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Promoting Competition to Reduce Drug Spending

June 29, 2017 | Prescription Savings

CVS Health Chief Policy and External Affairs Officer and General Counsel Tom Moriarty weighed in on a panel that examined the pharmaceutical supply chain.

Recently, I participated on a panel at The Brookings Institution on Fostering Competition in the Pharmaceutical Distribution Chain. The panel included:

  • Matthew Eyles, executive vice president, policy and regulatory affairs at America’s Health Insurance Plans;

  • B. Douglas Hoey, CEO of the National Community Pharmacists Association; and

  • Christine Simmon, senior vice president, policy & strategic alliances at the Association for Accessible Medicines, as well as executive director of the Biosimilars Council.

We discussed our reactions to a proposal focused on fostering competition in the generic drug marketplace, and I raised four points that are key to driving greater competition and better value in our health care system:

1. Generic Drugs Help Control Drug Spend

Although generic drugs account for the majority of drugs dispensed, they only account for a fraction of drug spending overall, helping to keep prices down for payors and consumers. Multiple data points from a variety of researchers and drug trend reports have supported this, including research from the U.S. Food and Drug Administration (FDA).

We’ve also seen the positive impact of increasing generic drug utilization for our clients and members. In fact, our 2017 Drug Trend report showed that generic utilization was a moderating force on overall drug trend – the year-over-year measure of prescription drug spending.

2. Competition from Generics and Biosimilars is Key

An important way to continue driving down drug spending is to support reforms that promote competition via generic and biosimilar market entries. Currently, there is a considerable backlog of generic drug applications pending review and approval at the FDA. Clearing this backlog would allow thousands of generic drugs to enter markets in therapeutic categories where there is little to no competition, which will in turn help to drive down drug prices.

In addition, we need to also address the application pathway itself, as there were fewer generic manufacturers filing new generic applications last year. Creating a more efficient pathway will help incentivize generic manufacturers and speed entry to market.

Finally, biosimilars, which are commonly thought of as generic versions of biologic drugs, have great potential for bringing down costs of these often expensive, specialty therapies. Compared to other countries, the U.S. is lagging behind in bringing these drugs to market, but we see great potential and believe they can have a similar impact that they’ve had in global markets, such as Europe and Japan. That said, it is vital that we work to streamline the biosimilar approval pathway now, so we can better support competition in biologic markets going forward.

3. Generics and Driving Value for the System

Our health system needs to find ways to increase value for patients, like efforts to promote competition with generics and biosimilars. At CVS Health, we are exploring ways to ensure our clients are getting the highest possible value from drug spend relative to the outcomes the drugs deliver. This includes our strategic formulary approach that optimizes the use of clinically equivalent alternatives to branded drugs, and supporting policies that help drive market competition.

4. Pharmacists Play an Important Role

Our pharmacists engage with patients every day, and pharmacy care will become increasingly important as our system continues to move toward value-based care, with a greater focus on patient outcomes. In fact, studies have shown that pharmacist engagement improves medication adherence, which can lead to better health outcomes, fewer (often costly) adverse events and lower overall health care costs.

For more information on how CVS Health is working to ensure consumers have access to affordable medicines, visit our Rising Drug Prices information center. And to stay informed about the most talked-about topics in health care, register for content alerts and our bi-weekly health care newsletter.