The state of this union's drug prices

It’s a week late, but it’s here: President Trump is set to give his State of the Union address tonight, and there’s basically no doubt that he’ll spend part of it talking health care — and perhaps most interestingly (to me),drug prices.

Remember last year? Trump was unequivocal: “Prices will come down,” he proclaimed. The president was so resolute that he even started riffing on FDA’s approval of generic drugs — hardly the most scintillating of prime-time topics. And advocates have high hopes that Trump will use his second State of the Union to once again make drug pricing a prime-time issue.

That got me to thinking: What does Trump’s State of the Union really mean for the drug industry? What are the best and worst case scenarios for drug makers? And for that, I polled a number of drug industry lobbyists who are planning to tune in tonight.

Some of the worst case scenarios made a lot of sense: among them, Trump calling out companies by name, announcing new policy ideas on top of the handful his administration is already pushing, or pushing even harder on his idea of tying what Medicare pays for drugs to what other pay, which the industry despises. One lobbyist even raised the nightmare scenario of Trump going back to his old promise of having Medicare negotiate the price of drugs.

The best case scenarios were much less exciting (Can you really blame drug industry lobbyists for not being able to think of many great scenarios for tonight?) But one really caught my eye: That Trump spends so much time lathering on praise about his administration’s progress that he offers just empty promises about more action coming.

Will tonight’s speech be full of bluster or substance? Will anybody’s nightmare come true? Will FDA’s generic approval statistics once again become prime-time TV? You’ll have to check back tonight. Lev, Ike and I will all be on Capitol Hill tonight covering the event for STAT. Stay tuned.

In the meantime, have your own worst/best case scenario? Shoot me an email and I’ll tweet out my favorites. Feel free to send me other tips too! I won’t tweet those out unless you ask me to. I'm nicholas.florko@statnews.com.

FIRST IN STAT: Express Scripts CEO Steve Miller on rebates

My colleague Ike Swetlitz caught up with Dr. Steve Miller, chief medical officer of Express Scripts, one of the country’s largest PBMs, to talk about the Trump administration's new plan to end the use of drug rebates in Medicare. And Miller didn’t mince words: he’s not a fan.

“In this era where we're all really worried about pharma pricing, we're about to hand them a major windfall through this policy,” Miller told Ike.

As a reminder, the Trump administration proposed Thursday ending the rebates drug makers pay insurance companies in exchange for favorable placement on insurance formularies.

Miller isn’t the only one to see the proposal and think of dollar signs for drug makers. House Speaker Nancy Pelosi (D-Calif.) said something similar when the rule first dropped last week. The argument: That drug makers will have freer rein to charge what they want for drugs.

PBMs have long argued that the current rebate system works well for negotiating down the price of drugs and that ending rebates could put that entire system at risk. Miller toed a similar line in his chat with Ike.

Miller also maintained that Express Scripts wouldn’t be impacted by the proposal. “For our companies, the good news is, we actually flow 100% of those [Medicare] rebates back to … our plan sponsors, and so for us, financially, it’s not an impact,” Miller said.

That leaves me with one big question: If PBM’s financial ties aren’t impacted by the new proposal, why oppose it so vociferously?

Speaking of rebates: wasn’t there supposed to be more to it?

Experts predicted before Thursday that if the Trump administration proposed a regulation to end drug rebates, it would explicitly carve out value-based arrangements — the much-ballyhooed agreements between drug makers and insurers that would let the latter only pay for drugs when they work. But that didn’t happen.

Now drug makers are looking to Congress for some help. That suddenly raises the profile of a newly released bill from Sens. Bill Cassidy (R-La.) and Mark Warner (D-Va.) The legislation is about as technical as it gets, but its intent is to make it as clear as possible that value-based pricing arrangements are allowed under the law, even if the administration cracks down on drug rebates.

The bipartisan duo was working on the legislation long before the Trump administration unveiled its proposal, but it couldn’t come at a more opportune time.

“My members want the legislation, they want the certainty of a statutory safe harbor that outlines the rules of the road around these arrangements,” Joel White, a lobbyist who heads the Council for Affordable Health Coverage, a coalition of drug makers, PBMs and insurers, which is pushing for more clarity around these pricing deals.

While Thursday’s regulation does include a brief section, buried 43 pages in, that says HHS “does not intend” for the new proposal to “have any effect on existing protections for value-based arrangements between manufacturers and plan sponsors,” drug makers have already been arguing that those “existing protections” aren’t strong enough.

While White maintains the administration is still committed to protecting value-based arrangements, other experts I spoke with weren't so sure. Multiple attorneys told me they were dismayed by the lack of new protections (the technical term is a regulatory safe harbor) for value-based arrangements, and that the administration’s brief assurances in the rule just weren’t enough.

Not enough rebate talk for you? I’ll also flag this thorough STAT Plus policy rundown that Ike and I wrote together, unpacking all the looming questions for the rule. Read more.

STAT SCOOPLET: Yet another drug pricing hearing?

The Ways & Means Committee, the main House committee with jurisdiction over Medicare is gearing up to hold its first drug pricing hearing later this month, a committee spokesperson told STAT. (ICYMI last night, the Senate Finance Committee also just announced its SECOND hearing on the issue in 2019. It’s calling on seven CEOs to testify. Get me some popcorn!)

The actual date and witnesses for the Ways & Means hearing are still unknown, but the news has me interested for a few reasons. Chief among them: The lawmakers who will be leading the meeting.

Rep. Lloyd Doggett of Texas, a fierce adversary of drug makers, now leads the panel’s health subcommittee. I’ll be watching to see if Doggett can use his new perch atop the subcommittee to push some of his sweeping drug pricing bills, like one that requires Medicare to negotiate the price of drugs and threatens to strip drug makers of their patents if they don’t negotiate.

I’ll also be watching Doggett’s Republican counterpart, Rep. Devin Nunes of California, a lawmaker known more for his relationship with Trump than for his record on health care. It’s not at all clear yet where he stands on the issue: Nunes is not a co-sponsor on any drug pricing legislation this Congress, or last Congress. In fact, he hasn’t even released a public statement on health care since May of 2017, according to his website. The closest he has come was co-sponsoring legislation repealing the Independent Payment Advisory Board, a drug-industry-opposed panel created by Obamacare that had been charged with proposing cuts to Medicare spending.

Worth your time

Bloomberg's Anna Edney writes about both a scary regulatory failure and a dream scenario for brand-name drug makers: widespread infractions at the West Virginia manufacturing plant of Mylan, the generic pharmaceutical manufacturer. The story raises the question: is the U.S. drug supply chain as safe as the FDA says? — Lev Facher

Vox revealed last month that a top San Francisco hospital was charging patients with private insurance through the roof — and now the hospital is suspending that practice for 3 months while it comes up with a better system, they report. — Ike Swetlitz

A heck of a scoop from Axios detailing how Trump has spent the last three months in the oval office. Now if only we could get some details on how much time he’s spending reading about FDA’s generic drug approvals … — Nick Florko