GPPR Podcast Editor Joe Lustig (MPP-EP ’24) speaks with Dr. Richard Frank – a distinguished health economist, Brookings Institution fellow, and Director of the Schaeffer Initiative for Health Policy – to talk about why drug prices are so high, the steps Congress has taken to bring them down, and what they might do next.
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GPPR Podcast Editor Joe Lustig (MPP-EP ‘24). Hello listeners, my name is Joe and this is the Georgetown Public Policy Review Podcast.
One of the most important and vexing challenges facing healthcare policymakers in the United States is the price of prescription drugs. Drug prices in this country are much higher than in other peer countries. According to the Department of Health and Human Services, drug prices in the U.S. are about 2.5 times as high as in similar, high-income countries. High drug costs are obviously a problem for American households, especially the elderly and people with complex medical conditions who rely on expensive drugs. It’s also a problem for the federal budget, since prescription drugs account for a significant portion of spending in Medicare and Medicaid. Congress took steps to address high drug prices in the Inflation Reduction Act, which was signed into law by President Biden in August of 2022. To talk about the history of drug pricing policy in the U.S., the provisions in the Inflation Reduction Act, and what else Congress might do to tackle the high price of drugs moving forward, I’ve invited Dr. Richard Frank on to the podcast. Richard is a distinguished health economist and an expert on drug pricing issues. I can think of no one better than Richard to talk us through these complex issues.
All right, Richard. Thank you so much for joining us this afternoon to talk about drug pricing. To get started why don’t you just introduce yourself – who you are, your work and your interest in drug pricing.
Dr. Richard Frank: My name is Richard Frank, and I’m a health economist. I am a Senior Fellow at the Brookings Institution and I direct the Schaeffer Initiative on Health Policy there. And I’ve been a health economist in academia, in government and in the nonprofit sector for a long time. I spent close to five years in the Obama Administration in the Department of Health and Human Services. And I’ve worked on drug pricing issues for over 30 years.
LUSTIG: Great! Awesome. Thank you so much. So I wanted to see if we can start by giving folks a brief history. So many people may not know that Medicare has not always covered drug pricing. So Medicare originally passed in 1965 as part of President Johnson’s Great Society. And initially, it covers hospital services, it covers physician services, but it doesn’t cover drug pricing, so I was hoping you could just walk us through what were the considerations that went into that? Why did Medicare initially not cover drugs?
FRANK: Well, Medicare was built off of a platform that was essentially the Blue Cross Blue Shield standard option at the time. And at that time, drugs were a really tiny part of what we spent money on in health care. And so people didn’t view it as a type of serious financial risk that it is today. And so the standard Blue Cross plan didn’t cover it. Lots of insurance plans didn’t cover prescription drugs. And so Medicare sort of followed suit and didn’t.
LUSTIG: That’s interesting. So it was sort of not even thought of as a significant health expense for most people. So, as a result the legislators and the Members of Congress and the interest groups that were negotiating this didn’t even really think to cover drugs. Is that right?
FRANK: Yeah. Well, it’s important to recognize two other points related to this. One is that inpatient drugs were covered as part of the hospital bill.
LUSTIG: Right.
FRANK: And also physician-administered drugs, such as chemotherapy for cancer were covered under Medicare part B. And so it was really the outpatient – the pills that we go through the drugstore to get – that were uncovered. And so those at that time were a much smaller part of our healthcare budget than they are now.
LUSTIG: That makes a whole lot of sense. So drugs you get in the hospital and drugs a doctor gives to you at their office were covered. Drugs you go to the pharmacy counter to get just weren’t a significant enough part of the health care expenditures at time to be considered covered, That makes sense.
FRANK: Correct. Yes.
LUSTIG: So, fast forward to 2003, and Medicare does come around to adding – or Congress comes around to adding – a prescription drug benefit to Medicare. But it was a little bit different than traditional Medicare. So in most Medicare, you know, for physician services for doctors Medicare is the direct insurer. People who have Medicare for their health insurance go to the doctor and Medicare pays the doctor. It’s just covered that way. The Medicare prescription drug benefit wasn’t designed that way, it was more of a public-private partnership. Could you explain sort of how that program was designed, and why?
