July 16, 2018
The Honorable Alex Azar
Department of Health and Human Services
200 Independence Avenue SW, Room 600E
Washington, DC 20201
RE: Request for Information: HHS Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs
Submitted electronically via: http://www.regulations.gov
Dear Secretary Azar:
The National Pharmaceutical Council (NPC) shares your interest in fostering an affordable, accessible patient-centered health care system. With this in mind, NPC appreciates the U.S. Department of Health and Human Services (HHS) soliciting public comments on potential policy development and agency action that could “realign the system in a way that promotes the development of affordable innovations that improve health outcomes and lower both out-of-pocket cost and the total cost of care.” 
NPC is a health policy research organization dedicated to the advancement of good evidence and science, and to fostering an environment in the United States that supports medical innovation. NPC is supported by the major U.S. research-based biopharmaceutical companies. We focus on research development, information dissemination, education and communication of the critical issues of evidence, innovation and the value of medicines for patients. Our research helps inform important health care policy debates and supports the achievement of the best patient outcomes in the most efficient way possible.
NPC welcomes this opportunity to provide input on potential policy considerations related to lowering drug prices and reducing out-of-pocket costs. Please find our comments below.
- Increasing Competition
Revising the government price reporting barriers to value-based contracting
NPC appreciates the agency’s willingness to consider changes to remove barriers to value-based contracting caused by government price reporting requirements, such as the Medicaid best price provision.
In response to rising health care costs, health insurance payers and biopharmaceutical manufacturers have begun entering into value-based payment arrangements that link the price of prescription drugs to patient outcomes. The goal of such value-based arrangements is to shift health care payment from volume to value by linking payment to outcomes. However, the “best price” framework within the Medicaid Drug Rebate Program currently poses a barrier to broader negotiation and implementation of value-based agreements.
NPC recently conducted an analysis of the potential regulatory barriers that limit the potential of value-based contracting.  This study found that Medicaid’s best price rules create strong incentives to limit the rebates that manufacturers can provide for medications covered under Medicaid. Medicaid’s best price is set quarterly based on the single lowest price available from the manufacturer to any entity, such as payers and providers, in the U.S. The regulations stipulate that a manufacturer must provide Medicaid either the maximum rebate in the market or a 23.1 percent rebate, whichever is higher. Medicaid’s best price rules, therefore, increase the cost of contracting, creating a financial incentive to limit rebates on applicable medications.
To remove this barrier to value-based approaches to health care payment and reimbursement, the Medicaid Drug Rebate Program and Average Sales Price in Medicare Part B should be further studied to determine what, if any, changes or clarifications are needed to accommodate value-based contracts in a way that both public and private payers are able to effectively share risk with innovators.
- Better Negotiation
Revising anti-kickback statute to improve adoption of value-based arrangements
NPC appreciates the agency’s willingness to consider revising specific statutes and regulations to improve adoption of value-based arrangements.
Currently, there is significant uncertainty surrounding how the anti-kickback statute (AKS) aligns with value-based contracting.  Our recent analysis of the potential regulatory barriers that impede value-based contracting found that “the federal AKS effectively prohibits manufacturers from utilizing risk management tools that could bolster patient outcomes and save money in federal health care programs. Manufacturers in value-based arrangements take on the risk for successful outcomes. For example, if a medication does not work for a patient, the manufacturer loses money, even if the failure is due to factors out of the manufacturer’s control. Manufacturers could institute programs aimed at giving the patient the best chance of successful treatment, including patient education, nurse coaching, case management support, benefit assistance, adverse event monitoring and more sophisticated outcomes monitoring. The current AKS, though, threatens large penalties for providing anything of value that could be seen as driving business toward a manufacturer.” 
The uncertainty associated with the federal AKS can inhibit uptake and advancement of these contracts as well as the transition from volume to value more generally. Therefore, we recommend that the application of AKS to value-based contracts should be clarified.
