Posted: 08 Jan. 2019 5 min. read

Drug pricing is likely to be a top priority for Congress and the White House in 2019

By Sarah Thomas, managing director, Deloitte Center for Health Solutions, Deloitte Services LP

As we head into 2019, I expect that tackling pricing, spending, and costs for prescription drugs will become an even more important issue for the White House and the 116th Congress. About 80 percent of Americans rank drug pricing as the top priority for lawmakers—above reducing the federal budget deficit or increasing the investment in infrastructure—according to a recent survey published in Politico.1

What actions might we see in 2019? It has been eight months since the administration released its Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs (see the June 19, 2018 My Take). Before we get into what might happen in the year ahead, let’s first take a look at the policies that are already in place, the ones that are being drafted, and the issues not yet addressed. Here are three key takeaways to consider:

Takeaway #1: The administration has made progress on many ideas included in the blueprint

By my count, there are 28 separate ideas included in the blueprint—some are fairly specific, others are much more general. The document splits these ideas into four categories: increased competition, better negotiation, incentives for lower list prices, and lower out-of-pocket costs. The ideas are also divided into two timelines—Immediate and Further. Activity is already occurring on at least 13 of these ideas (some were underway before the blueprint was released).

My assessment is that the greatest concentration of implemented (as opposed to proposed) policy has been through guidance and action that the US Food and Drug Administration (FDA) has issued to spur competition. For example, the agency released a Biosimilars Action Plan in July and approved seven new biosimilars—15 biosimilars have now been approved (see the December 18, 2018 Health Care Current).2 Although biosimilars might not generate the same kind of savings that consumers get from generic forms of small-molecule drugs, specialty biologic drugs are among the most expensive therapies for consumers.

Takeaway #2: Existing proposals affect a wide range of stakeholders

The ideas included in the blueprint would affect manufacturers of pharmaceuticals (brand and generic) in one way or another. But some proposals would also affect hospitals, physicians, pharmacies, pharmaceutical benefit manufacturers (PBMs), and Medicare Advantage (MA) plans.

Policies that could affect hospitals include:

  • Proposed rules around site-neutral payments (ensuring that payments for care provided in one setting are equivalent to payments for identical care provided in a different setting)
  • Proposed rules to change the reimbursement formula for Medicare Part B drugs (more on that below)

Policies that could affect MA plans include:

  • Finalized changes to the Medicare Prescription Drug Program in the 2019 Part C and Part D regulation, which allow for faster mid-year substitution of generic drugs onto formularies
  • A proposed rule to give Part D plans more flexibility to limit coverage of drugs in protected classes (see the December 4, 2018 Health Care Current)

Policies that could affect pharmacies and PBMs:

  • In October, the president signed two bills to prevent "gag clauses" in agreements between pharmacies and PBMs. Some pharmacists have complained that gag clauses can keep them from disclosing cheaper drug options to consumers (see the October 16, 2018 Health Care Current).

Takeaway #3: Many of the more debatable proposals have not yet been finalized

In my view, one of the most surprising proposals (in terms of potential debate) would require manufacturers of high-price drugs to cite prices in their television advertisements. Under the proposed rule, manufacturers would publish the price (the Wholesale Acquisition Cost) for a typical course of treatment for an acute medication, or a 30-day supply of medication for a chronic condition. The policy would apply to all drugs with a price of $35 per month or more.

The pharmaceutical industry has pushed back on the proposal, which it contends could confuse consumers who often pay less than the list price. Before the administration released this proposal, the industry developed an initiative that would allow consumers to search drug prices through a website.

Another debatable proposal is similar to a Medicare Part B change suggested by the previous administration in 2016, but with a new twist. This policy—which would be implemented as a Center for Medicare and Medicaid Innovation (CMMI) project—would reduce payments the Medicare program makes to providers by tying payments to a composite amount based on the average amount paid for those drugs in a number of other countries. According to the US Centers for Medicare and Medicaid Services (CMS), this model would include physicians, hospitals, and potentially other providers and suppliers in selected geographic areas. The agency has indicated that it is considering issuing a proposed rule this spring, which could become effective the following year.

A third policy—which was floated in some speeches, but has not yet materialized in proposed regulations—would prohibit (or potentially eliminate) rebates for drugs. Under this practice, PBMs and Part D plans exact rebates from drug manufacturers in exchange for placement of drugs on preferred tiers of a formulary. Although the administration has been supportive of private-sector moves to reduce consumer prices (by passing rebates to consumers) at the point-of-sale, it has not issued a policy that would overhaul rebates.

Some movement to address rebates has already started in the private sector. Two PBMs already are offering employers an option for a new formulary model that would reduce the role of rebates. Others have already established programs to share rebates with consumers at the points-of-sale.

Final thoughts—for now

On the private side, I think we might see more activity around value-based contracting this year. Some state Medicaid programs have been developing innovative payment arrangements with drug manufacturers, adding to the many experiments emerging with commercial health plans, and one with the Medicare program. Per the 21st Century Cures Act, FDA released guidance on how drug and medical device companies can communicate information to health plans and formulary committees that could aid value-based contracting.

It will be interesting to see if the new Congress bands together with the administration on a shared agenda in this space. I expect 2019 to keep us busy on this front!

1. Americans’ priorities for the new Congress in 2019, Politico , Harvard T.H. Chan School of Public Health, January 2019
2. Biosimilars Action Plan: Balancing Innovation and Competition, FDA, July 2018 (


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Sarah Thomas

Sarah Thomas

Managing Director | Center for Health Solutions

Sarah is the managing director of the Center for Health Solutions, part of Deloitte LLP’s Life Sciences & Health Care practice. As the leader of the Center, she drives the research agenda to inform stakeholders across the health care landscape about key trends and issues facing the industry. Sarah has more than 13 years of government experience and has deep experience in public policy, with a focus on Medicare payment policy.