FRANK: So, the Medicare Modernization Act was sort of an important policy initiative from the Bush Administration – and that was in 2003 – and the motivation was to sort of cover drugs to recognize that they were now a significant part of the health care spending equation. And the idea there was to use market forces to try to control the cost of the benefit, among other things.
And in a sense, there are sort of two sides of the market forces here. On one hand, they created a market in how drugs get distributed and prescribed. But they insulated the pricing mechanism from the usual types of administrative prices that you see in Medicare, such as those that we use with hospitals and physicians, and some durable medical equipment. And there was a clause in the Medicare Modernization Act that prohibited Medicare from directly negotiating the prices of prescription drugs covered under the part D benefit, which is the outpatient prescription drug benefit. And so, that was motivated out of a concern that the presence of price controls would inhibit investment in research and development of new drug products. And that was a policy that was aggressively supported by the pharmaceutical industry. And it was one where many consumer groups and insurers were somewhat uncomfortable with.
LUSTIG: And so just to draw out the pricing mechanism point a little bit, because that’s really important. So with Medicare Parts A and B – hospital and physician insurance – those prices are set sort of just by the government, right? The government puts out a price schedule every year that determines how much physicians are paid, or how much hospitals are paid for each particular service, for, you know, go down the list of any service you could get in a hospital or from a physician and here’s the price Medicare is going to pay. Is that right?
FRANK: Yeah, that’s a simplified but mostly accurate version.
LUSTIG: Right. Okay, great. But, so, for drugs it’s not that.
FRANK: No
LUSTIG: What they do is they sort of set up a private market, and let them market determine the price rather than having the government dictate, or even negotiate with those prices are.
FRANK: Well they set up private purchasers known as prescription drug plans. They were like specialty insurance plans. So if you were a Medicare beneficiary you could sign up for one of these plans if you wanted prescription drug coverage. And they would negotiate with the industry, much like pharmaceutical benefit managers do broadly in the marketplace, and they would – through the design of the benefit, through negotiation, through the use of drug formularies – try to get price concessions from manufacturers. And that works pretty well when there’s a lot of competition for a drug. Because by encouraging folks to buy a lower price version, you can get price concessions by playing the manufacturers against one another. However, when there isn’t much competition, that becomes much more difficult, and these prescription drug plans are in a much weaker bargaining position. And in those cases what you see is much higher prices.
LUSTIG: So, in other words, if there is a particular drug that doesn’t have any good substitutes, then the fact that there’s competition among prescription drug plans doesn’t really help you bring down prices, because ultimately the manufacturer has all the leverage. They can just say “take our price or or we’re not going to put our drug in your plan.” And so the mechanism to use market forces to bring down the price doesn’t really work.
FRANK: Yeah. In fact, it’s a little worse than that, because by having many prescription drug plans, what you do is you fragment the market. So you have lots of smaller plans negotiating with a big plan, and, you know, something we all learned in the school yard is when a big guy fights with a little guy, the big guy usually wins.
LUSTIG: Right. That makes sense. So, I think there are various smaller scale efforts to combat some of these problems in the decades following the Medicare Modernization Act. But really, the first major drug pricing legislation was passed last year, and that was the Inflation Reduction Act, which had a lot of other unrelated measures. But one core section of that bill was a series of reforms intended to bring down drug prices and rectify some of the problems created by the way that Medicare Part D was originally designed.
So I know that you have looked very closely at this, and I want to sort of have you walk through some of the major provisions and explain them for the audience. So the first major provision is something that we’ve already talked about a little was that the bill – the Inflation Reduction Act – allows Medicare to directly negotiate drug prices with manufacturers, but only for a pretty small set of drugs. So do you want to walk through those provisions?
FRANK: Sure. The first part is to allow the government to no longer be bound by what is known as the non-interference clause of the Medicare Modernization Act. And what that does is it says that the government will be permitted initially to negotiate the prices on ten drugs that are high-spending drugs in terms of the claims they make on the Medicare program that have been in the market for nine years if they were a small molecule drug and 13 years if they are biologic drugs.
