02.12.18

Trump Administration Proposes Changes to Lower Drug Costs

Source: FirstWord

The administration of US President Donald Trump on Friday released a white paper unveiling a number of proposals seeking to target rising prescription drug prices. The proposed changes include introducing an annual price cap on out-of-pocket spending by seniors in the Medicare program, potentially making generic drugs free for this group of people, as well as allowing as many as five states to jointly negotiate drug prices for Medicaid as part of a pilot program. 

"The US biopharmaceutical industry is the engine of worldwide biopharmaceutical innovation and an important part of our economy," the paper stated, continuing "preserving this industry and encouraging it to innovate while making drugs more available and affordable for all Americans is an attainable goal." 

Additionally, the proposals would also permit Medicaid to exclude certain drugs from its list of approved medicines to allow negotiations with drugmakers. However, the proposals would not grant government programs the ability to directly negotiate drug prices with pharmaceutical companies. 

Health and Human Services Secretary Alex Azar, who reportedly plans to include the drug pricing initiatives in Trump's budget proposal to be released on February 12, explained that the primary goals of the proposals were to "reduce out-of-pocket expenses for seniors" and "increase the ability of the government to get a good deal" in purchasing medicines. Azar, who was confirmed by the Senate last month, continued "we do think drug prices are too high."

Other recommendations in the proposed strategy include having insurers share rebates from drug companies with patients, as well as changing the requirement that insurers in Medicare's prescription program cover at least two different medications in each broad class of drugs, a condition that in some cases can thwart insurers trying to negotiate lower prices. The plan also proposes changing how Medicare pays for drugs administered in a doctor's office so Medicare does not reimburse based on a fixed percentage of a drug's cost, with some critics claiming the current system can encourage doctors to prescribe more expensive medications. Further, the proposed strategy calls for working with states to revise Medicaid rules so manufacturers do not have an incentive to set artificially high prices due to the rebates they provide the programme for low-income patients.

Commenting on the news, Evercore ISI analyst Ross Muken suggested that the proposals deserve consideration, as "there has been a shift in tone over time and recent ideas are largely more sensible versus the ideas being bandied about a year or two ago." However, financial analyst and former drug company executive Richard Evans predicted that while the plan would help lower costs, it would likely not do so to the same extent as giving Medicare a direct role in setting prices. "Convincing the average voter who is upset about drug prices that this is the path to righteousness is going to be a hard sell," he said.

Last year, Trump stated that drugmakers are "getting away with murder" and suggested that companies could be forced to bid for government business. The President also announced his intention to lower drug prices and reduce regulation. 

Meanwhile, FDA Commissioner Scott Gottlieb previously proposed several changes that would expand the agency's ability to influence drug pricing. Gottlieb later revealed plans to reduce the prices of generic drugs and introduced measures to ease the approval of complex generics.

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