Pro­posal for cheaper drug prices is quashed

Pres­i­dent’s about-face com­pli­cates de­sire to keep prom­ise on the trail


The Trump ad­min­is­tra­tion has with­drawn a key pro­posal to lower drug prices, which its top health official had touted seven months ago as the most ef­fec­tive way to curb medicine costs for con­sumers.

The drug re­bate rule would have ended a widespread prac­tice in which drug­mak­ers give re­bates to in­sur­ance mid­dle­men in gov­ern­ment pro­grams such as Medi­care. The idea was to chan­nel that money to con­sumers in­stead.

The pro­posed rule was the sec­ond ma­jor Trump drug pric­ing ef­fort to col­lapse this week after a fed­eral judge blocked an ad­min­is­tra­tion rule that would have re­quired drug­mak­ers to dis­close the list prices of their medicines in tele­vi­sion ads. To­gether, they com­pli­cate the ad­min­is­tra­tion’s ef­forts to lower pre­scrip­tion drug costs, po­ten­tially un­der­min­ing one of Pres­i­dent Trump’s main cam­paign prom­ises as he seeks a sec­ond term.

The with­drawal of the plan is ex­pected to put pres­sure on ad­min­is­tra­tion of­fi­cials to pur­sue more pop­ulist pro­pos­als, from im­port­ing lower-cost drugs from other coun­tries to bas­ing the prices of some Medi­care drugs on the lower prices paid by other coun­tries —

ideas fa­vored by the pres­i­dent but re­viled by the drug in­dus­try and many Repub­li­cans. It also demon­strates the in­ter­nal con­flicts within the ad­min­is­tra­tion on drug pol­icy and the pres­i­dent’s ten­dency to flip-flop; the plan was part of his drug pric­ing blue­print re­leased with fan­fare a year ago.

Health and Hu­man Ser­vices Sec­re­tary Alex Azar and top White House pol­icy ad­vis­ers had dis­agreed over the mer­its of the drug re­bate rule, with Azar con­tin­u­ing to cham­pion it and most White House pol­icy of­fi­cials ar­rayed against him over concerns it would cost nearly $180 bil­lion over the next decade and could raise Medi­care pre­mi­ums.

Drug re­bates, which Azar in Jan­uary termed “a shad­owy sys­tem of kick­backs,” are es­sen­tially dis­counts off the list prices of drugs. Drug­mak­ers pay them to phar­macy ben­e­fit man­agers, or di­rectly to in­sur­ers, in exchange for a drug be­ing in­cluded on a list — or for­mu­lary — of drugs cov­ered by a given health plan. The ben­e­fit man­agers say those re­bates are a small part of the dis­counts they ne­go­ti­ate to lower the costs of drugs to in­sur­ers, in­clud­ing Medi­care. They con­tend the real prob­lem is that man­u­fac­tur­ers set list prices too high.

In the end, ad­min­is­tra­tion and con­gres­sional budget an­a­lysts pro­jected that if drug­mak­ers no longer paid the re­bates, they were likely to pocket most of the sav­ings rather than pass them on to con­sumers. And with­out the mid­dle­men ne­go­ti­at­ing drug dis­counts, Medi­care would be on the hook for more of the costs, lead­ing to in­creased in­sur­ance pre­mi­ums and gov­ern­ment spend­ing, an­a­lysts said.

The de­ci­sion to jet­ti­son the pro­posed rule was made at an Oval Of­fice meet­ing this week in which sev­eral ad­vis­ers, in­clud­ing White House Do­mes­tic Pol­icy Coun­cil Di­rec­tor Joe Gro­gan and Azar, dis­cussed the pros and cons with Trump, ac­cord­ing to a White House official and lob­by­ist briefed on the meet­ing. Like oth­ers, they spoke on the condition of anonymity to dis­cuss in­ter­nal de­lib­er­a­tions.

Gro­gan ar­gued that the rule would raise Medi­care pre­mi­ums right be­fore the 2020 elec­tion, the two peo­ple said. Azar was the only one ad­vo­cat­ing for it. Trump him­self made the de­ci­sion to with­draw the plan, ac­cord­ing to ad­min­is­tra­tion of­fi­cials.

