NAS Panel Seeks More Government Negotiation on Drug Prices, Curbs on Pharma Physician Perks

Kerry Dooley Young

December 01, 2017

Congress should allow the federal government greater ability to directly negotiate the prices of medicines, as well as consider other steps to make prescription drugs more affordable for Americans, says a new report from an influential advisory group. The panel that created the report also seeks to curb direct-to-consumer advertising and promotions aimed at physicians.

The November 30 report, Making Medicines Affordable: A National Imperative, from the National Academies of Sciences, Engineering, and Medicine (NAS), offers eight recommendations and suggests 27 steps for implementing them. These include a proposal that physicians, medical practices, and hospitals "substantially tighten restrictions on pharmaceutical detailing visits, the acceptance and use of free drug samples, special payments, and other inducements" meant to win favor for certain medicines.

"Professional societies, trade organizations, and insurers could play an important role in accomplishing this objective," the NAS report says.

The report also addresses obstacles to the introduction of cheaper generic drugs. And it calls for greater transparency about how money flows among drugmakers, insurers, and a group of middlemen firms known as pharmacy benefit managers. Pharmaceutical sales in the United States totaled $457 billion in 2015, according to the report, which cites federal data.

The NAS report may bolster simmering congressional efforts to address drug costs, a topic that's drawn bipartisan interest. Alex Azar II, President Donald Trump's nominee for secretary of the Department of Health and Human Services (HHS), on Wednesday told a Senate committee that he'd make lowering drug prices a top priority if he's confirmed for the job. The Senate Committee on Health, Education, Labor and Pensions (HELP) will review the new NAS report at a Dec. 12 meeting, said Sen. Jeff Bingaman (D-NM), who served on the NAS panel.

"There's a chance that you could get some traction on this set of issues," Bingaman said at a Thursday press conference.

In a Thursday statement, HELP Chairman Lamar Alexander (R-TN) said that he looks forward to hearing from Norman Augustine, the chairman of the NAS committee that conducted the study on drug prices.

"I appreciate the thoughtful work of the National Academies on this report on this important issue," Alexander said.

Augustine, who is also a former chairman of Lockheed Martin, said the current model of paying for medicines is "unsustainable." Public concern about pharmaceutical costs may have hit a tipping point amid recent media reports about a $600 price tag for the widely used EpiPens, the report says. It also notes the "financial toxicity" faced by many people with cancer, as increased debt and bankruptcy often result from the high cost of medicines used to fight this and other serious diseases. The NAS report cites research that found that the median monthly cost of cancer drugs at the time of their US approvals rose from about $1500 in 1965 to $150,000 in 2016 (all prices are expressed in 2014 dollars).

A Balancing Act

Yet, the report also stresses the need to keep drugmakers well financed to fund risky research projects. About 9 of 10 new drug candidates that advance as far as testing in humans subsequently fail, according to the report. During the time the NAS panel worked on its report, for example, Eli Lilly and Merck had major setbacks in clinical trials to develop medicines for Alzheimer's disease. In this field of research, the failure rate is more than 99% percent, according to the report. NAS panelists kept these daunting odds in mind in making their recommendations, Augustine said.

"We sought to balance the need for affordable drugs with the need for an industry healthy enough and capable enough to develop new drugs for future patients," he said. "In the end, drugs that are not affordable are of little value, and drugs that don't exist are of no value."

The NAS panel began its work with 18 members. One member resigned because of personal reasons. Another, biotech pioneer and former Genzyme Corp. executive Henri Termeer, died in May but remains among the 17 panel members listed in the completed report. A dissenting opinion from Termeer and Michael Rosenblatt, MD, a former top Merck executive, is included in the NAS report. They objected to the NAS report's recommendation that the federal government be given authority to negotiate drug prices, arguing that this would "produce a near monopoly and functional price controls." They also questioned their fellow NAS panelists' bid to curtail direct-to-consumer advertising.

Yet, seven of the 17 NAS panelists felt the recommendations didn't go far enough. This group, which includes University of Chicago researcher Rena Conti, PhD, largely backed the report's recommendations but, in a section of the report that presents minority perspectives, called for even bolder action on several approaches. These include efforts to peg payments for medicines to the results they deliver for people.

In their perspective, Dr Conti and colleagues say the NAS committee's recommendation in support of value-based price models "understates the maturity of those methods as used around the world today and by American payers, intermediaries, physicians and hospital systems.

"Its tentative tone belies the reality that, in the absence of such methods, patients are left at the mercy of coverage and pricing decisions that are completely unknown to them," Dr Conti and colleagues write.


The NAS report's eight recommendations and selected implementation suggestions are as follows:

  • Accelerate the introduction and use of cheaper generic copies of pills and copycat versions of biotech drugs. The Department of Justice and the Federal Trade Commission should work to deter agreements through which one drugmaker pays another to delay the introduction of a generic or copycat medicine.

  • Consolidate the federal government's purchasing power. Congress should allow HHS to act as a single entity to directly negotiate with companies. HHS also should be allowed to do this on behalf of state agencies.

  • Provide greater transparency of financial flows and margins in the pharmaceutical industry. Congress should require disclosures from insurance and pharmaceutical companies on drug prices.

  • Discourage direct-to-consumer advertising and promote industry codes of conduct on physician outreach. Congress should disallow the tax deductibility of direct-to-consumer advertising of prescription medicines as a business expense.

  • Change the design of insurance plans to reduce drug cost for consumers. Congress should establish limits on the annual out-of-pocket costs paid by people enrolled in Medicare's Part D drug plans by removing the cost-sharing requirement for patients who reach the catastrophic coverage limit.

  • Eliminate inefficiencies in federal drug discount programs meant to aid vulnerable groups. The panel seeks an expansion of HHS' authority to provide increased oversight and regulation of the federal 340B drug discount program, which many hospitals use.

  • Ensure that financial incentives created to spur research into treatments for rare diseases aren't diverted to widely used drugs. The US Food and Drug Administration, for example, should be directed to limit the market exclusivity awarded to orphan drugs to one 7-year extension.

  • Increase information and incentives to better align prescribing patterns with the value of treatments. There should be site-neutral payment policies for drugs administered by clinicians in medical practices and hospitals.

The NAS study was sponsored by the American College of Physicians, the Breast Cancer Research Foundation, the California Health Care Foundation, the Commonwealth Fund, the Laura and John Arnold Foundation, the Milbank Memorial Fund, and the Presidents' Committee of the National Academies of Sciences, Engineering, and Medicine. Dr Rosenblatt has worked as chief medical officer for Flagship Pioneering. He is also a shareholder of Radius (of which he is a founder) and Merck. Henri Termeer was former chairman, president, and chief executive officer of Genzyme and served on the boards of directors for several pharmaceutical and biotech companies.

NAS. Making Medicines Affordable: A National Imperative. Published 2017. Abstract

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