Improving transparency within pharmacy benefit manager (PBM) agreements to promote value-based care
NPC appreciates the agency’s willingness to examine current health care financing and reimbursement mechanisms and we agree that too often negotiations do not result in the lowest out-of-pocket costs for consumers. As mentioned in the RFI, “most current PBM contracts may allow them to retain a percentage of the rebate collected and other administrative or service fees,” which may prompt some PBMs to prioritize price and financial considerations over clinical, patient, and employer-purchaser value considerations. To explore this issue in more depth, NPC recently conducted a survey of employer opinions of their PBMs.  Overall, the study found that employers question the overall value that they are getting from their PBMs. Specifically, employers reported that:
- the current PBM model lacks transparency, especially with regard to how PBMs make money
- their contracts with PBMs are overly complicated, ambiguously worded, and often benefit the PBM at the expense of the employer
- they would welcome an alternative to rebates, such as discounts or point-of-sale rebates, in which patient payments are lowered, reflecting a post-rebate price
- possible solutions to increase the value for patients include value-based insurance design (VBID)
As the agency considers new policies to address current PBM practices, policies that improve transparency and provide consumers with point-of-sale rebates and discounts should be prioritized.
How and by whom should value be determined
NPC appreciates HHS’s interest in exploring the question of how and by whom value should be determined. Although this question was posed within the context of indication-based payment, we believe it is important to consider this question more broadly given the current policy environment surrounding value assessment.
In response to rising health care costs, value assessment frameworks have emerged as tools for assessing the comparative effectiveness of health care products and services that are generally designed to inform payer and/or provider decision-making on the value of prescription drugs and other services. However, value assessments are a new and evolving area, and they have the potential to have a tremendous impact on patient treatment decisions, as well as on coverage and reimbursement decisions. To establish good practices to guide value assessments and help ensure they are effective tools to support value in patient care and outcomes, rather than well-intentioned but flawed tools that impede it, NPC developed Guiding Practices for Patient-Centered Value Assessment. 
NPC’s Guiding Practices recommend that patient-centered value assessment should:
- engage patients in the assessment and incorporate the broad array of factors they value
- incorporate patient preferences
- adopt a broad societal perspective
- be transparent and reproducible
- be updated regularly to capture the dynamic nature of value
However, current value assessment frameworks fall short in their efforts to balance the evaluation of treatment costs with a comprehensive consideration of benefits to the patient.  By not incorporating the full value and benefits of medical innovation, as well as the patient's input, frameworks fall short of their goal to accurately assess value. 
Since framework assessments will likely influence such diverse areas as payer decisions about what to include in health care benefits and doctor-patient dialogues about treatment choices, it is important to recognize that value should be defined by the market – the stakeholders involved in health care decision making and payment – after consideration of all evidence. In accordance with NPC’s Guiding Practices, a diversity of frameworks reflecting the differing stakeholder preferences, rather than only one “best” framework, is needed. One framework will not be adequate for all uses, nor can one framework account for the unique needs of all stakeholders in the health care system. No single entity can effectively be the sole arbiter of value for all stakeholders.
Alternate financing models as part of value-based arrangements may improve patient access to needed medications
Biopharmaceutical innovations have a significant positive impact in the treatment of disease. However, despite being a source of high value, some innovative therapies may place considerable financial burden on payers due to the delay between the most significant costs and benefits. This is compounded by patients moving between payers whereby the potential savings of the treatment are experienced by an entity that did not pay for said treatment. This misalignment between who pays for a therapy and who reaps its downstream benefits has concerning implications for both patient access to needed medications and manufacturer development decisions.
In our recent study “Insurance Switching and the Mismatch Between the Costs and Benefits of New Technologies,” we examined the disconnect between the short-term budget impact of innovative treatments and their downstream effects on payers and society.  This research modeled the impact of short-term versus future payments via a curative gene therapy for a childhood disorder, a highly effective hepatitis C therapy, disease-modifying Alzheimer’s therapy, and cardiovascular disease therapy for both rare and genetic higher risk prior cardiovascular event populations.
This study identified several financing challenges related to new innovative therapies and underscored the potential policy implications associated with contemporary health care payment mechanisms. Using the hepatitis C analysis as an example, this study found that new curative therapies require substantial upfront investment but reduce long-term costs significantly compared with years of living with the disease and its complications. However, immediate budget implications have led many insurers, including state Medicaid programs, to limit access to such therapies. This example illustrates that payers may decide to limit access, thus deferring the costs to future payers like Medicare, adding costs to the health care system and delaying access to treatments.
Additional research we conducted specific to new innovative gene therapies further underscored the need to implement new alternative payment approaches in conjunction with “well-developed risk management mechanisms upon which payers traditionally rely.”  However, our research suggests that alternative financing approaches should be tailored to specific disease and therapy characteristics to be effective and could best be implemented as value-based contracts, provided the implications of the Medicaid best price provision and AKS concerns are addressed.