LUSTIG: I’ll just pause you there real quick. What is the difference between a small molecule drug and a biologic drug?
FRANK: Small molecule drugs are the drugs that are typically what we’ve lived with for a long time, which are chemicals that are easily replicated that you can sort of make in a laboratory and that do not involve human cells or anything like that.
Biologics, which are more like vaccines, have living material there, and work on the body differently, and are very often large molecules that are actually quite complicated, and therefore are very difficult to exactly replicate or reproduce.
And so the Inflation Reduction Act allows the government to negotiate for those types of drugs that are in part D, which again, are the outpatient prescription drugs. And the government can only do so if they meet those criteria. And the reason that those criteria are there are, in a sense, because they’re trying to be sensitive to those innovation incentives. The logic is, if you’ve been on the market for nine years, and you’ve been selling hundreds of millions of dollars worth of product every year, after nine years you’ve probably made your money back. But in addition to that, in the process of negotiation the government is supposed to take into account things like whether, in fact, these drugs have broken, even – you know, covered their development costs, how effective those drugs are compared to everything else in the market that treats the same illnesses and things like that. And so again, it’s a fairly cautious approach to enter into negotiation. And then there’s a process that will begin around two years from now, a little less than two years from now.
LUSTIG: Great. So, you mentioned that it’s 10 drugs. And so, you know, some people might think that doesn’t sound like a whole lot, and I know that there are, I think there are more added every year for a few years, and I think it adds up to maybe 35 drugs. But still that that sort of seems like a small number.
FRANK: They keep they keep accumulating
LUSTIG: Right.
FRANK: So if you get 15, it’s 15 the next year, and 20 the year after, and so on. And then it continues. So again. It’s a cautious approach. But you know, in a sense, you’re setting up this whole new program. And you’re setting up a program to do some very complicated work. And so you’ve got to sort of build this ship, and then you’ve got to learn how to sail it. And so, starting off modestly, and ramping up is a very sensible thing. Now, if you look at countries in Europe that have been doing this for years. Many of the nations like Germany – you know, they only negotiate over 10 to 20 drugs a year, anyway, you know, sometimes a little bit more, sometimes a little less. But it’s not like 2,000 drugs are being negotiated every year. It’s a very sort of specific, manageable number. Just because these are complicated products. They matter a lot to human beings, and you want to be careful about how you go about navigating those waters.
LUSTIG: So the idea is to sort of incorporate – a pilot program is the wrong term – but to start slowly, make sure you can sort of develop the process, make sure that Medicare and and the government develop an expertise about how to do this and scale it up over time.
FRANK: Yes, and you know it’s not that difficult to pooh pooh ten drugs. But when they’re selling, you know, 1, 2, 4 billion dollars a year of product to Medicare alone, you know, ten drugs can wind up being quite a bit of money.
LUSTIG: Ok, that’s negotiation, which I think is one of the provisions of the law that got the most attention. There’s another provision that would require pharmaceutical manufacturers to pay rebates if the price of a drug rises faster than inflation. So can you talk a little bit about that provision and the thinking that went into it.
FRANK: Sure that you know one of the things that has been clear is that over the last 5-10 years we’ve had very low inflation right until just this past year. You know, we’re talking like 2% a year. And you’ve been seeing brand name prescription drug prices going up at, you know, 6-7% a year. And so clearly, those price increases are not because the costs of doing business are going up. It’s for other reasons, and the concern was – and this was initially, a bipartisan concern – that the taxpayers are not getting a good deal going forward. And so what the Inflation Reduction Act does is it says that if you are raising your prices faster than the Consumer Price Index, set at a base of 2021, you will have to rebate to the government the difference between what you would have charged times the number of drugs you sell relative to what you actually did. So you take what you actually did charge what and what you would have charged had you just stayed with inflation. You take that difference. You multiply by the number of pills you sold, if you will. And then that difference is the size of a rebate.
LUSTIG: And if the government receives that rebate is the idea that the governmentpasses that rebate on to the consumers of the drug? Or or is that not? Or does it just go into government general revenues?
FRANK: Well it does go into that. There are provisions in there that limit – for example in a third provision that changes the design of the prescription drug benefit. It protects and helps pay for that.
