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Trump Offers Blueprint to Drive Down Prescription Drug Prices; Targets Rebates, "Middlemen"

Mary Caffrey
Out-of-pocket costs for consumers and targeting the complex pharmaceutical rebating system were the high points of a presentation that began in the Rose Garden and ended with HHS Secretary Alex Azar's details in the White House press room.
In a Rose Garden ceremony, President Donald Trump vowed to go after the “middlemen” and offered a plan that could put drug prices in TV ads, as part of his quest to drive down what Americans spend on prescription drugs, something he promised to do as a candidate.

However, it’s the details outlined afterward by HHS Secretary Alex Azar that could bring far-reaching changes to the pharmaceutical industry and the healthcare system, including an end to the complex system of rebates that Azar said sometimes allows pharmacy benefit managers (PBMs) to be paid from both health plans and drug makers. This must stop, Azar said, and the payment system must be replaced with one that lowers prices for consumers at the pharmacy counter.

“We’re laying out the most complete action plan for drug affordability in our history,” he said.

Meanwhile, the president who once said drug companies were “getting away with murder” today spread the blame for high prices among many players, from the PBMs to foreign countries that he said enjoy the fruits of US drug development while capping prices, forcing American consumers to pick up the tab.

President Trump’s speech, titled, “American Patients First,” was notable for what it did not do: the president did not call for changing the law to let Medicare directly negotiate drug prices, a step both Trump and his rival Hillary Clinton favored in the 2016 race for president. Instead, private health plans that manage Medicare Part D plans will do the negotiating,

Just ahead of the speech, a letter outlining the “blueprint” appeared from Azar; FDA Commissioner Scott Gottlieb, MD; and CMS Administrator Seema Verma, which said:
  • HHS will increase competition in the drug markets
  • Medicare Part D will gain new tools to negotiate discounts for seniors
  • Manufacturers will gain new incentives to lower list prices
  • The administration will act to reduce consumers’ out-of-pocket (OOP) spending
Azar said while some of the items will require Congress to act, many can be done administratively and are not interdependent. He was clear that fixing the pricing system will take time. “It took decades to erect this complex, interwoven system,” he said.

A request for information will seek to untangle information about rebates, which are a key target of the initiative. Gottlieb has spent weeks talking about the secrecy that the surrounds the system of discounts that manufacturers pay PBMs to maintain favorable positions on formulary; for years, the payments were largely used to hold down premium but in recent weeks Optum, which is owned by UnitedHealthcare, announced plans to pass discounts directly to consumers. Azar, the former president of Eli Lilly, said because rebates are tied to the compensation structure of PBMs, the current pricing system works against a drug company that wants to cut costs at the pharmacy counter. “What goes on now is frankly a bit of a game,” he said.

Increasing competition. To increase the number of generic and biosimilar options, the blueprint calls for ending loopholes that allow manufacturers to prevent generic competitors to reach the market, and to continue Gottlieb’s efforts to promote competition in the biologics market. Trump specifically praised Gottlieb, and then added that “we are very much eliminating the middlemen. The middlemen became very, very rich. They won’t be so rich any more.”

Shortly after the speech, PBM Express Scripts, which provides drugs to 83 million patients, said it “looked forward” to working with the administration to increase the availability of generic drugs and to eliminate gag clauses at the pharmacy counter. “President Trump rightly recognizes drug companies charge way too much, and their prices need to come down. … By taking on tough challenges, we helped employers save $32 billion on their prescription drug bill in 2017 alone.”

Medicare Part D changes. The blueprint outlines how HHS seeks to allow health plans that administer Medicare Part D plans to gain authority to manage high cost drugs that do not currently have rebates or negotiated fixed prices, including those currently in protected classes. In a White House press availability after Trump’s speech, Azar outlined plans to give health plans that administer Part D the flexibility to negotiate with drug makers on prices—or whether to offer certain drugs—and then let seniors decide whether to select plans based on what they offer. CMS would also give Part D plans flexibility to respond to price increases for sole source generics, and similar negotiating tools would be extended to drugs paid for by Medicare Part B. Azar also said that protected class status might be tied to a drug’s cost being held stable for an extended period, perhaps 18 months.