Considering the long-term value of pharmaceuticals is critical
As the agency considers policy proposals aimed at promoting the development of affordable innovations that improve health outcomes and lower both out-of-pocket cost and the total cost of care, it is important to recognize the long-term value associated with biopharmaceutical products. In a recent study published in the American Journal of Managed Care titled “What do Prescription Drugs Really Cost in the Long Run?”, NPC estimated the long-run average cost for a typical drug, accounting for the effects of generic competition and medical cost offsets .
This study found that using a branded price in policy discussions may “overstate the true long-run cost of pharmaceuticals by 40 percent to 75 percent after accounting for generic price reductions and medical cost offsets.” This is an important finding because unlike pharmaceuticals, medical services and treatments do not have an analogous market intervention to generic entry that helps to reduce prices over time. To ensure incentives for biopharmaceutical innovation and market access remain, it is important that the long-term value associated with biopharmaceuticals is considered rather than the price of a biopharmaceutical at one particular point in time.
- Additional Feedback
NPC appreciates the opportunity to provide additional feedback and suggestions related to improving the affordability and accessibility of prescription drugs.
Importance of improving data access
As the agency considers new policies related to reforming the health care system, it is important that potential policy solutions are methodologically rigorous and evidence-based. The availability of high quality research on quality, value, and comparative effectiveness is critical to improving the U.S. health care system. However, an NPC-funded analysis found significant variation in state and federal data access policies as well as numerous indirect barriers, including complex data use application procedures, high user fees, and prolonged wait times for data delivery, all of which can limit crucial research activities.  Although some progress has been made at a national level to improve data access, including the Centers for Medicare & Medicaid Services’ announcement that Medicaid and Children’s Health Insurance Program data will be released in 2019, problems remain in accessing other data sets, particularly those at the state level. Without access to data, especially data that is complete and granular, the opportunity is lost to facilitate research that allows for improvements such as label refinements, more accurate reimbursement decisions, and better formulated, more robust value-based agreements.
A holistic approach to managing health care spend is needed
In addition, ensuring meaningful patient access to appropriate medications is a central component of NPC’s mission. As new policies related to lowering prescription drug prices are reviewed and considered through this RFI process, we encourage the agency and other health care stakeholders to broaden the focus from solely one on prescription drug costs to a more holistic consideration of health care costs in general. Rather than focusing on one sector of the health care system, it is important to evaluate cost trends and cost-effectiveness of treatments and services across the health care continuum so that future policies do not disincentivize biopharmaceutical innovation while allowing the utilization of high cost, low value care to continue.
Moreover, biopharmaceuticals have played a key role in improving health outcomes, and therefore new health spending policies should consider the impact on health gains resulting from biopharmaceutical innovation. NPC recently published a study on the historical impact of biopharmaceuticals on improved outcomes for patients.  Overall, the findings highlight the need to apply value assessment across medical technologies when evaluating return on investment for health care services.
NPC appreciates this opportunity to provide input on potential policy solutions to improve patient access to affordable medications. We would be pleased to meet with you to expand upon our comments, share our research, and continue this important discussion.
Robert W. Dubois, MD, PhD
Chief Science Officer
 US Department of Health and Human Services. (2018). HHS Blueprint to Lower Drug Prices and Reduce Out-of-pocket Costs. Retrieved May 18,2018 from: https://www.federalregister.gov/documents/2018/05/16/2018-10435/hhs-blueprint-to-lower-drug-prices-and-reduce-out-of-pocket-costs
 National Pharmaceutical Council. (2018). Regulatory Barriers Impair Alignment of Biopharmaceutical Price and Value. Retrieved June 25, 2018, from: http://www.npcnow.org/publication/regulatory-barriers-impair-alignment-biopharmaceutical-price-and-value
 National Pharmaceutical Council (2017). Toward Better Value. Retrieved June 25, 2018, from: https://www.npcnow.org/publication/toward-better-value
 National Pharmaceutical Council. (2016). Guiding Practices for Patient-Centered Value Assessment. Retrieved June 25, 2018, from: http://www.npcnow.org/sites/default/files/npc-guiding-practices-for-patient-centered-valueassessment.pdf.
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