LUSTIG: Got it.
FRANK: And so to some extent it’s internally consistent that way. You have to remember that those two provisions are saving on the order of 150 billion dollars.
LUSTIG: Right. So you know, I think a lot of people think about drug pricing policy as sort of intended to save consumers out of pocket costs, which it does. But also this is saving the federal government a tremendous amount of money, because Medicare itself pays for
so many prescription drugs for seniors, and by reducing those prices, in addition to reducing seniors’ out of pocket costs, it also saves the federal government a lot of money which can then be used to fund other programs.
FRANK: Yeah. Well, I prefer to think about it as saving the taxpayers money, because, in fact, it does save the taxpayers money, and you know it contributes to deficit reduction, etc., which is what the Congressional Budget Office pointed out in making their estimates
LUSTIG: Great. So you started to mention the Part D redesign, and that’s the next thing I wanted to get into. So, one of the other major provisions is that it establishes an out of pocket cap, an annual out of pocket cap of, I believe, $2,000 in Medicare Part D, so a beneficiary wouldn’t have to pay more than $2,000 out of pocket in a given year for prescription drugs. And it makes some other changes to the design. So do you want to talk about that a little bit.
FRANK: Sure. So in a sense what you’ve pointed out is a three-legged stool. There’s the negotiations, there’s the inflation rebate and then there’s the Part D redesign. And the redesign is a thing that doubles down on saving consumers out of pocket expenses. So the first thing as you note it does, is it caps the total out of pocket spending on prescription drugs. And so what that does is, it saves a relatively small number – well, a large number, but a relatively small portion of Medicare beneficiaries – a lot of money. So, if you have a very important chronic condition that requires you to take drugs that are going to cost you $50,000 to $100,000 a year, up until this law passed, even when you hit the so-called catastrophic benefit, you were still paying 5% out of pocket. And it turns out 5% of a large number is still a pretty large number for consumers. And so it was uncapped. And so, the $2,000 limit protects people who are relatively sicker from really catastrophic costs. And that was the first important piece.
Second is that the benefit redesign increased the number of people eligible for a low-income subsidy. So it moved up the income requirement that qualifies you for a low-income subsidy.
And so again, what you’re doing is you’re making drug coverage more affordable to people.
And again, that’s another way to lower the costs associated with prescription drugs to consumers, to real people.
And then the third piece was it capped the price of insulin at $35 per month. And so,
once again, what you have is that the negotiation piece looks at the total price, as does the inflation rebate piece, which has benefits, as you noted to consumers. But then the benefit to redesign really goes right after giving consumers more financial protection against the cost of prescription drugs.
LUSTIG: Got it. So the the first two legs of the stool, as you put it, are focused on sort of saving the taxpayer money, and the third part of the stool sort of uses some of that taxpayer savings to make the Medicare Part D prescription drug benefit more generous in a lot of ways for the folks who are using, or spending money on drugs.
FRANK: Yes, but you know, consumers benefit from the first two as well. Because consumers pay a portion of benefits out of pocket. And again they often pay a deductible before they get there, and so all of this affects – the first two legs – would still affect those consumer prices as well.
LUSTIG: Right. That makes sense. So I want to come back to insulin. But before I do, just to sort of conceptualize a little bit the point you made about the out of pocket max. I think, you know, most people who have health insurance will understand – there’s sort of these phases, so there’s your deductible, which, until you hit your deductible, you’re responsible for all of the expenditures that you incur. Then above your deductible, usually there’s some kind of co-pay or coinsurance amount where you’re paying a portion and the insurer is paying a portion. And then you get your out of pocket max, and once you’ve hit that, your insurer is covering everything. So that’s sort of normal. Medicare Part D is a little bit more complicated than that, because there, you know, there are these, sort of, different phases – I can put a diagram in the show notes so people can look at it because this gets really complicated.
But the sort of crux of it is that right now Medicare Part D does not have this out of pocket cap. It has this catastrophic coverage phase where consumers are only paying 5%. But, as you pointed out, if you’re someone who has a lot of really expensive drugs that you require, 5% of a lot of money is still a lot of money. And so this protects those folks, you know, who don’t have that protection from out of pocket maximum.
