TrumpRx Effects on Medicaid Rebates, Cost-Shifting, and Value-Based Drug Pricing: Robert Andrews

As TrumpRx introduces new drug pricing strategies, stakeholders should assess the potential changes to Medicaid rebate structures, the risk of increased costs for employers, and the shift toward value-based pricing models, says Robert Andrews, former US representative for New Jersey and CEO of the Health Transformation Alliance (HTA).

This transcript was lightly edited for clarity; captions were auto-generated.

Transcript

Pfizer’s TrumpRx deal includes discounts of up to 80% and Most Favored Nation pricing for Medicaid, according to the White House. How could this affect rebate structures and formulary negotiations in managed care?

It could affect it a lot. Let’s take Medicaid first. Right now, most Medicaid patients are covered by Medicaid Managed Care, by carriers like Centene and other large carriers. Those carriers have agreements with pharmacy benefit managers to cover people in Medicaid. This will have a profound impact on that. As prices drop over time, the role of the pharmacy benefit manager, I think, will change—maybe even will disappear, in the Medicaid context.

The discounts, though, for direct-to-consumer purchases, I’m not sure how real that’s going to be. I don’t mean this to be sarcastic, but you can go to the Mercedes-Benz website and try to buy a car. You can do it, but if you don’t have the $100,000 needed to buy the car, what good does it really do you?

If you’re looking at a GLP-1 [glucagon-like peptide-1] that has a list price of close to $10,000 a year, the idea that you can get a 60% discount and knock it down to $4000 a year doesn’t change the fact that not many Americans can afford $4000 a year out of pocket after taxes for the purchase of a drug. They’d much rather say, “Well, it’s covered by my health plan. I’ll pay 20% of it,” and go that route.

In my view, this is an admirable attempt to start to move the market, but it is limited in its initial impact.

How can payers guard against manufacturers raising prices on commercial plans to offset these new discounts?

It’s a great question. I think the best approach is for commercial payers—both employers and health plans—to coalesce and try to negotiate value-based pricing. Value-based pricing means that if you’re claiming a GLP-1 will save more in medical costs than it costs to buy the drug, then let’s price it accordingly.

What the market has told us, what the data have told us, in the HTA, is that GLP-1s do, in fact, reduce medical costs—not for everyone and not always, but for most. You do see fewer strokes, fewer heart attacks, fewer hospitalizations, and medical spending goes down by about $1900 a year per GLP-1 recipient. But the cost of the drug, net of rebates, is about $6000 a year. Investing $6000 to save $1900 isn’t value-based purchasing.

What we’d like to see, and we think government should participate in this as well for Medicare, is to agree to have the drug manufacturers share in the profits and share in the gains that they are creating when people get less sick less often. That’s a very admirable thing to do. But to price the drug in the first instance so that the risk is borne not just by the buyer of the drug but also by the seller, if it turns out that the projected medical savings never materialize, I don't think the employers or health plans or consumers should be paying for a gain that never really materializes.