Prescription drug affordability continues to be a pressing issue in the United States. Nearly 36% of Americans say they have difficulty affording their prescription medications, with many choosing to skip their medications due to cost.
In July 2024, the Senate unanimously passed a bill that could help lower the costs of prescription drugs by allowing generic and biosimilar competitors to enter the market.
Explore what this legislative action could mean for your employee health plans and why it might be time to speak with a benefits consultant about restructuring your offerings.
Fundamental Provisions of the Bill
Sponsored by Senators Richard Blumenthal (D-CT) and John Cornyn (R-TX), the Affordable Prescriptions for Patients Act promotes generic and biosimilar competition for prescription medications, which helps lower their costs.
The bill was created to help stop anti-competitive practices, such as patent thickets, a common tactic drug companies use to prevent other businesses from selling generic or biosimilar versions.
Reduction of Federal Deficit
While the recently passed version of the bipartisan pharma patent bill contains only a portion of the sponsored senators’ original legislation, it is expected to reduce the federal deficit. The Congressional Budget Office (CBO) reported that the bill could potentially reduce the federal deficit by up to $1.8 billion over the decade.
Limitation on Patents
In an effort to reduce drug costs, the bill limits the number of patents that pharma companies can assert in litigation on individual biological products. These limits are subject to waivers and exceptions, such as the length of time a product has had regulatory approval from the U.S. Food and Drug Administration (FDA).
Impact on Market Competition and Drug Pricing
The Federal Trade Commission (FTC) interim report confirms the immense power that pharmacy benefit managers (PBMs) have over patients’ ability to afford and access their prescription medications.
As a result, PBMs can dictate both the types of available drugs and their costs. This new bill is one of the latest in a series of proposed legislation that promotes increased competition and reduced drug prices.
Promotion of Generic and Biosimilar Competition
The pharma patent bill was created to fight patent thickening, which occurs when drugmakers stack secondary drug patents to develop a system of intellectual property rules that make it challenging for generic and biosimilar competition to join the market.
It also targets “product hopping,” which occurs when drug manufacturers encourage patients to use follow-up products when patents of original versions near expiration. This crackdown on aggressive patenting practices will likely directly impact market dynamics and drug pricing.
Comments From the Pharmaceutical Care Management Association (PCMA)
The PCMA, a lobbying group representing PBMs in the U.S., issued a statement saying that “patent abuse legislation should be the top consideration” and is an important step in ending anti-competitive practices.
The PCMA applauded the Senate’s decision to pass the bill and believes promoting greater competition to reduce prescription drug costs for patients is necessary to the mission of pharmacy benefit companies.
Broader Implications and Future Actions
The pharma patent bill received broad bipartisan support with multiple cosponsors, including Senators Ted Cruz (R-TX), Mike Braun (R, IN), Chuck Grassley (R-IA), Lisa Murkowski (R-AK), Peter Welch (D-VT), Amy Klobuchar (D-MN), and Senate Judiciary Committee Chairman Dick Durbin (D-IL). This unanimous vote in the Senate signifies a strong commitment to addressing drug price issues in the U.S.
Federal Trade Commission (FTC) Report
In July 2024, the FTC issued a 71-page bipartisan interim report that shined light on the commission’s two-year investigation into questionable practices of PBMs.
PBMs are responsible for negotiating drug costs and rebates with pharmaceutical manufacturers. Research suggests that these entities profit by inflating drug prices.
Allegations of improper pricing are influencing the FTC to file suit against the three largest PBMs in the country – CVS’ Caremark, Cigna’s Express Scripts, and UnitedHealth’s OptumRx.
Continued Legislative Efforts
While the bill’s long-term effects on drug pricing remain to be seen, there is widespread hope that pharmaceutical companies’ abusive patent practices will soon end.
Ongoing bipartisan collaboration to address ongoing drug pricing issues is more important than ever, especially as patients struggle to pay for their medications. With greater competition, drug companies are more motivated to invest in innovative work that could produce new and improved drugs.
Consult With a Benefits Consultant from New City to Optimize Your Employee Health Plans
Employers nationwide continue to face rising healthcare costs and the challenge of providing employees with affordable, high-quality care options. At New City Insurance, we help businesses restructure their employee benefits for cost savings without reducing network access or access to benefits.
To speak with a knowledgeable benefits consultant about improving your employee health plans, contact New City today at 888.210.2765.