President Donald Trump speaks about prescription drug prices with Health and Human Services Secretary Alex Azar in the Rose Garden on May 11. Thursday’s event is another move to address his campaign promise on lowering those prices. | Carolyn Kaster/AP Photo
President Donald Trump on Thursday will unveil a plan to overhaul how Medicare pays for certain drugs, attacking “foreign freeloaders” that he says have driven up costs in the U.S. The bold move addresses a Trump campaign pledge to lower drug prices, just days before the tightly contested midterm elections in which health care is playing a pivotal role.
Trump is scheduled to outline the details in a speech at HHS at 2 p.m., his first address at the health department. The proposal, described to POLITICO by three individuals with knowledge, still needs to be refined and put through a federal rulemaking process. Story Continued Below
The proposal would bypass Congress by using a pilot program to test three ways to lower the costs of drugs — including negotiating for some drugs directly administered by doctors in hopes of keeping them in line with the far lower prices paid in many other countries. The proposal applies only to drugs administered in doctors’ offices and outpatient hospital departments — medicines like cancer treatments and injectable treatments for rheumatoid arthritis or eye conditions. It won’t affect most prescriptions purchased by patients at pharmacies.
The proposal, which was sent to the White House earlier this month, would use Medicare’s innovation center to test three ways to lower the costs of drugs — including negotiating for some drugs that are directly administered by doctors, in hopes of keeping them in line with the lower prices paid in many other countries. The proposal applies only to drugs administered in doctors’ offices and outpatient hospital departments — medicines like cancer treatments and injectable treatments for rheumatoid arthritis or eye conditions. It won’t affect most prescriptions purchased by patients at local pharmacies.
The Trump administration will say that Medicare could save more than $17 billion over five years, with the cost of some drugs dropping by as much as 30 percent.
HHS did not respond to requests for comment Wednesday night. But HHS Secretary Alex Azar alluded to the announcement early Thursday morning as he touted a new report on high U.S. drug prices that bashed “global freeloading” and said that Medicare often pays nearly twice as much as countries like France and Japan to use the same drugs.”I look forward to hearing from POTUS later today on the administration’s efforts to address the high cost of prescription drugs, and our work to put American patients first,” Azar tweeted. “Stay tuned.”
The administration is bracing for blowback, said one official, noting that hospitals and doctors — and of course the drug companies — all have reason to be unhappy about a plan that will cost much of the health sector money. The drug industry and its allies have lots of lobbying clout; a less ambitious effort by the Obama administration to address Medicare Part B prices fizzled in late 2016. PhRMA, the main trade group representing drugmakers, said it needed more details on Trump’s plan but expressed “serious concerns” about proposals that could limit patient access to drugs or discourage innovation.
“Nobody’s going to like this,” said the official. “It antagonizes too many people.” But Trump’s proposal could appeal to patients — who stand to benefit from lower prices — and Democrats, who have chastised the Trump administration for not using all of its regulatory power to cut drug prices, which polls have shown are a concern of Republican and Democratic voters alike.
Three drug companies — Roche, Amgen and Regeneron — would be particularly hard hit by the move, Wall Street investment analyst Ronny Gal of Bernstein wrote in a note to clients. He analyzed the share of Medicare Part B revenue for the top 20 drugs purchased by the program in 2016. Johnson and Johnson, Bristol-Myers Squibb and Eli Lilly would also be affected, according to the analysis.
Both “Roche and Regeneron are showing the strain,” in the stock market’s reaction Thursday, Gal said.
Despite the threat, Gal said the proposal “should be taken in stride,” due to the drug industry‘s “substantial clout” and the Trump administration’s history of throwing out a “sharp first position and negotiating some of it away.“ But he cautioned the private sector is taking a page from the White House and starting to look at similar cost control ideas.
Health care has emerged as a hot issue in the midterms, with Democrats making gains by pledging to protect Obamacare protections for people with pre-existing conditions. Those protections would have been undermined in GOP repeal bills and are now threatened by a White House-backed lawsuit brought by conservative states. Trump’s pivot to drug prices could help Republican candidates needing a winning message on health.
Hours before Trump’s speech, the pro-Obamacare group Protect Our Care called it a “desperate attempt to mask” the GOP’s health care agenda.
“Making this announcement 13 days before an election where health care is the number one issue to voters just goes to show the desperation of a president who has led a GOP war on health care and who promised prescription drug price cuts, while drug costs go up for Americans at the same time drug company profits skyrocket,” said Leslie Dach, the group’s chairman.
The Trump administration proposal has several strands, all of which dramatically shake up the industry that right now has vast control over setting Medicare drug prices.
Under the planned “international pricing index,” U.S. drug prices would be benchmarked against 16 other nations — Austria, Belgium, Canada, Czech Republic, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain, Sweden and the United Kingdom — where target drug prices are collectively 44 percent lower. Prices would slowly be lowered to international levels over five years.
The Trump administration also wants to experiment with letting private sector vendors negotiate with drug makers. That strategy is modeled on how health insurers negotiate drug prices in Medicare’s Part D program, which covers outpatient drugs for older Americans. Medicare would test this approach in certain geographic areas, where participation would be mandatory for physicians and hospitals. Not all drugs would be included in this test. CMS would focus on drugs made by just one company (which tend to be expensive) and biologic medicines, which make up a large share of Medicare Part B spending.
Under the third branch of the strategy, officials would try changing incentives for doctors to prescribe drugs. Under Medicare’s current system, doctors often have incentives to prescribe more expensive drugs, because they get a fee based on the price. Changing that to a flat fee — instead of a percentage — could help nudge doctors to use less expensive medications.
Beyond Trump’s speech, administration officials are planning a communications blitz, which began with the HHS report on Thursday morning that lays out the high prices with Medicare’s Part B program. Azar is scheduled to give his own speech at the Brookings Institution on Friday. CMS also will begin inviting comments and announce that it may propose the rule in the spring of 2019 with an eye toward starting the program in spring of 2020.
When President Barack Obama sought to test new ways to pay for physician-administered drugs, the blowback came from fellow Democrats, as well as from Republicans, doctors, hospitals and patient groups. His proposal never got off the ground.
But Trump will tout his plan as part of his “America-first” agenda, blaming other nations for paying too little for drugs and relying on Americans to absorb the higher prices that fund new pharmaceutical innovation. The president has repeatedly demanded that other nations pay more for medicines, a move that he’s claimed would enable the U.S. to get better deals.
Trump’s proposal does not appear to immediately affect what other nations pay. Instead, his ideas borrow from other countries’ playbook — a gambit to align high U.S. drug prices with the rest of the world, which spends far less on the same medicines.
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