Trump adjusts focus on cutting drug prices
WASHINGTON — After two setbacks this week, President Donald Trump is now focusing his drive to curb drug costs on congressional efforts aimed at helping people on Medicare and younger generations covered by workplace plans.
The White House on Thursday yanked its own regulation to ease the financial bite of costly medications for those on Medicare by letting them get rebates that drugmakers now pay to insurers and middlemen. A congressional agency’s estimate that the plan would have cost taxpayers $177 billion over 10 years seemed to seal its fate.
Earlier a federal judge ruled that the administration lacked the legal authority to require drugmakers to disclose list prices in their TV ads. The ruling Monday blocked a highly visible change expected to have started this week.
Both price disclosure and the rebate idea were part of a strategy on drug costs that Trump announced at the White House with much fanfare last year.
“This is a big setback,” said Peter Bach, director of the Center for Health Policy and Outcomes at New York’s Memorial Sloan Kettering Cancer Center. The rebate rule “was not good
policy [since] it would have increased spending on prescription drugs even if it mildly reduced out-of-pocket costs in some cases. But nevertheless this was a cornerstone of the blueprint.”
White House spokesman Judd Deere said the rebate proposal was withdrawn “based on careful analysis and thorough consideration.”
Deere said Trump is not backing away from his promise to lower drug prices, and the administration is setting its sights on bipartisan legislation. One idea would cap drug copays for people with Medicare, which would produce savings for senior citizens taking costly drugs. That’s another way to achieve a similar goal as the rebate plan.
“The Trump administration is encouraged by continuing bipartisan conversations about legislation to reduce outrageous drug costs imposed on the American people, and President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline,” Deere said in a statement.
While agreeing it’s a setback for Trump, John Rother of the National Coalition on Health Care said that if legislation could be worked out, “that might actually lead to a better outcome.” His organization is an umbrella group that represents a cross section of business and consumer groups.
The chairman of the Senate Finance Committee, Charles Grassley of Iowa, and the committee’s top Democrat, Sen. Ron Wyden of Oregon, are trying for a compromise centered on lowering drug costs for government programs such as Medicare and Medicaid. Top administration officials this week participated in a closed meeting among Grassley and Republican senators on his committee.
Grassley said in a statement that he had concerns about the administration’s rebate rule but was confident about the prospects for legislation. “While the final details are still being negotiated, we’re on track to report a bill out of committee very soon,” he said.
Separately, Grassley and Illinois Sen. Dick Durbin, the chamber’s second-ranking Democrat, are pushing legislation that would grant the government the power to require drug companies to disclose their prices in consumer advertising.
House committees are also working on legislation, and Speaker Nancy Pelosi, D-Calif., remains in contact with the White House on a drug cost compromise. Changes to Medicare often have an impact on employer insurance, but the main dividend for working families could come from legislation to promote pharmaceutical competition.
The rebate plan was crafted by Health and Human Services Secretary Alex Azar but ran into opposition from White House budget officials. That push-back stiffened after the nonpartisan Congressional Budget Office estimated that the plan would have little effect on manufacturer prices and would cost Medicare $177 billion over 10 years by leading to higher premiums subsidized by taxpayers.
Trump’s reversal on rebates was a win for insurers and middlemen called “pharmacy benefit managers” who administer prescription drug plans for large blocks of insured patients.
Shares of several big companies that manage prescription benefits started climbing early in the day.
It was a defeat for the pharmaceutical industry, which had lobbied to promote rebates. Drugmakers prefer that to other approaches lawmakers are considering. Those include “inflation rebates” that drugmakers would be paying directly to Medicare if they raise prices beyond a yet-tobe-determined measure.
“The administration has abandoned one of the only policy solutions that would have truly lowered what patients are forced to pay out of pocket for the medicines they need,” Jim Greenwood, head of the Biotechnology Innovation Organization, said in a statement.
Rebates are a largely unseen part of the complex world of drug pricing.
Under the administration’s plan, drugmaker rebates now paid to insurance companies and their middlemen would have gone directly to senior citizens in Medicare’s Part D program when they filled their prescriptions.
But congressional analysts concluded that drug companies were unlikely to lower list prices across the board in response to the plan. Meanwhile, insurers would raise premiums to compensate for the loss of rebates.
The Trump administration wants to modernize the Medicare Part D prescription-drug benefit, particularly by exposing insurers to more risk so they better negotiate drug prices, a senior administration official said.
The move would require insurers to pay more than they do now in certain phases of Part D where beneficiaries have a gap in government coverage or have reached a maximum out-of-pocket cost that pulls them out of that gap.
Labor Department data indicate that changes may be afoot with drug prices.
Overall prescription drug inflation seems to have stabilized, with more monthly declines than increases recently. The White House credits Trump for that change, but independent experts say the trend isn’t totally clear yet.
Trump has signaled that he is open to allowing Americans to import cheaper drugs from other countries, throwing support behind Florida Gov. Ron DeSantis’ move to create a drug-importation program in his state. Some Senate Republicans, such as Grassley, have also indicated that they support such a move.
Azar said Thursday that his concerns that such a program would put patient safety at risk have waned, saying the drug-supply chain “has changed substantially.”
Trump mentioned last week a “favored-nation clause” that his administration is working on, but he didn’t elaborate. Last year, he outlined a proposal to base the price the U.S. government pays for some drugs on cheaper prices in other countries, where national health programs use their considerable bargaining muscle to contain costs.
Republicans have been skeptical of the idea, as it relies on prices in countries where governments largely set them instead of allowing them to be determined by the market. Grassley, whose committee has jurisdiction over Medicare and Medicaid, said last month that he opposed the idea.