It used to be that pharmaceutical manufacturers had to worry (mostly) about federal health policy. Every few years manage through a big piece of legislation from Congress and then the regulation on Medicare, Medicaid, the Affordable Care Act and any regulation that came out of the legislation. But over the past few years, the drug pricing changes are coming from every direction – including states.
You might be familiar with Prescription Drug Affordability Boards happening in Colorado, Oregon and Maryland (more in a future post) but there are arrows coming from all directions. Just in the past few weeks we’ve had the Florida legislature introduce proposals on international reference pricing for Florida. A bit too soon for those of us who lived through the failed Trump proposal of Most Favored Nation.
The Florida bill proposes that, starting in October 2025, reference pricing would be available to cash-paying patients and health insurers. The international reference pricing would be based on countries that have gross domestic product of at least 40% of the United States (excluding single-payer health systems). Manufacturers would need to report actual price for each country identified net of discounts/rebates for government/insurers and patients (cash-pay). If a manufacturer fails to report, they face a financial penalty of $10,000/day for first 30 days for non-compliance and then their drug is pulled.
In terms of implementation of the pricing, pharmacies would charge cash-paying patients no more than the reference price plus a dispensing fee. Health insurers would reimburse no greater than reference price plus admin/dispensing fee. Savings would go toward patient premiums and/or cost-sharing. Medicaid would have access to reference pricing if it is lower.
The bill is working its way through committee. I have no idea of its odds of passage but, even if it were to pass, the implementation of it seems questionable. The reporting requires a lot of contracts to be reviewed/revised for confidentiality. It seems messy.
The rates other countries pay are lower. I can point to lots of talking points on why (our access to innovation, our willingness historically to pay for innovation, discounts/rebates driving up price and leaving net flat, etc.). I might have accepted international reference pricing as a rationale path forward 20 years ago, but we’ve found other ways to claw back from the industry (Medicare negotiation, Part D redesign, inflation rebates, higher rebates, 340Bs and PDABs).
Big picture, I wonder how much more the branded pharmaceutical industry can take and still maintain its investment in innovation. Newly-approved products are not getting quick traction in terms of market access and then you have the uncertainty of march-in rights, state-based proposals and whatever comes out of the presidential election process. When will investors say meh?