FRANK: Yeah. Correct.
LUSTIG: Okay. So let’s go back to insulin briefly, because I thought it was interesting that you know, insulin is one drug, and it’s sort of the only one that is singled out in the bill completely. Insulin gets a $35 out of pocket cap. There’s no other single drug that’s treated that way. And insulin also – you know – you hear Congressman talk about it a lot. You hear policymakers talk about the price of insulin a lot. What is it about insulin that gives it this singular focus? Why are policymakers so interested specifically in insulin? Why does it get singled out on the bill?
FRANK: Well, a couple of reasons. The first is in a way, it’s kind of a poster child for some of the dysfunction of the prescription drug market. So that’s one thing. Second thing is, there are a lot of people with diabetes who are insulin-dependent in the Medicare program. And that number seems to be growing, so there’s a lot of people involved. And also insulin has been around forever. I mean, you know some of it – there are some new products. But there have been insulins that have been around for a long time. And when I talk about sort of the dysfunction, that is partially reflected in what happens.
So if you look at what the government pays for insulin it’s actually not wildly expensive in many cases. And that’s because there’s a lot of competition. There are multiple products. They operate in slightly different ways. And the government gets back, you know, through the prescription drug plans, they negotiate pretty good deals with manufacturers, and so that comes in the form of rebates to the prescription drug plans and to the government. However, consumers pay on the basis of a list price which is completely different from net price, which is the list price minus the rebate. And so you have consumers paying off a base of a much higher price in the actual transaction with either the prescription drug plan or the government. So only one not getting a good deal up to this point on insulin for consumers, which represents that dysfunction that I was talking about. And one of the places where it is most extreme was in the insulin market.
LUSTIG: Got it
FRANK: So, given that there’s a lot of people within insulin, that it’s disproportionately a problem of old age, and there’s this dysfunction, it got the attention of Congress, as it should. And so what they did is they said:
“Well, look. The problem here is not that there aren’t mechanisms, either through the new negotiations or through the existing prescription drug plan approach to fix this problem for the government side of the market. But there’s a big problem on the consumer side.”
So they decide to go after it directly and just say, “look, no more payments above $35. It’s not going to be a percentage off of a list price anymore. It’s just this number, and that’s it.”
LUSTIG: Got it.
FRANK: And that tremendously changes the affordability.
LUSTIG: Okay, that makes a whole lot of sense. I appreciate that explanation. So I wanted to quickly talk about – you’ve done a really great job of walking us through what’s in the bill. I wanted to just briefly talk about some of the critiques of the bill. So I’ve sort of heard three major critiques, and I want to just have you – and a couple of them we’ve touched on already – but want to have you respond to those and let us know what you think. So the first, which I think we’ve addressed a little bit is the one you hear from the left, which is mostly just that this isn’t big enough. They should have included more drugs. They should have just directly controlled prices rather than have the government negotiate. You know a desire, I think, on the left for just something more aggressive. So if you have a response to that, I’d love to hear what you think.
FRANK: Well, you know, I think that, certainly the idea of phasing something in, I think it’s going to be – you know the government is going to learn a lot. It’s going to have to do a lot of thinking. I would guess that they will, over time, be modifying their guidance and their procedures as they learn more about how to do this, and so, starting off with a bunch of clearly high-priced drugs that have been around for a long time and made a lot of money, you know, that still don’t have any generic competition with them. That’s not a bad place to start.
And the thing that I think is so important about the Inflation Reduction Act is it gives the government a whole new set of tools to do this with. And I think that setting things up so that you can learn how to use your tools and use them appropriately, I think, is a good thing, and you know, as you see, the Biden Administration, their budget this year proposed extending the number of drugs going forward.
LUSTIG: Yeah.
FRANK: And so you know what that highlights is the fact that okay, we’ve got some tools in place. We’re gonna learn something in the first couple of years to do it. And then let’s potentially think about, you know, extending those tools as we learn how to use them. That seems like a perfectly reasonable way to proceed. You know as much as I admire, sort of, constructive impatience. I think that’s one thing.
