The effort would likely have a limited impact, affecting prices of older drugs whose patents and exclusivity have expired and lack competitors. In contrast, the major driver of drug spending growth in 2016 was new brands that had been on the market for less than 2 years, according to a recent report from the QuintilesIMS Institute, a research organization.
FDA “can’t do much, because they are about safety and efficacy; they’re not about pricing,” said Gerard Anderson, a professor at the Johns Hopkins University Bloomberg School Public Health. “They, being the FDA, have stayed out of the pricing issue for as long as they could, and really don’t have a major role in pricing. They’re out there to provide competition and they’re out there to make sure the drugs are available, but they’re not out there to say a price is or is not appropriate.”
FDA will hold a public meeting in mid-July, and it is asking the public to identify policies that are being used in anti-competitive ways.
“We know that sometimes our regulatory rules might be 'gamed' in ways that may delay generic drug approvals beyond the time frame the law intended, to reduce competition,” Gottlieb wrote. “We are actively looking at ways our rules are being used, and in some cases, misused.”
Despite President Trump's repeated promises to take action to lower drug prices, it has been unclear what specific measures he would support. That has unleashed wide-ranging speculation during the past few months. Initially, many in the industry worried that Trump could be talking about the government negotiating drug prices for Medicare prescription drug benefit — a level of intervention drug companies would strongly oppose. After he met with a roundtable of CEOs in late January, those worries eased. Other rumored actions in leaked documents obtained by Kaiser Health News and the New York Times have included principles that the pharmaceuticals industry supports, including the greater adoption of value-based contracts, in which the prices of drugs are linked to how well they work.
The effort by the Food and Drug Administration reveals the most detailed policy direction on drug prices to date, and are targeted at a specific niche part of drug spending: old drugs that have high prices because of a lack of competition. While certain cases of companies buying old, off-patent drugs and raising their prices have drawn widespread outrage, the action will not address problems commonly highlighted by critics of the pharmaceuticals industry, such as the inflation of branded drug list prices and the high prices of specialty drugs. Increasing competition is one of the approaches to drug prices that generally has bipartisan support.
At a Senate hearing on Tuesday, Gottlieb explained the agency's broader philosophy and strategy in the development of new drugs — a focus on increasing the number of drugs to bring down spending.
“The most tangible way we're going to reduce health care costs is by finding better treatments for a lot of costly diseases,” Gottlieb said, adding that he would examine regulatory hurdles that could be delaying the development of cutting-edge drugs. He said that he hoped to help spur the development of rare disease drugs, for example by addressing a backlog in FDA's responses to companies seeking a designation as orphan drugs, a special category that confers a seven-year monopoly and offers other incentives to drug companies. Orphan drugs are some of the most expensive drugs on the market.
Last week, about 30 people from across the government attended a high-level meeting in the White House's Roosevelt room to discuss possible actions on pricing, according to a senior administration official who requested anonymity and wasn't authorized to give details of the meeting. There was no definitive decision on when to issue an executive order, and much of the discussion centered on the complexity of drug prices. They agreed to have weekly staff-level meetings and monthly meeting of the principals, which included White House budget director Mick Mulvaney, Treasury Secretary Steven Mnuchin, Health and Human Services Secretary Tom Price, Gottlieb and others.
A White House spokesman said that the meeting was “part of the ongoing discussions to reduce the burden of the high cost of drug prescriptions and unleash a wave of innovation to develop cures and treatments for patients” in an email.
There has been a growing sense of relief from investors and pharmaceuticals companies that actions are likely to be less threatening to the industry than feared.
A research note from Bernstein analyst Ronny Gal suggested that some possible actions the White House could take, such as limiting the use of a controversial drug discount program or capping patients' out-of-pocket costs, could even increase industry profit.
“If anything, the limited scope of the discussions should be good news for the pharmaceutical and bio industries and investors because nothing like sweeping action to curb drug prices is under discussion and the industry probably will not view the subjects of the Trump discussions negatively,” Terry Haines, a policy analyst at Evercore ISI wrote to investors.
In Gottlieb's blog post, he outlined two specific methods that companies are using to block generic competition as a target. He said companies may be using a law intended to help prevent harm from drugs with serious risks to stop competitors from acquiring their products to create a generic version. Companies also limit distribution of their drugs through contracts and agreements with distributors, making it hard for competitors to obtain enough product to make their own version.
Earlier this month, Gerard Anderson, a professor at Johns Hopkins University School of Medicine testified in a Senate hearing that the solution to that problem was in the hands of Congress, since a law could require companies to provide their product to potential competitors.
“I think only the Congress can essentially say that. There is about a $3 billion savings that the Congressional Budget Office has estimated could happen if essentially Congress were simply to say to the company, 'you got to make that available,'" Anderson said.
Damian Paletta contributed to this story.