- President Donald Trump on Thursday gave a speech on ways to curb drug pricing.
- The speech focused on spending in the part of Medicare that pays for seniors who get drugs administered in a doctor’s office.
- Trump has decried “global freeloading” as a reason the US pays high drug prices, but the administration’s plans to bring down costs actually piggybacks on what other countries have done to lower prices.
- If the plan moves forward, it’s likely to face a lot of opposition from parts of the healthcare industry, including pharmaceutical companies and doctors.
President Donald Trump’s plan to lower drug prices sounds a lot like what the “global freeloaders” he often criticises do themselves to curb high prescription costs.
Trump’s administration plans to set up an “international pricing index,” in which some US drug prices would be linked to what European nations like Germany and France pay, according to a proposal published Thursday. Trump touted the plan in a speech at the Department of Health and Human Services as part of his broad goal to reduce drug prices.
“Americans pay more so that other countries can pay less, very simple, that’s exactly what it is,” Trump said Thursday. “It’s wrong – it’s unfair.”
The HHS is asking for feedback on the plan before it plans to propose it more formally in early 2019. It could take effect as early as 2020.
The speech was a continuation of an effort set in motion in May, when the Trump administration laid out a 44-page drug-pricing blueprint, calling out middlemen in the pharmaceutical industry and “freeloading” by other countries that pay less than the US for prescription drugs.
The speech also comes at an interesting time given the proximity to the midterm elections. So far, Republicans have been on the defensive when it comes to healthcare, especially when it comes to the GOP’s attacks on preexisting-condition protections, so the speech was also an attempt to reframe the healthcare conversation as Americans head to the polls.
The Trump administration’s proposal is focused on prices paid for drugs that are covered under a portion of the Medicare program known as Part B. Those are typically drugs that are given in a doctor’s office and include drugs used in cancer treatment as well as eye medications like Eylea and Lucentis.
The proposal won’t extend to the drugs Americans pick up at the pharmacy counter or beyond the Medicare program, and to start, it would apply to 50% of the country.
In 2015, Medicare spent $US26 billion on Part B drugs. Most of the drugs in the Part B plan are a kind of drug called a “biologic,” or drugs made of living organisms (usually cells). They’re typically made by one drugmaker, which means there isn’t a lot of competition over price. The US spent $US647.6 billion on Medicare in 2015, meaning Part B spending made up about 3% of Medicare’s total spending.
The HHS estimates that the new plan would save Medicare $US17.2 billion in total over five years.
By tying the price Medicare is willing to pay to the price in other countries, Trump is effectively piggybacking on the efforts by governments in those countries to lower drug costs. Those are the same initiatives he’s recently slammed as “freeloading.”
Getting to lower prices
The Department of Health and Human Services released a report Thursday showing that the prices paid in the US for drugs that were part of Part B were 1.8 times as high as in other countries such as the UK, France, and Canada.
To cut back on that, the Trump administration is also considering two other changes:
- Increasing the role of companies known as pharmacy-benefit managers in managing drugs and pricing in the Part B program.
- Changing up the incentives for doctors, so they’re paid based on a flat fee rather than a percentage of the price of a drug, as a way to push them to use lower-cost drug options.
The index approach would start by focusing on drugs made by a single drugmaker and biologics, which tend to face less competition. To manage the lower price, the Trump administration is considering asking for assistance from companies in the private sector like PBMs, who historically have not been involved in the Part B aspect of Medicare.
“We are encouraged the Administration is exploring greater use of competitive pharmacy benefit manager (PBM) tools in Medicare Part B to ensure beneficiaries have access to medications that may otherwise not be affordable,” JC Scott, president of the Pharmaceutical Care Management Association, which lobbies on behalf of PBMs, said in an emailed statement.
Similarities to ‘global freeloaders’
While Medicare is barred from explicitly negotiating prices with drug companies, Trump’s proposed changes are designed to use the collective power of the growing Medicare market to force drugmakers to bring down their prices or lose access to a potentially lucrative market. The approach bears some similarities to price negotiations by government healthcare programs in European countries such as the UK.
In those countries, the government health systems directly negotiate with pharmaceutical makers over the price of their drugs. If the two sides don’t agree on a price, the drug may not make it to the country’s market at all, costing the maker a large chunk of change. In addition to direct negotiation, the countries use a variety of other methods, such as reference pricing, that bear similarities to the Trump proposals.
Already, however, there is scepticism about how much this will affect the drug industry.
“This is the first time a US administration appears to have taken a real step in their direction (how committed they are, we will see),” the Bernstein analyst Ronny Gal said in a note Thursday ahead of the speech. “Some of the ideas like introducing indexing prices to other countries would be viewed by the drug industry as outright antithetical to their interests.”
If the plan moves forward, it’s likely to face a lot of opposition from parts of the healthcare industry, including pharmaceutical companies and doctors.
The drug industry’s lobbying group – called the Pharmaceutical Research and Manufacturers of America (or PhRMA) – came out swinging against the proposed rule.
“The administration is imposing foreign price controls from countries with socialised health care systems that deny their citizens access and discourage innovation,” PhRMA CEO Steve Ubl said in an emailed statement. “These proposals are to the detriment of American patients.”
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