It's the same song, but a brand-new verse for 2017's drug-pricing debate

President-elect Donald Trump recently said he'd bring down drug prices, but lawmakers such as Rep. Buddy Carter, far right, the only pharmacist in Congress, are pressing on PBMs, too.

We won’t surprise anyone by saying that Topic No. 1 in pharma this year was drug pricing. We’ll give you one guess as to whether 2017 will be more of the same.

The advent of a Trump Administration essentially guarantees it. Despite pharma’s many friends inside the Beltway, despite campaigns highlighting the industry’s good works, despite the very real benefits newly approved drugs are offering patients in the real world, the public and political spotlight will remain on dollar signs.

But though the theme remains the same, the characters aren’t—and nor is the story. The industry stars of the coming year won’t be Valeant Pharmaceuticals or Mylan or any of the other smaller drugmakers that publicly shamed pharma with their massive price increases on older meds. It’s bigger than that now. Big Pharma companies have become leading players. And, of course, it’s not about candidates in 2017. It’s about a President-Elect—initially thought to be hands-off on the issue—who has laid down a wild card with a recent promise to “bring down drug prices.” Payers, depicted last year as forces holding down drug price increases, now have their own critics.

For 2017, keep an eye on these three subplots: Politics, self-policing and PBMs.

President-Elect Trump has backed, at various times, a couple of policies anathema to the pharma industry, reimportation of drugs from lower-priced jurisdictions and increased negotiating power for the behemoth of the U.S. health system, Medicare.

Reimportation, backed in the past by Sens. John McCain and Amy Klobuchar, among others, has never made it through Congress. But if Trump successfully pushed the idea amid today’s pricing backlash, it would subject U.S. price levels to foreign competition. Suddenly, drugs sold at government-controlled or -negotiated prices in countries such as Canada would be available in the U.S. for resale. Meds from low-cost retail markets, such as India, could make their way into the U.S. as well. This would undermine pricing power in the U.S., which still forks over much more per script than the rest of the world, and in turn, erode sales in pharma’s largest market on the globe. Not an insignificant threat.

Under some proposals, Medicare price negotiation could be a double whammy. It would not only give the U.S. government, still the healthcare system’s largest payer, a powerful lever for driving down the costs of drugs for seniors. It might also open those numbers to public scrutiny, giving private payers ammo for their own negotiations. After all, if Medicare pays X for a drug, why would private payers willingly pay X + 20% or more?

Trump isn’t the only backer of Medicare price negotiation, either. Klobuchar penned an op-ed in USA Today, saying she's ready to work with the incoming president to lower drug prices. In late December, 19 Democratic senators wrote Trump to offer their assistance in a drug-pricing crackdown—including Medicare price negotiations. They suggested the FDA’s user-fee renewals, scheduled for passage in Congress in the spring, as a vehicle for these proposals. Or in a veiled reference to the President-Elect’s promise to repeal Obamacare, “other health-related legislative priorities.”

But Trump’s two big ideas aren’t the only political threats, either. Various measures are percolating in Congress that, while not as dramatic, could nibble away at pharma’s pricing power. Sen. Susan Collins recently unveiled the results of a months-long investigation into drug pricing, particularly the companies, such as Valeant and Turing Pharmaceuticals (of ex-CEO Martin Shkreli fame), that acquire “single-source” drugs and jack up prices to maximize profits. Collins and her group suggest some measures for speeding generics to market, particularly those to compete with these newly price meds. The report even advances the idea of emergency imports to combat sudden, sharp increases in price.

Needless to say, the industry doesn’t want the government to hand down new limits to their market maneuvers. The pharma trade group PhRMA, the biotech industry group Bio, and major drugmakers such as Pfizer have been trying to burnish biopharma’s image—and make the case that revenue growth equals R&D breakthroughs—via some slick advertising and marketing campaigns. PhRMA is said to be revving up for a fight on Capitol Hill, increasing dues for the purpose.

But some drugmakers see pre-emptive action as the way to steer clear of big changes in government rules. Allergan CEO Brent Saunders has been the most vocal proponent of self-policing, first by pledging to limit price hikes at his own company, and since then, by warning fellow pharma executives that the pricing issue isn’t going away anytime soon.

