President Trump spared no sector of the drug distribution chain Friday in announcing his administration’s plan to lower prescription drug prices.
“Everyone is involved in this broken system — the drugmakers, insurance companies, distributors, and pharmacy benefit managers (PBMs) and many others contribute to the problem,” Trump said during an address in the sun-filled White House Rose Garden.
“The government is also partly responsible,” Trump added. “Previous leaders have turned a blind eye to this incredible abuse, but under this administration, we’re putting American patients first.” In fact, “American Patients First” is the formal name for the administration’s plan, which can be
seen on the Department of Health and Human Services (HHS) website.
He also singled out Big Pharma for special criticism, noting that drug companies spent $280 million on lobbying last year, “more than tobacco, oil, and defense contractors combined.”
The administration is attacking the problem on several fronts, starting with “ending Obamacare’s twisted incentives that encourage higher drug prices,” according to Trump. “[There are already] some incentives in Medicare Part D drug plans to encourage drug companies to keep their prices low.” He noted that Alex Azar, Secretary of HHS, “used to run [a drug company], and nobody knows the system better than Alex.” Azar headed the U.S. division of drugmaker Eli Lilly before becoming HHS secretary.
Ending the Pharmacist Gag Rule
Trump promised to end the system’s “double dealing that allows middlemen such as pharmacy benefit managers to pocket rebates and discounts that should be passed on to consumers and patients” and end the pharmacist “gag rule” that prevents pharmacists from telling patients if they can get a cheaper deal on a prescription by just paying for it directly rather than going through their insurance company.
Other initiatives Trump mentioned include:
- Preventing drugmakers from unfairly manipulating the patent system. “Our patent system will reward innovation but won’t be used as a shield to protect unfair monopolists,” said Trump. In a briefing with reporters following the president’s speech, Azar criticized brand-name drug companies for not allowing generic manufacturers access to innovator drug for purposes of FDA-required testing of generic versions to prove bioequivalency.
- Speeding up approvals of over-the-counter drugs “so that patients can get more medicines without prescriptions.”
- Forcing foreign countries to start paying more for prescriptions drugs. “In some cases, medications that cost a few dollars in a foreign country cost hundreds of dollars in America,” Trump said. “That is unfair, it’s ridiculous, and it’s not going to happen any longer. It’s time to end global freeloading once and for all.” Trump said he would direct U.S. Trade Representative Robert Lighthizer to “make fixing this injustice a top priority with every trading partner.”
Changes to Medicare Part D
During the 2016 campaign, Trump had repeatedly insisted that Medicare should negotiate with suppliers to bring down prices paid under the program. But the plan released Friday called for only a limited version involving Part D.
“Part D is now 15 years old,” Azar said at the briefing. “When [it started], we had the best tools and were the best at negotiating deals for senior citizens — we drove tight formularies for senior citizens,” he said. “But over 15 years … it got frozen in place, and the private sector kept adapting and learning … how to control the ‘drug spend’ even better. We need to bring the tools available to the private sector to Part D plans so they can negotiate better deals.”
And the system for paying for the drugs dispensed under Medicare’s Part B program also has to change, Azar added. “[Doctors are] paid now on list price plus a markup; they send us a bill and we write a check,” he said. “We’ve got to figure out ways to move those drugs into private Part D negotiations so we can … start getting bargains for seniors and taxpayers.”
Azar also addressed transparency in drug pricing. “We’re having FDA look at how to require in direct-to-consumer [drug] ads that you have to disclose the list price of your drug. It’s material and relevant to know if it’s a $50,000 drug or a $100 drug, because often the patient will have to bear a lot of that cost.”
“The other thing we have to look at is the entire system of rebates with PBMs,” he continued. “Right now, the incentive is for the drug company to have [a high list price] and negotiate rebates [from that]. What if we said, “No rebates, just a flat price,” which would disincentivize drug companies from having higher list prices.
Azar also questioned the way PBMs are paid. “They’re taking it from both sides, getting compensated from insurance companies and from the drug companies they’ve negotiating against,” he said. Instead, perhaps the industry should move toward a “fiduciary model” in which the PBM works for insurance companies or individuals and can’t get paid by drug companies, “so there is a complete alignment of interests.”
Finally, he gave the administration credit for already giving Americans an $8.8 billion break on drug costs, via its approvals of generic drugs.
Reactions
Healthcare groups had mixed reactions to the administration’s proposals. “The AMA [American Medical Association] is pleased the Trump administration is moving forward with its effort to address seemingly arbitrary pricing for prescription drugs,” AMA president David Barbe, MD, said in a statement. “Physicians see the impact of skyrocketing prices every day as patients are often unable to afford the most medically appropriate medications — even those that have effectively controlled their medical condition for years … We hope the administration can bring some transparency – and relief – to patients.”
“We commend President Trump and his administration for their focus on this essential issue,” America’s Health Insurance Plans (AHIP), a lobbying group for the health insurance industry, said in a statement. However, although several of the administration’s proposals will help lower costs, “We are concerned that some proposals would actually lead to higher costs for Americans, because they would weaken the ability of plans to negotiate lower prices.”
“Insurance providers share the savings from negotiations with drug manufacturers by lowering premiums and copays for all consumers,” AHIP continued. However, one of the administration’s proposals “requiring drug rebates to be passed through to Medicare patients at the pharmacy counter would likely lead to higher drug prices from manufacturers, and would lead to higher premiums for seniors, as well as $40 billion in additional costs for hardworking taxpayers.”