I think the other thing is, I think you do want the negotiation. Because more often than not you’d rather have people walk away from an interaction, having shaken hands and knowing that, you know, nobody really got taken to the cleaners. And I think the balancing act here is, you need to have a mechanism in place that keeps everybody at the bargaining table. And that was always a very hard thing to figure out how to do, right? Because, you know, if you can walk away at any point, then the other guy is in a really bad bargaining position. And so you need to have something that keeps people at the table for a long time, and the Inflation Reduction Act does that through an excise tax. And I think that, you know, people can argue about how proper that was, etc., but you know to some extent, if you didn’t do that, you’d never be able to have a bargaining situation where everybody has a reason to stay at the table.
So I do think that in general, you want to have an opportunity. So you go back and forth. So you get feedback from the industry. So you learn about how they do business. And you let them make their case about why a particular drug is more or less important than another one. I think that it’s an important thing to do. And, you know, if you have seen the recent draft guidance that has come out of the Medicare program, you see that they really are trying to set up a process
where they actually have conversations with the industry. And so it’s not just, “Here’s my number. Take it or leave it, or we’re leaving the table.”
LUSTIG: Yeah. So that’s helpful. And I love the term “constructive impatience.” I’m going to use that.
So, the second criticism I’ve heard, and this tends to be more from the right, from sort of the free market types, or from the industry, is that this might lead to unintended consequences. So, for example, you can imagine that – the inflation rebate piece – if you tell the manufacturers well, you’re only allowed to raise prices X percent per year, they might say, okay, to make up for that, I’m just going to, when I first introduce a drug, I’m just going to make the price higher, because I know that future price increases are limited. And if they do that, does this actually have the effect that that’s going to be intended? So I’d love to hear how you think about that.
FRANK: Well, yeah. There’s no doubt that one of the possible consequences – one of the incentives – is to more or less do just as you said. For new drugs coming out to market, that are entering a market, for example, where there either isn’t much competition, or where a new product is a lot better than the existing product, there will be a tendency to be able to raise those prices. I think that’s true. And I think that, you know, in the sense you can take that incentive and blow it up and say: “Ah See, it neutralizes the whole program!” Well, that’s in fact not true. If you look at the Congressional Budget Office, they took that into account, and they still estimated very large savings, billions of dollars every year, over 10 years and beyond. And so to some extent, that’s true. And sometimes you just can’t accomplish everything with one policy. And so you’re probably going to see either folks trying to use other tools, or kind of revisiting this issue later. But it’s a difficult issue. And I think it’s going to be one of those areas that evolves.
LUSTIG: And the last area, and this is probably the most, maybe the most important criticism of the bill is that – and this is something you hear about drug pricing policy in any context – is that if you control prices too much, pharmaceutical manufacturers simply aren’t going to have the incentive to innovate, and the result might be fewer drugs. And you know obviously that’s that’s bad, because if there’s a potential future life-saving drug out there that never gets invented because you simply eliminated the market incentives for a pharmaceutical manufacturer to create it. Obviously, if that’s true, that would be bad. So that’s probably the most common and most concerning argument you hear from both sort of free market conservatives, and from manufacturers themselves. So I would love to hear – and I know you’ve written about this – so I would love to hear what you think.
FRANK: So, there is no doubt that you can expect somewhat fewer drugs to be coming to market as a result. However, that’s not a useful metric in terms of guiding us in thinking about the impact on American society, right? What we care about is, are we going to get new cures? Are we going to get new treatments? There have been a lot of dramatic claims made by the industry. I think somebody called it “the coming nuclear winter,” which is, you know, just a gross exaggeration. So let’s think about the track record here and let’s remind ourselves of a couple of bottom line facts. Fact #1 is we’re still going to have the highest prices in the world for prescription drugs by a long shot. That’s Number 1.
Number 2: No drug gets touched until they’ve been on the market for either 9 or 13 years. Let’s take a disease like Hepatitis C, which recently was the extreme winner in an R & D sense which is that a cure was developed. Well, they made their money back almost instantaneously. And then have made huge profits since, even with competition. And then nine years down the road. They’ll have made a huge amount of money, and that’s a relatively small disease group. I mean not tiny but not huge. Not like arthritis. And so I think that those are some things to bear in mind.