“There was pretty wide con­sen­sus and Russ Vought [act­ing di­rec­tor of the Of­fice of Man­age­ment and Budget] was chief among those that [said] it was a ter­ri­ble idea,” a se­nior ad­min­is­tra­tion official said. “The cost was ex­or­bi­tant and it was per­ceived as a bailout to Big Pharma . . . There was wide con­sen­sus with OMB lead­ing on the charge on that.”

On a call Thurs­day af­ter­noon with re­porters, another se­nior ad­min­is­tra­tion official said there was concern the rule’s expense might com­pro­mise ne­go­ti­a­tions with Congress over leg­is­la­tion to lower drug costs. If law­mak­ers were con­cerned about how the rule could affect Medi­care pre­mi­ums, the official said, “it could have in­serted new vari­ables into a ne­go­ti­a­tion.”

Azar echoed the White House’s line of rea­son­ing in a brief­ing with re­porters. “At the end of the day, while we sup­port the con­cept of get­ting rid of re­bates . . . we’re not going to put se­niors at risk of their pre­mi­ums going up,” he said.

Still, he con­tended, “re­bates’ days are num­bered . . . We have to­tally changed the de­bate on re­bates.”

The de­ci­sion drew praise from phar­macy ben­e­fit man­agers — who would have been most hurt by the pro­posal — and who had lob­bied mem­bers of the Do­mes­tic Pol­icy Coun­cil and top health of­fi­cials to drop it.

“Only drug man­u­fac­tur­ers have the power to set drug prices. We be­lieve that the key to low­er­ing drug costs is to en­act poli­cies that en­cour­age greater com­pe­ti­tion,” Phar­ma­ceu­ti­cal Care Man­age­ment As­so­ci­a­tion chief ex­ec­u­tive JC Scott said in a state­ment.

Drug­mak­ers, how­ever, called the de­ci­sion “a blow to se­niors.”

“Of all the poli­cies pro­posed in Wash­ing­ton right now, this was the only pro­posal that would pro­vide im­me­di­ate sav­ings at the phar­macy counter,” said Holly Camp­bell, a spokes­woman for PhRMA.

White House spokesman Judd Deere said the White House hoped to col­lab­o­rate with Congress on other ap­proaches to low­er­ing drug costs.

“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,” he said in a state­ment.

Azar and Gro­gan met with Se­nate Repub­li­cans this week to dis­cuss a bi­par­ti­san drug pric­ing pro­posal, ex­pected to be un­veiled in the com­ing weeks, which in­cludes more than a dozen pro­vi­sions, in­clud­ing cap­ping out-of-pocket costs in Medi­care drug ben­e­fits and changes to Med­i­caid, ac­cord­ing to a Se­nate aide.

Azar told re­porters Thurs­day that he is work­ing with the White House on other ideas to lower drug prices, in­clud­ing find­ing ways to im­port lower-cost drugs from other coun­tries.

Trump has em­braced a pro­posal by Florida Gov. Ron DeSantis (R), for in­stance, to im­port low­er­priced drugs from Canada. Azar had orig­i­nally ex­pressed concerns that such an ap­proach could al­low po­ten­tially unsafe coun­ter­feit drugs into the coun­try.

On Thurs­day, Azar re­it­er­ated his as­ser­tion that im­port­ing drugs from other coun­tries makes sense only if it can be guar­an­teed that the U.S. drug sup­ply is safe and that such a pol­icy would save money for con­sumers. But he said that re­cent changes in who is dis­tribut­ing drugs “could open the door” to meet­ing those cri­te­ria.

Asked whether he was dis­ap­pointed in the pres­i­dent’s de­ci­sion on re­bates, Azar said he was not.

In re­sponse to another ques­tion about his ten­ure at HHS, he said he would be “de­lighted to stay in this role as long as the pres­i­dent is in of­fice and the pres­i­dent wishes me to be here. I love this job.”

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