Pharmacy Outlook: Chip Davis, AAM

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Chip Davis

Chip Davis

The public continues to name health care costs — and prescription drugs in particular — as a top priority. A recent survey from the Kaiser Family Foundation found that eight in 10 Americans say the cost of prescription drugs is ­unreasonable.

At the same time, the value of generic medicines is well established. Consider this: Because of the value brought by lower-priced generic competition, the average co-pay for a generic prescription is $5.63, less than one-seventh of the average co-pay for a brand-name prescription of $40.65.

These savings represent affordability for payers and access to care for patients. Savings from the use of generic medicines totaled $293 billion in 2018 and nearly $2 trillion over the past 10 years. These savings continue to increase and are essential to the future of health care.

However, the landscape is changing. Although specialty drugs, which include biologics and other complex medicines, account for only 2% of all volume, they are responsible for an increasing share — almost half — of all drug spending. These medicines provide hope to patients with cancer and a range of serious diseases. Biosimilars — lower-priced versions of brand biologic medicines — have been projected to save as much as $54 billion in the U.S. over the next 10 years. They are available in the European Union and around the globe, but currently the United States lags behind.

The Food and Drug Administration has approved 25 biosimilars, but only 11 are available to patients. The Association for Accessible Medicines’ Biosimilars Council found that a combination of brand anticompetitive tactics and misaligned policy incentives has cost the U.S. health care system an astounding $9.8 billion in lost savings since 2015.

Here are some other issues to keep an eye on in 2020.

Campaign rhetoric

In the election year, watch for candidates making extravagant promises. But some of the issues are simple — although generic and biosimilar medicines provide savings, a combination of government policies and anticompetitive behaviors are keeping safe, effective and affordable generic and biosimilar medicines out of reach for too many patients. AAM’s #Doesnt­Add­Up campaign highlights these challenges, as well as the fact that although generic drugs continue to decline in price, patients may be paying more at the pharmacy counter.

Potential changes to the Medicare drug program

Senate Finance Committee chairman Charles Grassley (R., Iowa) and ranking member Ron Wyden (D., Ore.) are sponsoring the Prescription Drug Pricing Reduction Act, and House Democrats have put forth the Elijah E. Cummings Lower Drug Costs Now Act. Among other provisions, the bills would make significant changes to the Medicare drug program, including creating an out-of-pocket cap on seniors’ drug spending and reforming the overall drug program’s design to provide greater incentives for health plans to manage costs. There is reason for concern: Medicare’s share of retail spending on prescription drugs has increased from 18% in 2006 (the year Part D launched) to 30% in 2017 and is likely to continue growing.

As policy makers consider possible Medicare reforms, AAM is working to ensure that these measures promote Medicare policies to encourage rapid adoption of lower-priced generics and biosimilars:

• Cover new generics and biosimilars at launch. If Medicare drug plans prioritized coverage of new generic and biosimilar competitors when they cost less than the brand, it would save money for seniors and taxpayers alike.

• Place generic drugs on generic tiers. Policy makers should ensure that low-priced generic drugs are placed on generic tiers. According to analysis by Avalere, this requirement would have saved patients who take generic drugs an estimated $4.1 billion in 2019.

• Create a separate tier with lower cost-sharing for specialty generics and biosimilars. Establishing different tiers for specialty products would allow plan sponsors to encourage patient use of lower-priced biosimilars and generics through lower cost sharing.

These proposals would ensure that health plans and pharmacy benefit managers support greater access to affordable medicines.

State legislation

Some states are also likely to consider legislation relating to drug pricing. Unfortunately, many of these efforts pose significant challenges to the future sustainability of low-cost generic and biosimilar ­competition.

For instance, California recently enacted legislation allowing the state attorney general to investigate settlements between generic and brand-name drug companies that accelerate competition to the market; AAM is challenging the law, on the grounds that it violates the U.S. Constitution. It is vital that any legislation protect and expand access. Currently, the average state saved $5.7 billion from the use of generics in 2018, with California leading the way at $26 billion. On average, Medicare generic savings came to $1.78 billion per state, and Medicaid savings averaged $917 million per state.

Shortages and quality

High prices are one major factor interfering with patient access. The threat of drug shortages is another. Recently, the FDA issued a report, titled “Drug Shortages: Root Causes and Potential Solutions,” that recognizes the complex challenges that can lead to drug shortages, including market conditions that jeopardize sustainability. AAM and its members continue to work with FDA and policy makers to develop and promote solutions to the challenges caused by and stemming from drug shortages.

Occasionally, the media sounds alarms about the quality and safety of U.S. pharmaceuticals. Patients might ask their doctors or pharmacists about these stories. Readers of this publication — whom patients trust when they make decisions related to their own or their family’s health — should know that patient safety and drug product quality remains the top priority for AAM and its member companies. Studies regularly confirm that generics and biosimilars are as safe and effective as their brand-name counterparts.

FDA, which conducts rigorous inspections domestically and internationally, reinforces this conviction. “Safety of Medicines” is the first principle of the AAM Code of Business Ethics: Every member company pledges to “conform to high standards of quality, safety and efficacy as determined by regulatory authorities in each economy in which they operate.” Further information is on our website at

Chip Davis is the president, CEO at Association for Accessible Medicines.



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