MedPAC recommends Congress target rebate traps, biosimilars to bring down drug prices

Drug prices
Unnecessary prescriptions and drugs meant to control the side effects of other drugs have caused part of the growth in drug spending, MedPAC commissioners said. (Getty/Tero Vesalainen)

WASHINGTON, D.C.—Congress should focus its efforts to reduce drug costs around making changes to Medicare Parts B and D, reducing reinsurance rates and improving biosimilar availability, the Medicare Payment Advisory Commission (MedPAC) said during its meeting on Friday.

Commissioners of MedPAC, an independent congressional agency that advises Congress on issues affecting the Medicare program, issued draft recommendations that CMS institute several reforms to Part B. Specifically, they should address Part B's average sales price system and drug value program to start bringing down the cost curve.

MedPAC also suggested that in the future, certain drugs could be moved from Part B to Part D to create better efficiencies. MedPAC previewed many of these changes in a letter (PDF) sent to CMS Administrator Seema Verma on Wednesday.


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During their Friday meeting, commissioners expressed frustration that some drugs covered by Medicare have faced regular price increases—upsetting the commission's goal of stability for its beneficiaries.

"Session after session, we're looking at increasing prices on the various chapters that have been reviewed. And in my mind all of those represent failures in our overall goal of price stability," said Commissioner Bruce Pyenson during the meeting.

A point of contention for the commission was the "rebate trap," whereby drugmakers offer rebates on their drugs in order to make them the preferred formulary for pharmacy benefit managers. In practice, this means that even when biosimilar drugs come to market, many consumers find themselves with no way to access them.

"The rebate trap is the salmonella in the whole pricing buffet," said MedPAC Commissioner Brian Debusk, Ph.D., during the meeting.

RELATED: Could adoption of biosimilars be slowed by 'rebate trap'? Yale experts think so

Pyenson agreed. "I don't think any of this—any of the other suggestions will work if [the rebate trap] is not addressed," he said. "Biosimilars have failed here. In other countries, biosimilars are aggressively promoted by national systems and are in very wide use. And various obstacles we've seen in the U.S. have been resolved. Yet issues that are not supported by the science are repeatedly brought up."

Pyenson said the industry would never reach the promises of precision medicine if it didn't solve the problem of biosimilars. Failure of biosimilars "destroy the potential of personalized medicine. Because we can't have efficient production of biologic drugs on a mass scale" without them, he said.

Many of the changes targeted at the market would affect Medicare Part D. The commission recommended that CMS 

  1. Transition Medicare reinsurance from 80% to 20% of catastrophic spending.
  2. Apply coverage-gap discounts to biosimilar products.
  3. Eliminate cost sharing above the out-of-pocket threshold.
  4. Change low-income subsidy cost sharing to encourage generics and biosimilars.

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