With the surging costs of specialty drugs, what was once unthinkable in American healthcare is starting to look like a viable idea that the President is pushing.
The Obama Administration, like insurers and many consumers, is concerned about the costs of specialty drugs. Through 2018, experts predict that U.S. specialty drug spending will grow at annual compound rate of 17 percent, to the point where they may account for more than half of all drug costs.
And yet even though America is one of largest consumers of pharmaceuticals, prices remain relatively uncompetitive with international peers.
In case of hepatitis C blockbuster Sovaldi, France's Health Ministry has negotiated a $51,000 per-treatment reimbursement with manufacturer Gilead Sciences, while the United Kingdom is set to pay about $58,380 -- prices well below the $80,000 per-treatment sticker price in the U.S and perhaps better deals than even the exclusive arrangements secured by the likes of Aetna, UnitedHealth Group, Anthem, Express Scripts and CVS.
The Obama Administration, though, wants to harness some of the country's collective buying power for speciality drugs.
In the administration's federal budget, Obama is proposing to give the Department of Health and Human Services the authority to negotiate prices for biological and high-cost drugs on behalf of the 37 million Americans enrolled in Medicare Part D drug plans.
"We believe it will help with the cost of drug prices," said HHS Secretary Sylvia Mathews Burwell at a news conference.
Congress prohibited Medicare from negotiating prices with drug companies when it created Part D in 2003, and giving the agency that authority would require a legal change from Congress.
But the Obama Administration's move, even just as proposal, sends a message to the drug industry and greater healthcare sector that some leaders in government want to enter a new regulatory territory -- with Part D drug spending projected to increase 30 percent, to $82 billion, over the next year.
The drug industry is adamantly opposing the prospect of negotiating with Medicare.
"Medicare Part D is a widely successful program, keeping costs low for both beneficiaries and taxpayers through plan competition and negotiation, while also helping to hold down other healthcare costs by improving adherence to needed medicines," said John Castellani, president and CEO of Pharmaceutical Research and Manufacturers of America. "The program has improved seniors' access to medicines and kept premiums low, but the President's proposals could jeopardize that access by driving up premiums, reducing choice and restricting coverage."
The President's budget includes a number of proposals aimed at lowering drug costs in Part D and in Medicaid.
The plan to negotiate prices "is one of a range of potential solutions to address these growing costs, and the Administration looks forward to working with the Congress on this challenge," the White House said.
In addition to Part D negotiation, the President's budget calls for closing the coverage gap for brand name drugs in the Part D benefit by 2017, three years earlier than under current law, by increasing discounts offered by the pharmaceutical industry. The President also wants to increase access to generic drugs and biologics.
The budget proposes new prohibitions on "anticompetitive" "pay for delay deals" that keep generics off the market. It would also prohibit drug makers from extending the exclusivity of brand name biologics through minor alterations in formulations, and would lower the period of biologic brand exclusivity from 12 years to seven.
The Obama Administration also wants to align Medicare payments for drugs with Medicaid reimbursement policies, and would give HHS authority to suspend coverage and payment "for questionable Part D prescriptions," as well as pilot programs to curb painkiller abuse and overuse.
Altogether, the White House estimates that the drug changes would save mroe than $130 billion over 10 years.