President Trump is scheduled to deliver a major speech on drug prices today. This post is intended to start a dialogue on what he says and proposes.
It’s unclear whether Trump will provide specifics or whether those will be rolled out in coming weeks. As is always the case with Trump, there’s concern he’ll go off script despite apparent careful preparation of the speech.
The speech is reportedly going to coincide with an RFI from HHS on ways to restrain drug prices, building on ideas proposed in the administration’s fiscal 2019 budget request. That sounds like a delay tactic, but we’ll see.
Notably, Alex Azar and Scott Gottlieb, health secretary and FDA Commissioner, respectively, have recently hinted at substantial policy proposals. Azar, for example, has proposed shifting some of the drugs now paid for under Medicare Part B (such as chemotherapy drugs administered in doctors’ offices) to Part D, where private plans would have clout to push for lower prices.
Azar and CMS administrator Seema Verma have also suggested requiring PBMs to share the savings from drug rebates with consumers.
Indeed, PBMs appear to be squarely in the administration’s sites. Drug companies pay rebates to insurers and PBMs to assure their drugs get on formularies, and sometimes a preferred spot on a formulary.
Up the same alley, the two officials have proposed that Medicare Part D insurers be compelled to pass along rebates to Part D enrollees—something the pharmaceutical industry supports. Insurers now pocket most of the rebates. One idea: require Part D plans to pass along at least a third of rebates to enrollees.
Not surprisingly, insurers don’t like that idea. They argue that it (a) doesn’t force drug makers to reduce the list price of their drugs and (b) could actually raise costs for many seniors because insurers would pass the rebates along to high drug utilizers while raising premiums for all enrollees.
This stuff is complex, folks; it’s a marketplace and not a transparent one!
Less likely from the president is any proposal to end the legislative ban on direct government (Medicare) drug price negotiation with pharmaceutical companies.
Up in the air is importing and buying drugs from other countries, such as Canada. Trump has supported this idea in the past but Azar and Gottlieb strongly oppose it.
Trump has also railed against other countries skating off U.S. innovation in drug development. As is well known, most EU and developed countries negotiate and cap the price they’ll pay for medicines on behalf of citizens. That prompts drug companies to seek the bulk of their profits in the laissez-faire U.S.—the country where the bulk of the world’s biomedical research and drug developments is done.
No fair, Trump asserts. But will the administration want to further strain relations with EU allies around trade policies in light of the trade and tariff debate he recently triggered. EU countries have also been very clear on any suggestion that they pay more for drugs because the U.S. is unwilling to negotiate drug prices: No Way!
One thing’s for sure: the pharmaceutical industry is not going to relent in its long-standing opposition to drug price controls. See this piece from Monday’s New York Times.
Mounting Public Outrage
The industry’s efforts are, however, up against mounting public outrage. Even amid the chaos of the past year around ACA repeal and replace, anger about drug prices has not gone away. Media attention is constant (See this “60 Minutes” piece from last Sunday) and a recent Kaiser Family Foundation poll found more people complaining about drug prices than health insurance costs.
The public’s anger has been compounded in the last couple years by the opioid epidemic and widespread media attention to drug company’s complicity in promoting excessive use of narcotic pain pills.
Recent lawsuits and congressional hearings on this have also raised the prospect of legislation to place restrictions on the companies that distribute drugs. Pharmacy chains have put the industry on notice, too, that they’ll get tough when they have to. Walmart announced this past week that it will provide no more than a seven-day supply of first-time opioid prescriptions.
Also this week: 30 California counties joined dozens of other states, counties and cities nationwide seeking recovery for alleged taxpayer losses from the makers and distributors of opioid painkillers. A giant aggregated class action suit is underway that has been compared to the 1990s tobacco industry case.
Politics is also at play in all this. Drug prices are almost sure to be a potent issue in the mid-term elections. Nearly everyone agrees something needs to be done and both Republicans and Democrats stand to gain from campaigning on the issue and pushing solutions.
For Republicans, it’s a chance to pivot from repeal and replace and show they are still focused on health care costs. For Democrats, dumping on big pharma is tried and true—an evergreen. Republicans know they must blunt Democrats’ advantage on the issue.
For Trump, this is also a pivot, from ACA bashing to an issue he campaigned on and seemed genuinely vexed about—and one that struck bipartisan cords and was at odds with Republican pro-pharma orthodoxy and thus showing his independence from the party.
(It doesn’t help, though, that the speech comes the same week Trump’s lawyer, Michael Cohen, was revealed to have had a $1.2 million consulting contract with drug giant Novartis. Cohen promised to help the company gain access to Trump and other administration officials, a Novartis employee told the news organization STAT. Novartis let the contract lapse earlier this year and says now it was “a mistake.”)