“Limit your price increases before we all face the impact of government regulation that stifles innovation and patient care,” Saunders warned in a Forbes op-ed column in early December.

Some other drugmakers are acting. Novo Nordisk U.S. chief Jakob Riis stepped up in early December to make a similar pricing pledge, saying the Danish drugmaker would limit its increases to the single digits, once a year, and continue other moves to make its essential diabetes drugs more affordable for patients. Soon after, Eli Lilly & Co. said it would roll out a 40% discount on its insulins, teaming up with Express Scripts to sell the products directly to patients at the lower price. Both companies had drawn fire for insulin price increases that added up to three digits over the past several years.

Whether other major drugmakers will follow suit with pricing promises, public discounts or other moves isn’t clear. Some of the biggest pharmas say their prices, when considered across their broad portfolios of hundreds of meds, are reasonable and fair; high prices or seemingly outsize price increases on a few drugs are outweighed by the low costs on many other products they also sell. But others charge that pharma companies often use price increases to grow sales in absence of real innovation.

Novartis CEO Joe Jimenez, along with several of his peers, has a different answer to the pricing debate: pay for performance, which in itself is a sort of self-policing. Jimenez has said that value-based pricing allows drugmakers to reap real payoffs from real advances in treatment, while discouraging high prices on new meds that are less innovative. Amgen CEO Bob Bradway, whose company has inked some pay-for-performance arrangements on its PCSK9 cholesterol drug Repatha, says he’s expecting more and more of these deals to be struck. And Johnson & Johnson has signed on to a project with Medicare that focuses on rewarding the “value of care,” rather than assigning a blanket price tag.

“We believe in the efficacy of our products, and by collaborating with payers on solutions for reimbursement, we hope to help start a shift toward value pricing in the healthcare system,” Jimenez wrote earlier this year. “We want to be rewarded for the tangible outcomes our products provide patients, not for simply selling pills.”

Linking costs to results also serves as an antidote to the relentless payer pressure for discounts and rebates, often in return for favorable formulary placement. That pressure, which greatly intensified after Gilead Sciences introduced its hep C med Sovaldi at a $84,000 price, is expected to continue in 2017. (Gilead and Express Scripts, incidentally, recently came to a deal after a long, public squabble.) But in an ironic twist, pharmacy benefits managers and their arm-twisting have become targets themselves.

In the midst of the EpiPen pricing furor, Mylan CEO Heather Bresch presented a chart to Congress depicting a big markup between her company’s wholesale price and the eventual price paid by patients. That markup, she said, went to wholesalers, PBMs and other intermediaries. The PBM demand for discounts only “incentivized” price hikes, Bresch contended.

That was one piece of Mylan’s EpiPen case that caught on. Some U.S. lawmakers called for PBM investigations—and indeed, several drugmakers and PBMs have reported demands for information and documents about their financial relationships. Since then, Novo’s Riis went a step further to explain his company’s insulin price hikes, detailing how list prices rose as PBM rebates took an ever-growing chunk of the spread. QuintilesIMS produced numbers showing that net price increases in Medicare Part D—the portion of a price hike that actually flows to drugmakers as sales—have actually shrunk quite a bit as rebates grew.

PBMs are defending themselves, of course, maintaining that they're "guardians" against price hikes, not perpetrators. But if there’s comfort for pharma on the pricing side for 2017, it’s that the spotlight won’t be trained solely on drugmakers. PBMs will share the scrutiny as calls for transparency in the U.S. pricing system—including in Congress, but also among drugmakers themselves—threaten the dealmaking they consider proprietary.

Not what biopharma investors expected when Trump won the November election. Hopes that the new president would be hands-off on pricing sent stocks soaring, only to come down to earth after the president-elect again mentioned drug pricing as a target. As Wells Fargo analysts warned soon after the election, presciently, it turned out, “Relief rally aside, we do not think the drug pricing debate is over, just diminished, and it will still be an important topic in 2017 and beyond.” The remaining question is whether pharma turns that talk into action that fends off government intervention—or not.