Policy

Trump Targets Drug Pricing in Trade Agreements

‘It’s unfair, it’s ridiculous and it’s not going to happen any longer’

Health and Human Services Secretary Alex Azar testifies during a Ways and Means Committee hearing on the FY2019 budget for HHS in Longworth Building on February 14, 2018. (Tom Williams/CQ Roll Call file photo)

President Donald Trump has instructed trade ambassador Robert Lighthizer to grant the drug industry’s wish of making pharmaceutical prices a “top priority” in negotiations with other countries.

Trump revealed the instruction during a Friday announcement unveiling the administration’s overall strategy for lowering drug costs.

The administration’s blueprint recycles several previous proposals, but a new part of the plan includes leveraging trade agreements to try to reduce prices by pushing other nations to pay more.

Other ideas include examining whether to require drugmakers to disclose prices in their ads; updating Medicare’s online drug spending database to provide more information; revamping Medicaid’s rebate program; and banning Medicare drug plans from preventing pharmacists from telling patients when it’s cheaper to buy a prescription without using insurance.

Trump has labeled countries with socialized health care as “global freeloaders” for negotiating lower drug prices with companies that perform research and development in the United States.

“It’s unfair, it’s ridiculous and it’s not going to happen any longer,” Trump said Friday in the Rose Garden.

The U.S. pays 70 percent of the profits for brand-name drugs, according to the Organization for Economic Cooperation and Development. But experts question whether tougher negotiation strategies will lower drug prices in the U.S., and Trump’s plan was light on specifics.

The Pharmaceutical Research and Manufacturers of America, or PhRMA, praised the move but expressed concern about other proposed changes to Medicare. 

“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. “While some of these proposals could help make medicines more affordable for patients, others would disrupt coverage and limit patients’ access to innovative treatments.”

Prescription drug spending increased just 1.3 percent to $328 billion in 2016, according to the Centers for Medicare and Medicaid Services, a dramatic slowdown from past years when prices rose with the introduction of new specialty medications. The industry has touted the slower growth as it weathers public backlash.

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. The administration’s wide-ranging framework targets what Trump called “the tangled web of special interests,” taking aim at both drug manufacturers and the so-called middlemen — insurance companies and pharmacy benefit managers.

“We’re very much eliminating the middlemen,” he said. “The middlemen became very, very rich. Whoever those middlemen were — and a lot of people never even figured it out — they’re rich. They’re not so rich anymore.”

It’s unclear what Trump meant, but Health and Human Services Secretary Alex Azar and Food and Drug Administration Commissioner Scott Gottlieb have targeted pricing and rebate practices between drugmakers, insurers and pharmacy benefit managers they say encourage higher list prices and more use of expensive medications.

Azar told reporters afterward that the regulatory system prevents companies from lowering their prices, citing his own experience as an Eli Lilly & Co. executive. “The system doesn’t make that work,” he said.

Azar also said the FDA would “immediately” look into requiring drugmakers to disclose prices in their ads, although the details are unclear. Drug prices vary widely based on a consumer’s insurance plan. The U.S. is the only country, other than New Zealand, that allows drug companies to advertise directly to consumers.

“Think about all the time everybody spends watching drug company ads, and how much information companies are required to put in them,” Azar said. “If we want to have a real market for drugs, why not have them disclose their prices in the ads, too?”

Separately, the White House is requesting feedback in several areas, including creating more prescription drug plan incentives for drugmakers that don’t raise their prices.

Industry reaction

While Trump and Azar delivered tough remarks, it did little to scare the industry. Pharmaceutical stocks dipped slightly during the president’s speech before rising again. Individual companies and industry groups endorsed the administration’s overall message of lowering prices while spinning the speech to support their interests.

“Express Scripts stands up to drug companies and drug stores to make sure that everyone — patients, employers, health plans, unions and public programs — get a fair deal for the money they spend,” the country’s largest pharmacy benefits manager said in a statement. 

But America’s Health Insurance Plans expressed concern about the proposal to pass manufacturer rebates to consumers.

“Insurance providers share the savings from negotiations with drug manufacturers by lowering premiums and copays for all consumers,” AHIP said in a statement. “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.”

Azar said he would meet with the White House next week to begin implementing the proposals, which will take months to go through the rulemaking process. Trump said the White House would work with Congress on additional proposals.

Democrats called Trump’s promises hollow, pointing to December’s tax law that slashed the corporate tax rate for drug manufacturers, insurers and pharmacy benefit managers. House Minority Leader Nancy Pelosi of California said Trump “pulled his punch.”

Democrats were especially upset Trump’s announcement did not call for Medicare to negotiate drug prices, a popular Democratic proposal and one of his signature campaign promises. Doing so would require giving Medicare more power to exclude certain drugs, which opponents say could limit seniors’ access to medications.

“We don’t do it,” Trump said when he ran for president. “Why? Because of the drug companies.”

Medicare spends more than $100 billion on drugs through the Part B outpatient and Part D drug programs. Trump had met with House Democrats Elijah E. Cummings of Maryland and Peter Welch of Vermont in March 2017, when they said he readily backed their bill to give Medicare negotiating powers. But the president has offered nothing but “radio silence” since then, Cummings said Thursday.

“Very expensive champagne will be popping in drug company boardrooms across the country tonight,” Cummings said in a statement before the speech Friday.

Trump did call for improving Medicare’s negotiating powers. Many items in the administration’s blueprint were part of the administration’s previous 2019 budget request, including allowing drug plans to cover just one drug in each class rather than two — a provision that concerns some consumer groups. The budget request also included a provision moving some drugs covered under Part B to Part D to leverage private plans’ negotiating power.

Trump and Azar framed the proposals as a way of improving the government’s power over the industry while promoting competition.

“We’re going to see those prices go down,” Trump said. “It will be a beautiful thing.”

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