International pricing index would cut drugmaker profits, open competition, PwC report finds

Last October, the Trump administration released a slew of proposals aimed at lowering the costs of drugs in the U.S., one of which included establishing an international pricing index that would set reimbursement prices for pharmaceutical products based on what other economically similar countries pay. While the preliminary effects of the proposal on Medicare Part B would be small in comparison to the overall pharmaceutical spend in the U.S., some drugmakers would face a substantial loss of revenue, according to a recent report by PwC's Health Research Institute.

Under the proposal, Medicare Part B — which covers physician visits for seniors and the drugs prescribed to them during their visits — would set reimbursement rates for a particular drug to the prices paid in 14 countries including Canada, Japan and 12 European countries.

If the U.S. adopts this volume-weighted international pricing index, five pharmaceutical companies could expect to lose at least $500 million per year, according to the report, which analyzed the difference between domestic and international prices. Another six companies would likely lose $100 million to $500 million per year.

The report found that the index could limit pricing growth under Part B since pricing would be tied to countries with  regulators that limit price hikes.

From 2012 to 2016, 27 percent of drugs covered by Medicare Part B saw greater than a 10 percent annual growth in cost per dose. An additional 40 percent of drugs saw some form of increase, according to the report.  If the proposal is adopted, the percentage of drugs seeing increases would likely drop.

The research institute's report also found that the index could limit long-term spending for Part B.  CMS estimates that Medicare Part B could save $17.9 billion between 2020 and 2025.

The changes under the pricing index would subject 29 of the top 50 drugs under Medicare Part B to competition. A majority of the drugs are biological medications.

Read the full report here.

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