How This Analyst Views Hillary Clinton’s Proposed Drug Price Hike Monitoring

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It is an election year, and that brings all sorts of proposals and promises to the American people. Whether you are voting for Hillary Clinton or Donald Trump, or one of the independent candidates, one hot-button issue that is back on the table is the ongoing fight over drug prices. While this might ultimately bring one more wave of regulation, the public has been debating drug prices for years now — long before the EpiPen price hike debacle.

Clinton has released a proposed drug price plan that would review and ultimately prevent what might be some of the unjustified price hikes on drugs. That may sound awful for pharmaceutical and biotech outfits on the surface, but there may be some silver linings here that make this issue more pointed.

For starters, one of Clinton’s stated issues is finding a cure for Alzheimer’s disease by 2025. If a cure is found, they probably won’t be able to control the price of that treatment initially. On top of that, billions and billions of dollars have been spent by biotech and pharmaceutical companies in the fight against Alzheimer’s and dementia.

24/7 Wall St. has obtained a report from Janney Montgomery Scott’s Debjit Chattopadhyay with a review of what the Clinton plan really means to the industry. All in all, it might not be as catastrophic universally as some investors, consumers, patients and biohealth industry workers might fear. It may leave biotech upside but may focus more on existing drugs where price hikes are “not justifiable” based on time on the market and on R&D expenses.

In an effort to keep this from leaning to one side or the other, 24/7 Wall St. has included some brief commentary from industry watch groups on the Clinton proposals. After all, this is a serious hot-button issue.

Chattopadhyay has taken both sides of the case here to task. His initial statement said:

Overall, the proposals do not seem as onerous to biotechonology and appears to be directed towards long-available drugs, where prices have been artificially raised because of the lack of competition. However, the proposals do not tackle the issue of pharmacy benefit managers who have huge leverage with producers and are extracting significant discounts that are not being passed on to consumers. The plan also does not tackle the costs associated with hospitalization, which is where the bulk of health care dollars are being spent. On the not-so-good side – Giving Medicare power to negotiate drug prices, Capping out-of-pocket deductibles, and Value-based pricing are likely to weigh negatively. However, these are proposals and eventually needs to be shepherded through the fractious political system.

Chattopadhyay went on to show that the Clinton plan highlights what are the unjustified price increases of lifesaving or critically needed treatment that has long been available; with no meaningful change or improvement in the product (such as when a new acquirer rapidly raises the price); where there is limited or no competition among manufacturers of the treatment; and where there is an unjustified, outlier price increase. The so-called unjustified price increases would be determined by a review of criteria, including the following:

  • The trajectory and scope of the increase in price
  • Changes in the cost of production
  • The treatment’s relative value to patients, among other factors that give rise to threatening public health