monthly list of people who’ve raised their price more than 200 percent and shine the light on them. It would be less bureaucratic and less administratively complex. I think passing through the rebates is helpful, so that the people are seeing the discounts the drug companies are providing at the point of sale. Helpful, but not sufficient, because not every drug has a rebate. And in reality, the co-pay should be predictable and I believe not tied to the price of the medicine, so you see the fluctuation. The co-pay should be based on what’s affordable and what we want the patient to do. You know, evidenced-based pricing, organizations such as ICER, or private organizations, I think, looking and evaluating drugs is absolutely important. In fact, there’s even more evidence-based pricing organizations. At launch, we have the worst information we’re ever going to have about a drug. So for anyone to say they can do a value-based price for a new drug, they’re wrong, including the drug company. There is no good way to set the price for a drug at launch. There is a good way to stop the drug from coming to launch, which is by setting an artificially low price. So I think we need to think about getting the drugs into the market and collecting better information about them so that the price can be constantly scrutinized. And there should be more ICERs, there should be more organizations looking at these drugs, looking at the effect of them when they’re in market, how they work in men versus women, in different socioeconomic groups, and seeing whether they really are bringing the value to patients that we need them to. A clinical trial is an incredibly artificial setting, and while it’s a good start and it gets the drug approved on safety and efficacy, it’s really not the best way to measure the value of the drug. Talked a bit about patient cost-sharing already, so thinking about high-cost drug management, the Medicare benefit, as was designed, there weren’t a lot of specialty drugs. I think we definitely need to move towards reforms that put more of the risk and the cost for the drug onto the insurance plans and the drug companies in the catastrophic coverage zone. Right now there’s not a lot of incentive to negotiate for high-cost drugs, because the government covers the cost overruns for the higher cost drugs. At the same time, the patients need to see some of that relief so that their out-of-pocket cost is going down to something that’s affordable where they won’t walk away. And finally, moving towards a system where we are paying for outcomes, or we’re looking more at capitated payment models, where all the services are brought under one model where health plans, insurers are really encouraged to tradeoff between different types of care. I mean, right now, with drugs and everything else being in a silo, you can’t really save money or — there’s very little benefit to encouraging preventative care on the drug side in order to save on hospitalization. I think all providers need to be encouraged and share in the benefit of avoiding costly events for patients. And with that I’m going to go ahead and stop because I’m out of time. I just put that final slide up on the screen. So thank you. JAMES ROBINSON: Thank you. I’m pleased very much to be here and share some of my thoughts and from based on research. We are in this very remarkable moment in pharmaceutical policy debates where there are some very large ideas swirling around out there. Ideas that were once rather marginal to the policy discussion and they have to do something with — about comparative clinical analysis, about evidence-based pricing, value-based pricing, about what was the relationship — what should be the relationship between prices in the United States and prices in other wealthy countries? And how should we think about price changes or price increases over time? These are all big ideas and complex and I think there is a legitimate question: Can this work? I mean, even if this was passed, would this work? What would it mean? And so I’m going to share some experience from one other major country, Germany, who does this with a fair amount of success. And I’m going to define what that means, but before I even get into that, I want to say sort of as a preamble, I am not advocating that the U.S. import the German system of drug pricing and drug evaluation, that’s not the goal. Or that of any other country. Rather, my perspective is, United States needs to improve — we need to improve our system of drug evaluation, price negotiation over time, so that we don’t have to import drugs and drug prices from other countries. So I’m not advocating importing drugs and drug pricing, President Trump is advocating that, okay? I’m advocating, let’s do it the American way, but let’s learn from others. Okay? I think that —