Trump unveils plan to reduce drug prices

Posted May 12, 2018

Other proposed changes included activating programs that enable CMS to stimulate drug price negotiation among Medicare Part D plan sponsors and improve the value of drug purchasing programs. Democrats have long favored giving Medicare that power, but Republicans traditionally oppose the idea. Trump's plan calls on providers in the 340B drug discount program to report on how they use the savings. "A study a year ago by the industry journal Health Affairs found that the premiums that drugmakers earn by charging more for USA medicines far outweigh the amount they spend on developing new products".

Rather than bestow price negotiation power, the administration is trying a variety of approaches to Medicare reform in hopes of curbing drug costs. These proposals include targeting the secretive pricing rebate deals between drug makers and pharmacy benefit managers (PBMs), and addressing the "global freeloading" where foreign countries pay less for US -made drugs. Those include a proposal requiring drugmakers to disclose the cost of their medicines in their television advertisements.

- Banning a pharmacist "gag rule", which prevents druggists from telling customers when they can save money by paying cash instead of using their insurance.

"These far-reaching proposals could fundamentally change how patients access medicines and realign incentives across the entire prescription drug supply chain", President and CEO Stephen J. Ubl said in a statement. And it would require prescription drug plans for Medicare patients to pass on some of the discounts and rebates they receive from pharmaceutical companies.

Those ideas avoid a direct confrontation with the powerful pharmaceutical lobby, but they may also underwhelm Americans seeking relief from escalating prescription costs. The rebates, which are negotiated in secret by a middleman industry called pharmacy benefit managers (PBMs), are not considered kickbacks under current law.

Shares of major drugmakers, insurers and PBMs rose after the speech.

"Trump had a choice today: to seek disruptive fundamental reform or to embrace more incremental steps", wrote Terry Haines, a financial analyst, in an investment note. Bill Cassidy, R-Louisiana, who's called for a number of the policies on prescription drugs the Trump administration is now planning on implementing.

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A majority of Americans say passing laws to bring down prescription drug prices should be a top priority for Trump and Congress, according to recent polling by the Kaiser Family Foundation.

Trump returned somewhat to his previous fiery rhetoric against the industry, accusing the drug lobby of making an "absolute fortune" at the expense of patients.

Azar and other Trump officials have hinted for weeks that the plan would, in part, "dismantle" the convoluted system of rebates between drugmakers and the health care middlemen known as pharmacy benefit managers, which negotiate price concessions for insurers, employers and other large customers. Health plans provide more favorable formulary placement in exchange for the rebates. "Most of them would do very little for the 100 to 200 million Americans who are on private insurance".

Some more substantive changes are contemplated by the blueprint, although the document didn't lay out any concrete steps for how to achieve them.

"This is a total rip off, and we are ending it", Mr. Trump said Friday. "I don't want to overpromise that somehow by Monday there's going to be a radical change, but there's a deep commitment to structural change".

The way drug prices are determined is fundamentally the same everywhere.

The plan, however, is expected to mostly spare the pharmaceutical industry he previously accused of "getting away with murder".

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In countries with centralized health care systems, including Canada, the United Kingdom, Japan and most nations in the European Union, a single entity negotiates on behalf of all the country's residents.

"We're very much eliminating the middlemen", he said. It's also silent on the regulatory requirements that put costly burdens on generic manufacturers to generate data, Klasmeier said.

"It's hard to know why Germany or France or Australia would agree to something like that", said Professor Jack Hoadley of Georgetown University's Health Policy Institute.

Why is he tackling drug prices now?

The plan also will target Medicare Part B by limiting price increases that exceed the inflation rate within the program and restricting incentives for providers to prescribe high-cost drugs.

The drug industry's top lobbying arm, Pharmaceutical Research and Manufacturers of America, spent almost $26 million to sway federal decision makers previous year, according to records tallied by Center for Responsive Politics.

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