An RFI – Really?
The possibility of an RFI (request for information and ideas) sounds awfully much like a delay tactic—where Trump and Republicans can punt the issue to after the mid-term elections while saying they are doing something. Democrats probably won’t complain about that, however, since they want drug prices as a campaign issue and any legislative action this year is highly unlikely. Also, if they—the Democrats—regain control of the House and/or Senate they’ll have a much better shot at bolder legislation.
There’s certainly no dearth of ideas already in the public domain, including those discussed at length in these three recent reports (easily available via Google), just to cite a few:
- Making Medicines Affordable: A National Imperative; National Academy of Sciences, 240 pages, 2017
- “Reforming Biopharmaceutical Pricing at Home and Abroad,” a report from the Council of Economic Advisers, February 2018
- “High-Priced Drugs in Medicare Part D: Diagnosis and Potential Prescription,” a National Bureau of Economic Research working paper, January 2018.
The journal Health Affairs also released three insightful “policy option” papers in March 15 authored by leading academics and experts on drug costs. You can access them for free under “Featured Content” at healthaffairs.org.
All these reports and papers note prominently that incremental ideas won’t be enough to prevent substantially higher prices and costs for brand name medicines in the future. That is being driven by very welcome science—e.g. the new biotech cancer immunology drugs. But these medicines seem to get more expensive every year. And that’s limiting access.
Also, at present, there’s no clear pathway to transition a $200,000 a year brand name cancer drug to a $10,000 a year drug once it comes off patent. The companies set up to produce such generic biotech drugs (sometimes called biosimiliars) are more inclined to charge in the $120,000 to $170,000 range. In Europe, they are ordered to charge far less.
Some of the new biotech drugs will be magnificent breakthroughs. But they could also break the bank—with rising costs for government, employers and consumers.
As with other health care debates these days, this one is about the balance of power between government and industry. It’ll also a debate that pits public health and access to needed medicines against private sector profit.
More later after we hear what the President has to say.
Steven Findlay is an independent health policy analyst and journalist
The speech was a bust…as Trump’s speeches often are: full bombast and unrealistic promises. There was an embarrassing disconnect, for example, between Trump’s promises that drug prices would come down very soon and Azar’s much more cautious remarks that changing the byzantine mechanisms by which drugs are priced will take years.
But many of the ideas in the 44-page “American Patients First” are worthy of consideration. Unfortunately, others reveal a seriously poor understanding of the world pharmaceutical marketplace. In particular, Trump’s suggestion that the U.S. is being ripped off by other countries because they control/negotiate drug prices and thus those nations should pay higher prices (“their fair share”) is a complete non-starter. And terribly naive–much like the entire “America First” agenda of this administration.
The failure here is in US policy and law! Which allows drug companies to price in the US at will, based in part on the bogus argument that they need the high profits for research and development. The pharma industry overall consistently makes an 18 to 22 percent return in pure profit–among the highest in the world on a historic basis among all industries. True, a healthy pharma industry is a good thing but this is government-sanctioned greed and profiteering and has been for 20 years. That’s the reason for the outrage.
I’ll write another blog soon on some of the main ideas in “American Patients First.”
“The speech was a bust…as Trump’s speeches often are:”
Trump won the Presidency with his speeches and his tweets so I don’t know how you can say that.
“those nations should pay higher prices (“their fair share”)”
Their fair share doesn’t mean higher prices, though higher prices are possible.
” naive–much like the entire “America First” agenda of this administration.”
What is naive about America First? The leaders of most countries say they put their people first.
“this is government-sanctioned greed”
Maybe we need less government. For instance, if the government didn’t prevent buying pharmaceuticals from abroad American citizens would have a chance of obtaining those much lower prices.
Drug stocks rise after announcement.
Well, yes really, I listened to the Rose Garden and subsequent news conference. The real issues were not discussed, and a variety of structural issues for the low hanging fruit were selected. At least its a start for Medicare.
Not directly or indirectly acknowledged is the state of “social responsibility” exhibited by big Pharma as defined by its long standing and unchanging BUSINESS MODEL. The complexities of this business model have led to the odd character underlying our nation’s health spending for medication. The Big Pharma business model allocates 40% of their cash Income to its Net Income (profit) plus their Expenses for promotion. With the technological introduction of various immune modulating Biologicals and genetic modifying agents, medical spending for Trade Name medication is left largely untouched by the initiatives announced today. With a grand initiative as a low-level starter, we can only hope there is ‘more to come.’
Vague hand waving. A noun, a verb and competition (or markets). Basically magic. (I think they misread Clarke. All technology should be indistinguishable from magic, not health care policy.)
Hopefully, we get more specifics soon as right now it’s the tale of the incredibly vague and terrifically underwhelming.