Coalition Says Transparency, Value-based Pay Could Contain Drug Costs

July 8, 2016

This article originally appeared at on April 25, 2016.

By Shannon Muchmore  | April 25, 2016

Increased transparency and competition in the pharmaceutical industry and expanded value-based payment models would help address rising prescription drug prices, according to a coalition aimed at containing costs.

The Campaign for Sustainable Rx Pricing said multiple organizations representing doctors, nurses, hospitals, insurers and consumers have endorsed the proposals to fix what they say is a broken market for prescription drugs.

“We need to pay for what works, not so much for what's marginally beneficial," said John Rother, president of the campaign and CEO of the National Coalition on Health Care. “The most expensive treatment is not always the best.”

Spending on prescription drugs increased 12.2% in 2015 and 13.1% in 2014. The issue has sparked congressional hearings and gained traction on the presidential campaign trail.

In an effort to improve transparency, the groups want drugmakers to report true research and development costs, give annual reports on drug list prices and project federal spending before approval by the Food and Drug Administration.

To spur competition, proposals include speeding up approval of generic drugs as well as those that compete with expensive treatments. They also ask that federal agencies more closely monitor exclusivity protections and limit them to the most innovative products.

Premier COO Michael Alkire said the group purchasing organization supports the proposal.

"We are long-standing, vocal advocates in favor of greater marketplace competition to curb price increases by enabling the FDA to be more nimble and strategic in fast tracking certain drug applications, particularly for generic drugs or in cases where there may be a limited number of competitors or in new therapeutic classes," he said.

The campaign also advocates for federal programs like Medicare and Medicaid to require drug companies to release data and conduct their own research comparing new medications with existing treatments.

It also suggests increasing public and private funding for research and requiring drugmakers to compare a new drug's cost and effectiveness to that of those already in existence.

In a written response to the proposals, the Pharmaceutical Research and Manufacturers of America said the ideas would not increase access or improve coverage and instead promote a one-size-fits-all approach.

“Rather than address health care costs holistically, these proposals only apply to the small share of health care spending that goes toward life-saving medicines while exempting the largest health care cost drivers, such as hospital charges, which include significant markups for prescription medicines,” the organization said. 

Debra Whitman, chief public policy officer for AARP, which supports the proposals, said the key to reform is balancing drugmakers' legitimate need to develop innovative treatment with the ability for the healthcare system to handle the prices.

“Consumers desperately want innovation, but innovation that's unaffordable is meaningless,” she said.

The advocates said they have spoken about their priorities with legislators and candidates, including presidential candidates from both parties who are calling for direct price negotiations with drugmakers. Any action will likely have to wait until after the election.

Rother said the proposals have been in development for about two years and the stakeholders are readying for a long fight.

He would like to hear from the pharmaceutical companies and begin constructive conversations, he said.

“We're not here to slam them, but to invite them to put forth their ideas and have a dialogue about this,” he said.

Robert Doherty, senior vice president of the American College of Physicians, said drug pricing is a major concern among doctors and that "the status quo is compromising care and hurting patients." Drug manufacturers should be moving toward value-based payments like hospitals and physicians are, he said.

“It is not unreasonable in my mind to expect the same from the pharmaceutical industry,” he said.

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