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HHS mulls limited drug imports, seeks to remove rebate safe harbor protections

The Trump administration is mulling the idea of permitting limited imports of prescription medicines from foreign countries in cases where a company is the sole manufacturer of an old drug that has had its price hiked dramatically.

The administration also is seeking to remove the safe harbor protections that allow pharmacy benefit managers and health plans to secure rebates from drugmakers.

Both moves are aimed at fulfilling President Donald Trump's campaign promises of lowering Americans' costs for prescription medicines.

Weeks after unveiling his strategic plan in May to lower the prices of U.S. prescription medicines, Trump told Americans they would see "massive drops" from some big companies by mid-June. But that pledge was not borne out, and with the midterm elections approaching, the administration is under pressure to produce some results.

Pfizer Inc. and Novartis AG both in recent days agreed to temporarily hold off on hiking their prices until the end of 2018 — a move Trump praised on Twitter July 19. But both companies have taken significant price increases in recent years, and their six-month delay retains the status quo and does nothing to lower Americans' costs.

Importation a 'gimmick'?

While Trump promoted the idea of importing medicines from foreign nations during his 2016 presidential campaign, he has kept mum about the idea since entering the White House.

Trump's head of Health and Human Services, Alex Azar, in May called importation a "gimmick."

"It has been assessed multiple times by the Congressional Budget Office, and CBO has said it would have no meaningful effect," Azar told news reporters May 14.

"You can't improve competition and choice in our drug markets with gimmicks like these — you have to boost competition and price transparency," Azar said. He also noted that the previous four Food and Drug Administration commissioners from the Bush and Obama administrations said in an open letter to lawmakers that importation would be "a complex and risky approach."

The current FDA commissioner, Scott Gottlieb, in March 2016 wrote in Forbes that importing medicines from outside the U.S. would provide American consumers "little relief," criticizing Trump's idea as an "aged concept."

"Drug importation doesn't address any of these core challenges," Gottlieb wrote. "In fact, the imported drugs may end up being quite expensive."

Even when importation of foreign drugs is done under a regulated scheme, "it really wouldn't save money," he added.

In the article, Gottlieb said speculators should not be able to take advantage of consumers by securing monopolies on old drugs where patents have long lapsed and jack up their prices, but he gave no solution on how to handle that situation.

Price or shortage focus?

Now, though, Azar has asked Gottlieb to form a working group to "explore how importation could help address price hikes and supply disruptions that are harming American patients."

"We have seen a number of both branded and generic examples in recent years where a single manufacturer dramatically hikes the price for a drug unprotected by patent or exclusivities," Azar said in a July 19 statement.

He pointed specifically to Turing Pharmaceuticals AG, whose former, and now jailed, CEO Martin Shkreli increased the price by more than 5,000% of its toxoplasmosis drug Daraprim in 2015.

Other companies, like Valeant Pharmaceuticals International, which recently changed its name to Bausch Health Cos. Inc., have pursued a similar strategy of buying up older sole-source medicines and significantly raising their prices.

While Azar was focused on using the working group to address prices, Gottlieb centered on tackling drug shortages and only mentioned the issue of price once in his July 19 statement, calling it a barrier to patient access in cases involving sole-source medicines.

Gottlieb said he wanted the working group to examine whether, "under these narrow conditions, the additional market competition from the short-term importation of foreign versions of the drug may complement the FDA's current efforts and help meet near-term patient need in the U.S. until new competition is able to enter the domestic market."

The FDA has permitted the importation of drugs in shortage situations before, such as when Hurricane Maria struck Puerto Rico in 2017, affecting several manufacturers of critical injectable medicines.

The idea of permitting temporary imports of generics from tightly regulated countries when U.S. companies have significantly hiked the prices of their sole-source older products has been promoted by various people in the healthcare sector, including former Deputy FDA Commissioner Joshua Sharfstein.

Eliminating rebate safe harbor protections

In the administration's other move to lower drug prices, HHS late July 18 submitted a proposed rule to the White House Office of Management and Budget seeking to eliminate the safe harbor protections over PBM drug rebates.

Trump had targeted PBMs — often called middlemen — from the get-go, specifically taking aim at them in his May 11 blueprint to lower drug prices.

"We're very much eliminating the middlemen," Trump said at the White House on May 11. "They're rich. They won't be so rich anymore."

Given Trump had included the proposal to remove the rebate safe harbors in his plan, "It should not come as a surprise that this would require rulemaking," HHS spokeswoman Caitlin Oakley told S&P Global Market Intelligence.

Gottlieb first talked about re-examining the federal anti-kickback laws that provide safe harbor over the drug rebate deals biopharmaceutical manufacturers strike with payers during a May 3 address in Washington. He said that step could "help restore some semblance of reality to the relationship between list and negotiated prices, and thereby boost affordability and competition."

Insurers — including the federal government's Medicare Part D prescription drug program for seniors — hire PBMs to manage their drug benefit and to negotiate with biopharmaceutical manufacturers.

The PBMs extract rebates from drugmakers in exchange for putting the manufacturers' medicines on the insurance or Medicare plan's formulary.

Drug plans and PBMs take a portion of the rebates they have negotiated with the biopharmaceutical manufacturers and keep it as profit. The drug plans typically use the remainder of the rebates to reduce consumers' premiums.

Azar has repeatedly said the administration wants to move away from the rebate system and toward a fixed-price discount model — most recently promoting the idea during a June 26 Senate Finance Committee hearing.

Trump also included a measure in his fiscal 2019 budget request to require PBMs and Medicare Part D drug plans to share a portion of their rebates with patients at the pharmacy counter.