Price regulation of pharmaceuticals before and after the US elections
A first outlook: What does the change of government mean for the pharmaceutical market?
The current change of the US government shows how different these measures can be. In July 2020, for example, Trump signed an executive order addressing so-called Pharmacy Benefit Managers. They are commissioned by health insurance companies to negotiate drug prices with pharmaceutical companies. They earn profits by retaining a share of the negotiated discount. The greater their share, the more expensive the pharmacy selling prices are. Since the retained share is considered as too large, the executive order intends to pass them to patients. However, critics doubt that the regulation has too many loopholes for circumvention and therefore does not achieve the desired effect. Similarly, there are complaints about an outstanding effect of another regulation aiming to reduce insulin prices.
Further efforts by the Trump administration aimed at imports of pharmaceuticals from Canada. The intention was to reduce expenses and to secure the supply of pharmaceuticals during the SARS CoV 2 pandemic. However, this was recently rejected by the Canadian government.
Currently, Trump is calling for the introduction of a "most-favored-nation [reimbursement] price". The reference price would be the lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the pharmaceutical company sells in a member country of the OECD that has a comparable per-capita gross domestic product. More concrete specifications have not yet been disclosed.
Remarkably, Trump was supported by the pharmaceutical industry with only about 2.2 million dollars for his election campaign until November this year, whereas Biden received about 11.3 million dollars. Biden has other plans than Trump for the next legislative period. He intends to expand the Affordable Care Act, also known as Obamacare, which was introduced in 2010. In this context, tax benefits should help certain population groups to finance high health care expenditures. In addition, tax regulations related to the advertisement of pharmaceuticals are expected to be tightened.
Generally, the population will get the possibility to import certain certified drugs. This is expected to intensify competition for pharmaceutical companies and indirectly reduce prices. Direct interventions are also planned for price regulation: price increases of generic drugs that exceed inflationary adjustments are to be taxed and the negotiating power against suppliers whose drugs are not in competition is to be strengthened. Regarding the latter measure, Biden wants to oblige pharmaceutical companies to negotiate reimbursement prices with Medicare. Their pharmaceuticals are planned to be subjected to an evaluation of an independent review committee which is yet to be established. This committee will evaluate the value of the pharmaceuticals in order to determine a reimbursement price. For further conceptualization, Biden looks at the German AMNOG procedure.
As already reported in the previous blog post, there are strong interdependencies between German and international drug regulations. It cannot be ruled out that the upcoming changes in the US will have a significant impact on the German pricing. We will keep track of all developments and accompany you safely through new territories.