The Latest on Drug Spending: Senate Passes Gag Clause Ban to Help Consumers

Policymakers continue to advance ideas to rein in the high cost of medications for individuals and government programs. Here are some recent developments in drug spending policy, including efforts to ensure that pharmacists can inform consumers about lower-cost prescription options, and a Colorado settlement that will provide hepatitis C drugs to state inmates:

Senate passes bill addressing gag clauses and “pay-for-delay” deals. On Sept. 17, the U.S. Senate passed S.2554, the Patient Right to Know Drug Prices Act, 98-2. The bill prohibits gag clauses in contracts between pharmacies and insurers or their pharmacy benefit managers, the third party administrators who manage an insurance plan’s prescription drug benefit. These clauses preclude pharmacists from telling patients when they could pay a lower price for a drug by filling a prescription without using their insurance, but there is little public information on the prevalence of such provisions. The bill also requires makers of biologic and biosimilar drugs to report patent settlements to the Federal Trade Commission to ensure that the settlements are not anticompetitive, such as some reverse payment agreements or “pay-for-delay” deals used to resolve patent infringement lawsuits. This provision mirrors current law for small-molecule drugs.

Centers for Medicaid & Medicare Services announces indication-based formulary. On Aug. 29, CMS announced that starting in 2020, Medicare Part D plans will be permitted to use indication-based formularies, in which plans can choose to cover some Food and Drug Administration-approved drug indications, while excluding coverage for other approved uses. Currently, if a plan includes a particular drug on its formulary, it must cover the drug for every FDA-approved indication, though plans can use utilization management tools to drive patients toward preferred therapies. The change is intended to help Part D plan sponsors craft narrower coverage decisions, which would increase their ability to negotiate lower drug prices.

Americans think the cost of prescription drugs is too high. A poll released Sept. 13 by the West Health Institute and NORC at the University of Chicago shows that 77 percent of Americans think the cost of prescription drugs is unreasonable. Of the nearly 60 percent currently taking a prescription drug, more than a third said they had either skipped a prescription or taken less than the prescribed dose in the past 12 months because of cost.

Medicaid advisers consider grace period for Medicaid coverage of new drugs. The Medicaid and CHIP Payment and Access Commission (MACPAC), a congressional advisory group  on Medicaid and Children’s Health Insurance Program policy, discussed a policy option to provide states with a period of time to consider coverage of new drugs. Medicaid typically must cover new drugs immediately upon FDA approval, while Medicare plans and qualified health plans have six months to make coverage decisions for most drugs. The grace period could be used by state pharmacy and therapeutics committees to design formulary and utilization management policies before starting coverage.

Prisoners in Colorado get access to hepatitis C drugs. Colorado announced that it will begin providing treatment to all inmates with chronic hepatitis C as part of a settlement in a suit brought by prisoners that included allegations of inadequate access to medicines. Several other states face similar legal challenges.

Ian Reynolds is a manager with The Pew Charitable Trusts’ drug spending research initiative.