(This article appeared previously on Kaiser Health News.)
President Donald Trump, armed with the expertise of staff seasoned in the ways of the drug industry, unveiled his blueprint to address sky-high drug prices Friday May 11, promising that increasing industry competition will help Americans save at the pharmacy counter.
“Under this administration, we are putting American patients first,” Trump said, with Secretary of Health and Human Services Alex Azar by his side. Azar, he said, had a mission to “to bring soaring drug prices down to Earth.”
Many of the proposals Trump’s team can accomplish administratively — and some are already in motion — but for others, Trump said, he plans to work with Congress.
Trump: 50 Steps to Reduce Costs
The administration’s blueprint proposes 50 actions to reduce what Americans pay for drugs, including giving Medicare more power to negotiate drug prices, Azar said.
Azar said he wants to make drug prices more transparent, as well. For example, he said the Food and Drug Administration (FDA) should require pharmaceutical companies to disclose drugs’ list prices in their direct-to-consumer television ads.
“It’s material and relevant to know if it’s a $50,000 drug or a $100 drug,” Azar said.
Dr. Jeremy Greene, a professor and health policy expert at Johns Hopkins Medicine, said he was puzzled by how much control the agency would have over requiring drug prices as part of advertising.
“The FDA has had nothing to do with price, especially in advertising,” Greene said. “There have been prominent court cases over whether pharmacies can or cannot advertise based on drug prices.”
Regardless, Trump called the plan “the most sweeping action in history to lower the price of prescription drugs to the American people.”
“We will have tougher negotiations, more competition and much lower prices at the pharmacy counters,” Trump said. “And it will start to take effect very soon.”
On a separate note, Trump told the audience that “right-to-try is happening,” a nod to congressional efforts to expand access to experimental medications for people with life-threatening conditions.
‘More Show Than Substance’
Trump’s proposals target reducing the out-of-pocket costs for older Americans enrolled in Medicare — but experts say that amounts to more show than substance.
“There’s a difference between reducing the pain people feel associated with out-of-pocket costs at the pharmacy counter and reducing the actual national spend on prescription drugs,” said Allan Coukell, senior director for health programs at the nonpartisan Pew Charitable Trusts.
While 80 percent of Americans say the cost of drugs is unreasonable, one in four people report having difficulty paying for drugs, according to Kaiser Family Foundation polling. And the government is paying more, too. Medicare’s drug spending grew nearly 90 percent from 2006 to 2015, with an annual average growth rate of 7.6 percent, according to Pew.
During the campaign and his presidency, Trump has used strong language against the pharmaceutical industry, famously saying the manufacturers are “getting away with murder.” Late Thursday, senior administration officials told reporters on a call that the plan will reduce the price pharmaceutical companies set for drugs.
No Negotiation by Medicare for Lower Prices
But when asked about whether Medicare will negotiate drugs — as Democrats have called for and the president has talked about — administration officials said that lever would not be pulled.
Instead, Trump’s blueprint calls for measures such as offering free generics to low-income older adults, passing on to consumers more of the negotiated savings that insurers win, and making sure Medicare enrollees don’t spiral into the so-called catastrophic phase of coverage they hit when they pay thousands of dollars a year for drugs.
Leigh Purvis, director of health services research at AARP Public Policy Institute, said the president’s proposals fail to ultimately address that spending. AARP has long called for Medicare to have the ability to negotiate prices.
“Anything that doesn’t address the list price really is just kind of squeezing the balloon in this world,” Purvis said.
Limiting Out-of-Pocket Costs
For Medicare patients, though, limiting what they pay out-of-pocket could be especially helpful to those taking cancer drugs or other expensive therapies, said Stacie Dusetzina, an associate professor of health policy at Vanderbilt University School of Medicine.
Today, patients who pay $5,000 out-of-pocket for prescriptions enter the “catastrophic” category of Medicare coverage, and are charged just 5 percent of their drug costs. But given the astronomical cost of cancer drugs, that can leave patients paying $1,000 a month or more, Dusetzina said.
Medicare patients with the deadly cancer multiple myeloma can spend $14,000 a year out-of-pocket for the drug Revlimid, which costs about $20,000 a month, Dusetzina said.
Blaming Other Countries
Trump also accused other developed countries of “freeloading” by enjoying the fruits of American innovation — including drugs developed with taxpayer money or by U.S. companies — without paying a fair price. Because national health systems in other countries have authority to negotiate drug costs — and refuse to cover some drugs entirely — their citizens often pay a fraction of the prices charged in the United States.
“In some cases, medicines that cost a few dollars in foreign countries cost hundreds of dollars for the same pill” in the United States, Trump said. “It’s unfair, it’s ridiculous and it’s not going to happen any longer. It’s time to end the global freeloading once and for all.”
A spokesman for Doctors Without Borders said Trump has it backward. Instead of raising drug prices abroad, costs need to come down everywhere, said Leonardo Palumbo, U.S. advocacy adviser for the group’s access campaign.
“Other countries aren’t ‘free-riding,’ and lifesaving medicines aren’t more expensive here because they cost less elsewhere,” Palumbo said.
Limited Influence by Medicare
Today, Medicare has limited power to negotiate drug prices, partly because many of the most expensive treatments — such as those for cancer patients — are in a protected class that must be covered, Dusetzina said.
To really negotiate better prices, Medicare would need the freedom to reject some drugs completely, Dusetzina added.
But excluding certain expensive drugs from the Medicare program could leave patients in a difficult position, said Chris Hansen, president of the American Cancer Society’s Cancer Action Network. Patients who want an expensive drug would either have to skip it or pay for it themselves, he said.
Azar said Medicare could pressure drug companies to keep prices down in other ways.
“In our drug discount program, if you have a drug in a protected class, it’s almost impossible for drug plans to negotiate and get a discount,” Azar said. “What if we said you only get to be in a protected class if you haven’t raised your price in 18 months?”
Some policy experts, though, said Trump’s proposals are mostly old ideas.
“I don’t think anyone is talking seriously about having Medicare negotiate with drugmakers,” said Tom Bulleit, head of the health care practice at the D.C. office of Ropes & Gray.
Rep. Peter Welch (D-Vt.), who along with Rep. Elijah Cummings (D-Md.) met with Trump at the White House a year ago to propose changes on drug prices, said, “If you listen carefully, you can almost hear the champagne popping in the corporate boardrooms of drug companies across the country.”
David Maris, a pharmaceutical industry analyst for Wells Fargo investors, released a note earlier this month pointing out that the increased social and economic tension on the drug industry is building.
“My guess is this is just the beginning,” Maris said.
Targeting Plan B Drugs
Trump’s plan includes tackling the rising costs of drugs in Medicare’s Part B program, which pays for drugs delivered in doctor’s offices or hospital outpatient setting — a challenge previous administrations have failed to tackle.
While the details are still vague, Trump has called for the prices paid for certain drugs under Part B — these could include expensive drugs for cancer chemotherapy and rheumatoid arthritis — to be negotiated using the same tactics insurers and pharmacy benefit managers use under Medicare Part D, which is the program that older adults use for their retail prescription drugs.
Azar said the administration plans to release a request for information to gather input on changes to the program.
The Pharmaceutical Research and Manufacturers of America released a statement Friday saying it was looking forward to working with the administration and warning: “While some of these proposals could help make medicines more affordable for patients, others would disrupt coverage and limit patients’ access to innovative treatments.”
KHN’s coverage of prescription drug development, costs and pricing is supported by the Laura and John Arnold Foundation.
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