Global Drug Pricing: New Reporting Burdens May Impact Future Product Development in the U.S., UK, and EU

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DRUG PRICING TRENDS:

U.S.

• In the U.S., Congress will remain focused in 2022 on identifying policy alternatives that can have a dramatic impact on reimbursement, pricing, and innovation of prescription drugs.
• In particular, we expect Congress to continue to focus on policy alternatives set forth in H.R. 5376, the Build Back Better Act.

EU

• The EU and member states have been focused on driving down drug prices since 2016, and that focus has sharpened since the pandemic.
• 2022 will provide unique challenges and opportunities for industry to preserve and improve EU pharmaceutical law.

UK

• Drug pricing procedures are expected to become aligned with the pricing of companion digital tools.
• More pressure is likely to be put on life sciences companies to disclose costs as a justification for pricing.

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U.S.

We anticipate that the U.S. Congress will remain focused on policies that could have a significant impact on the reimbursement and pricing of prescription drugs — and ultimately on innovation in the industry, if passed and implemented. These include the Build Back Better Act’s policies relating to negotiation for some medicines covered under Medicare, inflation rebates in Medicare, and capping out-of-pocket spending in Medicare. Even if not passed under the Build Back Better Act (which itself may not pass), be prepared for continued focus on these policy alternatives in other legislative vehicles.

In 2022, life sciences companies will also need to prepare for the Refund Act, which introduces new requirements on manufacturers of physician-administered products to conduct enhanced monitoring and input procedures beginning January 1, 2023. This unprecedented development will require pharmaceutical manufacturers to provide quarterly refunds to Medicare for unused portions of certain physician-administered drugs. The industry will also need to prepare for the implementation of the Medicaid program’s value-based purchasing regulatory provisions in July 2022. Operational guidance on the latter is expected soon.

We also expect the trend for litigation and regulatory actions against drug pricing developments that unfolded under the previous U.S. administration to continue in 2022 under the Biden administration. In particular, manufacturers of outpatient prescription drugs should monitor litigation, administrative, and regulatory developments related to the 340B Drug Pricing Program and the Medicaid Drug Rebate Program. In addition, in connection with the Medicaid program, the forthcoming implementation of new regulatory burdens associated with line extensions and the expanded definition of “States” to include the U.S. territories may significantly impact the net pricing of drugs under the Medicaid program. This is in addition to the already significant increase in the regulatory burden manufacturers are expected to face in calculating and reporting detailed pricing information to the Medicaid program.

EU

In the final quarter of 2022, the European Commission is expected to propose new pharmaceutical legislation pursuant to its “Pharmaceutical Strategy for Europe.” This new legislation is likely to affect the fundamentals of current EU pharmaceutical law. It may restrict the scope and duration of IP and regulatory rights (e.g., regulatory data protection, rewards and incentives for pediatric and orphan medicinal products, and patent term restoration rules), in particular in situations where companies do not disclose R&D costs and/or do not launch their products in most or all EU member states.

Separately, the European Commission will start setting up the mechanisms for the roll-out of the recently adopted HTA Regulation (2021/2282), which provides for mandatory joint clinical health technology assessment of new centrally authorized drugs and selected medical devices as of 2025. In the meantime, the Commission will continue to support HTA cooperation between member states.

The new pharmaceutical rules and HTA cooperation, coupled with the ongoing budget pressures caused by the pandemic, will accelerate the push by the EU and individual member states to drive down drug prices. Throughout 2022, we are likely to see political discussions about drug pricing, and by the end of the year, we are likely to have more clarity on the extent to which valuebased pricing will be complemented or replaced by a cost-based, R&D expenditure-focused approach to pricing and reimbursement.

Whether a value-based pricing approach prevails will depend upon whether the EU institutions, together with national pricing, reimbursement, and antitrust authorities, accept that biopharmaceutical product development is not simply a question of R&D expenditure. If the R&D expenditure-focused approach to pricing does gain momentum during 2022, this is likely to have the greatest impact on smaller companies that lack a large portfolio through which to spread development risks.

2022 is therefore likely to present great challenges and opportunities for the life sciences industry to preserve and improve EU pharmaceutical laws. Life sciences companies should participate fully by making their views heard, either directly or via trade associations.

At the EU member state level, litigation will continue in antitrust cases regarding alleged “excessive pricing” and the replacement of authorized drugs by “replacement pharmacy compounding.”

UK

Post-Brexit, the UK government has been moving to expand the country’s platform as a key location from which to develop and invest in life sciences. In 2022, product development for smaller life sciences companies is likely to particularly benefit from stronger support from the key authorities in the UK. We also anticipate that innovative drugs will experience accelerated access to the UK market. Similar pathways that are also being explored for digital health technologies may materialize.

A range of new legislation has been introduced in the UK to facilitate life sciences. This is in part directed toward enabling faster access to the market for innovative digital technologies. UK health authority NICE — similar to the health authorities in other European countries — has updated its evidence standards framework for digital health technologies and has established a new Office for Digital Health. The UK government has also put aside a particular fund to support e-health technologies.

In 2022, more guidelines and procedures are expected to become available for digital health and AI technologies in the UK. It is not clear how these technologies will be priced and whether they will be aligned with the pricing of the associated drugs. Under the new proposed UK Medical Devices Regulation, there will be a new legal framework for software and AI devices that may be regulated as medical devices.

DRUG PRICING TIPS:

U.S.

• Life sciences companies should continue to assess their advocacy, regulatory, and litigation options with respect to aggressive drug pricing policy alternatives in 2022.
• Life sciences companies and their owners and investors should carefully consider the drug pricing legislative and regulatory proposals at the federal and state levels when evaluating coverage and reimbursement options for their products.

EU

• Life sciences companies should follow regulatory discussions closely and take on likely outcomes in clinical product development and regulatory decisions to ensure that products qualify for rewards and incentives.
• Companies should expect to meet an increased burden of proof to obtain pricing and reimbursement.

UK

• Life sciences companies should set up a product-specific “task force” with experts in various disciplines. Market access and pricing need to be considered from the outset, including when planning and designing clinical trials.
• Life sciences companies should prepare their market access at an early stage to ensure that they will be able to satisfy NICE’s cost-effectiveness criteria.