Jul 8, 2019

Axios Vitals

Good morning. I hope you enjoyed the holiday, even without Vitals in your inbox.

Today's word count is 703, or <3 minutes.

1 big thing: What the U.S. can learn from Germany on drug prices

Illustration: Sarah Grillo/Axios

Germany — the European country whose health care system is most similar to the U.S. system — seems to have found a way to regulate prescription drug prices without curbing its citizens' access to new, effective medicines.

Why it matters: While German-style drug pricing would be highly disruptive to the U.S. health system, the country's use of private insurers and its resistance to outright price-setting provides an illuminating case study.

How it works: The German system, unlike the U.S., tries to determine which drugs offer the most clinical benefit, and to pay them accordingly.

  • While Germany's private nonprofit insurers must cover a new drug at its list price for its first year on the market, pricing then becomes dependent on the effectiveness of the drug, as the L.A. Times' Noam Levey reported last month.
  • If the drug manufacturer can't prove that the drug is better than existing therapies, its price can't be any higher than the comparable drugs.
  • If the drug is better, then the manufacturer negotiates a price with the nonprofit insurers, which negotiate collectively to maximize their leverage.

Although many new drugs have exited the German market since this system was implemented, the vast majority of them were found to have no benefit above comparable drugs already on the market, according to a recent study in Health Affairs.

What they're saying: The U.S. may be able to learn from Germany's decisions to postpone price regulation until after a drug's effectiveness has been evaluated and to base price negotiations on evidence, said lead author of the study, Ariel Stern of Harvard Business School.

Yes, but: German insurers' collective negotiations are "quite different from the US, where drug price negotiations with manufacturers are fragmented, and often intermediated by pharmacy benefit managers," she added.

2. U.S. approving drugs after limited review

Nearly three-quarters of all new drugs approved last year were fast-tracked, in keeping with a trend that's emerged over the last decade, WSJ reports.

  • At least 60% of new drugs received expedited approvals each of the last 5 years.
  • These approvals are often based on early signs of potential instead of long-term studies.

Why it matters: "Families and doctors are thrust into a new world of trade-offs, raising complex questions about the medical and financial value of drugs with limited track records," WSJ's Peter Loftus writes.

The Journal found that this trend is particularly prevalent in cancer, and a rising proportion of expedited cancer drugs are approved without much evidence that they extend patients' lives longer than another drug or a placebo.

  • They're mostly made available to patients in advanced stages of disease.
  • Of the 42 new fast-tracked cancer drugs approved by the FDA between 2015 and 2018, the Journal found that only 19% had proof when they were approved that they significantly prolonged survival.

Go deeper:

3. Trump teases another executive order

Photo: Chen Mengtong/China News Service/VCG via Getty Images

President Trump told reporters Friday that he plans to issue an executive order creating a "favored nations clause," where the U.S. would pay no more for a drug than the lowest price paid by another country.

Why it matters: There are a lot of details that are unclear, such as how the order would be enforced and how much of a difference it would make, Axios' David Nather writes.

  • But it's a sign that Trump wants to use his executive authority to move ahead on his campaign promise to lower drug prices — and a bad sign for drug companies.

Key quote: "We're working on right now a favored nations clause, so that whatever the lowest nation is anywhere in the world, or company, but the lowest nation or company, then what happens is, we will pay that amount," Trump said.

4. Doctors slow to use pricing tool

A growing number of insurers and health systems are offering tools that give doctors drug pricing information in real time, but the uptake has been slow, NPR reports with Kaiser Health News.

Between the lines: The pricing tool, which shows how much patients will pay out of pocket for a given drug, aims to help them avoid sticker shock once they go to fill their prescriptions.

  • It also allows doctors to find cheaper alternatives when available.
  • The goal is to help prevent patients from declining to pick up their prescriptions because they can't afford them.

Yes, but: Some doctors don't want to get bogged down in conversations about drug prices, and the tools themselves are limited by the secretive nature of the price negotiation process.

5. While you were weekending...
  • The ACA lawsuit being argued before the 5th Circuit this week could become a political nightmare for Republicans, the Washington Post writes.
  • Cancer deaths in 2015 cost $94.4 billion in lost earnings, according to a study reported on by Stat.
  • NYT digs into what providing health coverage to undocumented immigrants would look like, and what's available now.

Have a great day! Send tips and feedback to caitlin@axios.com.