Cathy McMorris Rodgers (R-WA) and her Republican colleagues claim the Protecting Health Care for All Patients Act of 2023 legislation, which would ban the government from assessing whether new drugs actually improve people’s lives, is about protecting the interests of people with disabilities.
Instead, it protects the pharmaceutical industry’s pricing power, which has finally encountered a meaningful counterweight in the form of the Inflation Reduction Act.
For the first time in the program’s history, the IRA gives Medicare the power to negotiate what taxpayers and patients pay for some prescription drugs. Savings from this new authority are projected to reach $100 billion over a decade, a sum remarkable not only for its astronomic size, but that it comes entirely from the modest number of drugs Medicare can select for negotiation.
The dramatic savings opportunity speaks to Medicare’s historic role as a price taker in a market where price makers—pharmaceutical manufacturers, that is—have had overwhelming advantages in determining what one of the nation’s largest payers pays for prescription drugs.
Assessing Treatment Coverage
Enter the quality-adjusted life year, or QALY, a wonky health economic tool that combines gains in life expectancy and quality of life into one measure of the relative effectiveness of pharmaceutical interventions.
The QALY is used today in cost-effectiveness studies, which quantify the financial and health consequences of paying for new treatments. Health plans can use this information in making decisions about whether and how patients can access such treatments.
The QALY has drawn heavy opposition from some patient groups, often ones funded by and fronting pharmaceutical companies, who contend that the measure inherently limits opportunities for the elderly and those with disabling or terminal illnesses to access treatment.
Although the QALY is by no means perfect, its ability to quantify tradeoffs make it a unique and important tool for understanding whether we’re paying for treatments that actually work.
Still, these details would hardly seem to matter, since current laws already prohibit Medicare from considering it. So why H.R.485, and why now?
The answer is this bill uses the QALY as the tip of the spear to ensure that federal programs cover treatments even if they don’t work. Under the guise of protecting older adults, the disabled, and terminally ill, H.R.485 introduces language that would ban health plans’ use of the QALY and any other measures that could be construed as valuing treatments for various conditions differently.
This goes a step beyond banning the QALY, and creates a quandary for payers. Should coverage and payment conditions for a drug like Zolgensma, a gene therapy that improves both the survival and quality of life of children with spinal muscular atrophy, be the same as for a drug that delays the progression of a cancer, but has not been shown to improve patients’ survival?
One immediate consequence is the undermining of Medicare’s new negotiating authority, which does not consider cost effectiveness, but does account for assessments of relative clinical effectiveness of treatments, or comparative effectiveness research.
But H.R.485 doesn’t stop there. It expands the restriction from Medicare and Medicaid to include all federal and state programs using federal money to pay for prescription drugs, such as Veterans Affairs and the military. Unlike Medicare and Medicaid, other federal programs are not presently restricted from considering the QALY or other measures of a drug’s effectiveness. This includes the VA and military, which both negotiate prices for pharmaceuticals.
And although Medicaid is subject to the same restrictions as Medicare at the federal level, state Medicaid programs can also negotiate with manufacturers for rebates for certain drugs based on their effectiveness and how much they cost.
The Centers for Disease Control and Prevention develop recommendations for vaccine coverage that consider cost effectiveness analyses using the QALY. The Vaccines for Children program, which accounts for 50% of vaccines purchased in the US, follows CDC recommendations.
Compliance and Effectiveness
The bill’s requirement that each of these entities “provide for compliance” with the new limitation sends a clear message: Consider how well a drug works when making decisions about how to cover and pay for it, and you will risk facing a lawsuit.
The political prospects of H.R.485 are not yet evident. But its introduction alone is cause for alarm—bills that gain a modicum of political traction have an uncanny way of appearing dead, only to be resurrected as part of a political compromise to pass a large legislative package.
In achieving its true intent of preventing federal programs from considering whether a drug even works, H.R.485 will harm the very patients it claims to protect.
Paying for any new drugs, regardless of their effectiveness, creates no incentives for manufacturers to develop more effective treatments. At the same time, prices for new and aging treatments become unaffordable, leaving patients to ration drugs they need but cannot afford.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Anna Kaltenboeck is principal and head of the prescription drug reimbursement practice at ATI Advisory, a health research and advisory services firm.