But more importantly, is the track record. What do our current incentives incent? A lot of the money that’s spent on R&D is to produce drugs that are small variations on what are out there already. And we did some research where we found that somewhere between 30 and 40% of new drugs launched offer no significant benefits over what’s already out there. And about a third of them – 35, 40% – offer some meaningful benefits. And 20% we’re not sure of. So there’s a lot of room there to reduce the number of drugs coming to market that don’t add much to the public health.
So my view is which drugs are we incenting to come on the market? And it seems to me that if you have a really important drug, then you’re going to be able to charge a lot of money for a long time for that drug, even if you can’t raise it to the degree that you have been able to raise the price as you have over the last five years. But you can still, as you noted, launch it at a very advantageous price, and keep it there, and keep it even with inflation for the next nine years if you’re a small molecule for the next 13, if you’re biologic. And it seems to me if we’re talking about drugs where you’re making billions of dollars a year, there’s still a huge incentive to produce those types of products.
LUSTIG: So that’s really helpful. It sounds like part of what you’re saying is “sure there might be fewer drugs, but the drugs that would be coming to market that now won’t are probably more likely to be those kinds of drugs that are minor tweaks on existing drugs. They’re not that innovative. They don’t offer that much benefit, so they might not be that profitable. There’s still always going to be a huge incentive, and huge profits, if you, for example, cure Hep C, or something like that, you’re still incentivized and even more so now.
FRANK: Yeah, and I think the drafters of the legislation were mindful of this by going to nine years, going to 13 years, exempting small sales drugs from consideration, putting special orphan drug provisions that exempt them putting into special provisions to exempt true orphan drugs, and allowing small manufacturers – innovative manufacturers – to phase in over a longer period of time. So they were very mindful of those things. And, I think, that you know the Congressional Budget Office, I thought, did a very even-handed review of this. They talked about a very small number of drugs over 30 years falling off the table because of this. And you know, to some extent, there’s a lot of uncertainty here. But if I was to sort of pick a number because I had to, the Congressional Budget office usually does a pretty even-handed job of taking what we know and making a reasonable projection.
LUSTIG: Great. All right. So the last question I wanted to ask you before we wrap up is what do you think Congress might look at next on drug pricing? Are there other provisions that maybe didn’t make it into the Inflation Reduction Act or other areas of prescription drug policy that Congress might look at next. What should we expect in the future or hope for in the future?
FRANK: Well, I think a lot of folks on both sides of the aisle have been worried about the way that the patent system is working. So, for example, the creation of what have become known as patent thickets, where, for example, there’s a drug called Humera, which you might know, which sells, you know, like 21 billion dollars a year worldwide. They have hundreds of patents. And so, they can weaponize the patent and the legal system to keep competition off the market. And I think that is of great concern to both Republicans and Democrats, and I think there is some interest in trying to figure out how to address that issue. So I think that’s an important one. I think there are a variety of things that the FDA can do, or that Congress can authorize the FDA to do to adjust their regulations to promote more generic, and biosimilar competition. And so, I think those are potentially still very important tools in the tool chest for keeping drug prices in check.
Let’s see I would say the so-called “bouncing act” around what are known as accelerated approval drugs. The one that’s most prominent these days is the Alzheimer’s drug Aduhelm that was approved by the FDA under sort of controversial processes, and which none of the major payers in this country, including Medicare, want to pay for in an open-ended way, because the evidence suggesting that there is any clinical benefit was murky if not non-existent. And that the potential dangerous side effects were potentially significant in the form of brain swelling. So yeah, I think those are kind of three basic areas that I think have a lot of potential for bipartisan action that could really improve the way we pay for prescription drugs.
LUSTIG: All right. Well, that’s all the questions I have. Is there anything else you wanna want to bring up before we wrap up?
FRANK: No, I think that we’ve covered a lot of ground today.
LUSTIG: Great, well, awesome Richard. Thank you so much for joining us today. This has been a really great conversation.
FRANK: Okay, thanks so much for having me.
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