Industry Executive Warns International Pricing Index Could Slow Drug Investment

A possible transition to an international pricing index (IPI) to bring down drug prices has implications for the biosimilar market and has developed a surprising amount of momentum, although this is not well justified, Molly Burich, MS, director of public policy for biosimilars and pipeline at the pharmaceutical giant Boehringer Ingelheim, said Thursday at the 2020 Specialty Therapies and Biosimilars Congress in Miami, Florida.

The Trump administration’s proposal to peg Medicare payments for drugs to prices paid in other countries has been considered a slow horse in the race for solutions to rising prices and is highly problematic, Burich said, but people are holding onto the idea, which means it should be watched closely. Democrats have also latched onto the proposal, noting that US drug prices are sometimes multiples of what consumers pay abroad.

The pharmaceutical industry pushback on IPI has been significant. “Operationally, this is very challenging. That doesn’t mean they won’t finalize it,” Burich said. CMS has listed 16 countries that would form the basis of the index.

Prices in other countries would form part of a ratio for determining drug reimbursement in the United States, with the other portion being average sales price (ASP) in the United States. Gradually, CMS would adjust the index so that foreign drug prices are increasingly weighted; over time, this will reduce the amount that Medicare pays for drugs in this country, Burich said.

“Because you have a spender [Medicare] who’s managing the [drug] inventory, you’re removing a buy-and-bill component of this,” she said, explaining that the risk that physicians will overspend on drugs is removed.

“That’s the idea. Time will tell if it’s true. Essentially, physicians will get paid for administering the drug,” Burich said.

She predicted the gap between the cost of acquiring drugs and the amount that Medicare is willing to pay for them would develop into a problem. Some type of alignment between the 2 is expected to occur, but added, “I don’t know how CMS envisions that. That’s part of why this idea has been sitting for a long time.”

Both manufacturers and physicians have objected to this proposal. Right now, the manufacturer determines a drug's price and many factors go into that price, and it's wrong to assume that you can control pricing at the dispensing end of things. The proposal, "will not change manufacturer behavior," Burich said.

The CMS plan represents an oversimplification, she said. “If you’re trying to impact overall drug pricing, it’s not a sustainable policy change. You’re hurting the physician to try to impact the manufacturer.”

There’s a lot of concern that physicians may stop administering drugs when they encounter the difficulties of making this program work, creating patient access issues, Burich said.

The United States is generally a leader in first-to-market medicines, and drug prices cannot be pegged to international standards if drugs are not yet available in other countries. Burich cited research that indicated an average lag time of 18 months to 36 months before products introduced in the US market make their appearance elsewhere. “Companies make their own decisions, but most countries are behind the United States in terms of having access to products.”

“I don’t think any of us want a system that will lead to delayed access for patients. I think R&D is a hallmark of our country,” Burich said.

She also predicted reduced research and development overall would result. “Companies have to make tough decisions all the time about what they’re investing in, from an originator product standpoint. And the reality is if this type of payment policy is implemented, and drags down reimbursement, companies are going to have to make difficult decisions, and that could be particularly true for physician administered drugs.”

The average sales price formula for Medicare payment is not a perfect system, but it at least “takes all of the discounts for market channels into account,” she said.

Audience member Scott A. Soefje, PharmD, RPh, director of the department of pharmacy at the Mayo Clinic in Rochester, Minnesota, anticipates a harmful “ripple effect” from such a pricing policy that would particularly injure smaller drug manufacturers. He called IPI a potential “logistical nightmare” for pharmacy operations. There may be a way to make this system work and protect patient access, but the solution is not yet apparent, Soefje said.