Clinton announces plan to rein in 'unjustified' price hikes on drugs

If Hillary Clinton defeats Republican Donald Trump in the Nov. 8 election, she would need the support of the US Congress to implement key measures of her proposal.

Carolyn Kaster/AP
Democratic presidential nominee Hillary Clinton speaks in Reno, Nev., on Aug. 25, 2016. Mrs. Clinton is rolling out a plan Friday, Sept. 2, 2016, designed to give the federal government more power to push back against what she calls 'excessive unjustified costs' for medications that have long been on the market.

Hillary Clinton said on Friday that if elected to the White House she would create an oversight panel to protect US consumers from price hikes on long-available drugs and import alternative treatments if necessary, adding to her pledges to rein in drug prices.

Mrs. Clinton, the Democratic presidential candidate, would seek to give the panel an "aggressive new set of enforcement tools," including the ability to levy fines and impose penalties on manufacturers when there has been an "unjustified, outlier price increase" on a long-available or generic drug, her campaign said.

"Over the past year, we've seen far too many examples of drug companies raising prices excessively for long-standing, life-saving treatments with little or no new innovation or R&D," Clinton said in a statement.

If Clinton defeats Republican Donald Trump in the Nov. 8 election, she would need the support of the US Congress to implement key measures of her proposal.

Even though her plan would likely affect a small number of companies, it could be difficult to get Republican lawmakers on board, Morningstar analyst Damien Conover said, adding that a "Republican Congress would push back hard on this."

But Clinton's campaign cited Turing Pharmaceuticals LLC raising the price of the AIDS drug pyrimethamine and Mylan NV's recent move to increase the cost of EpiPen for severe allergy sufferers as "troubling" examples of price hikes that have attracted bipartisan congressional scrutiny.

Mr. Conover said that Clinton's plan to address unjustified price hikes is less of a concern to the drug industry than her pledge last year to reduce drug prices overall.

Drugmakers have said lowering or limiting drug prices would hamper their ability to invest in research and lead to fewer new therapies.

The ARCA Pharmaceutical Index of large U.S. and European drugmakers rose slightly on Friday, amid slight gains for the broad stock market. But shares of Mylan fell 4 percent to $40.20 on the Nasdaq.

The Nasdaq biotech index slipped 0.25 percent. The decline was slight compared to the more than 4.7 percent decline in the index seen on Sept. 21, 2015, when Clinton blasted "price gouging" in the specialty drug market on Twitter, responding to reports that Turing had acquired an older antibiotic, Daraprim, and then hiked its price by 5,000 percent.

A 'flag' for the industry

Peter Bach, the director of a nonpartisan health policy research group at New York's Memorial Sloan Kettering Cancer Center, said Clinton's announcement on Friday was a "flag" for drug manufacturers that her administration would notice and respond to steep price hikes.

"It's a response to the broader industry phenomenon of generating added profits by raising the price of drugs for which there is no competition," Dr. Bach said, saying the campaign was focusing on a "sub-category" of manufacturers that had not invested heavily in developing the drug.

Bach said he was contacted by the Clinton campaign about his work on drug pricing but had not advised the campaign in a formal capacity.

The oversight panel would be made up of representatives from existing public health and consumer protection agencies who convene to examine the scope of a drug price increase, the manufacturer's production cost and the treatment's relative value to patients and public health, Clinton's campaign said.

Terry Haines, head of political analysis for Evercore ISI, said he thought that Clinton's proposed panel had little hope of getting through Congress.

But Clinton, if elected, might be able to achieve price reform via changes to Medicare's prescription drug benefit, known as Medicare Part D, if she works with Congress to reform the Affordable Care Act, popularly known as Obamacare, Haines said.

In that event, Mr. Haines said shares of pharmaceutical and biotech companies could come "under sustained headline risk in 2017 as ACA reforms are discussed."

In cases where a price hike determined to be unjustified is accompanied by insufficient market competition, Clinton's administration would intervene to purchase alternative drugs from comparably regulated markets or to assist manufacturers in bringing the product to market in the United States.

Aaron Kesselheim, an associate professor at Harvard Medical School, called it a "bold idea" to get the federal government "involved in helping stabilizing some of these generic drug markets."

Until recently, there was a lengthy wait for generic drug approval by the US Food and Drug Administration. Although the wait time has shortened, there is often not enough consistent demand for manufacturers to enter the US market, Dr. Kesselheim said.

"Having the government get involved as a long-term purchaser of these products creates a stockpile to stabilize the market," Kesselheim said.

Kesselheim has testified before Congress about high-cost generic and long-available drugs and spoke to Clinton's campaign about his research as it developed its proposals.

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