Stephen J. Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of American (PhRMA), reacted negatively to the proposals for Medicare Part D and especially for Part B. He said in a statement, "These far-reaching proposals could fundamentally change how patients access medicines and realign incentives across the entire prescription drug supply chain. While some of these proposals could help make medicines more affordable for patients, ohters would disrupt coverage and limit patients' access to innovative treatments."

Effect of foreign drug prices. In recent weeks, conservative business leaders, such as Steve Forbes, have called for the Trump administration to take strong measures—such as keeping “our pills” out of other countries unless more was done to balance pricing between US and overseas markets. The 44-page blueprint said the administration plans to address issues such as compulsory licensing and theft of intellectual property, which often compel drug makers to lower prices in other countries. Trump said he would empower US Trade Representative Robert Lighthizer to make these issues a priority in talks with trading partners. “We have great power over our trading partners,” Trump said. “America will not be cheated any longer.”

There was no mention of importing drugs, something Democrats have called for in recent days. Besides direct Medicare negotiations, candidate Trump laid out healthcare principles in March 2016 that included letting Americans import lower-priced drugs from overseas and bringing greater price transparency to all levels of the healthcare system. The Medicare position was noteworthy because it had been long advocated by progressives, but had never gained traction in Congress.

Reducing OOP costs. The blueprint and Azar both call for ending gag rules for pharmacists and giving patients more information about low-cost alternatives, and getting patients more information about true co-pay costs before they are prescribed drugs. Azar said, for example, a patient should know before he has an infusion with a $300 co-pay if a self-administered drug is available for a $20 co-pay.

Scope of the pricing problem. Since taking office, these ideas have stalled, notes Madeline Twomey, a special assistant for Health Policy at the Center for American Progress (CAP). She cites a report by Congressional Democrats that says prices for the 20 most-prescribed drugs under Medicare Part D have increased 10 times faster than inflation over the past 5 years; the researchers found manufacturers raised prices 12% a year on average. CAP finds that companies continue to raise prices, even though profits for the 7 top pharmaceutical companies were $12.1 billion for the first quarter of 2018, a 29% increase from the first quarter of 2017.

Meanwhile, research at Harvard shows patients increasingly skip medication doses due to cost, and that tale was backed up earlier this week by testimony from both patients and medical experts who testified before the Special Senate Committee on Aging, which examined recent price spikes in insulin, a nearly 100-year-old drug that some patients need to stay alive. Last year, Azar's former company, Lilly, was the scene of protests over insulin prices.

Other commentators weighing in ahead of the speech said that focusing on “greed” misses the real problem: the enormous waste associated with research and development failures that must be absorbed into the costs of drugs that succeed. Writing for Endpoints, David Grainger of RxCelerate said some pharmaceutical punching bags—notably Gilead’s Sovaldi to cure hepatitis C virus—are unfairly held up for scorn when they save money in the long run, by reducing hospitalization.

Trump’s speech comes more than a year into his term, as critics say he has done little to follow through on his promise to get tough on drug companies and bring relief for consumers at the pharmacy counter. Recently, the team under Azar has gelled around the pricing issue in way that did not occur under predecessor Tom Price, MD.  Gottlieb is the breakout star of the administration, surprising critics with a commitment to evidence-based regulation, strong nutrition policy, and moves to promote more generic and biosimilar therapies.

“Today is an important day in the administration’s collaborative effort to address the rising cost of drugs,” Gottlieb said in a statement. “We know that the high list cost of drugs can adversely impact peoples’ access to medicines. People rely on medicines to improve their quality of life, manage chronic conditions and treat life-threatening illnesses. Access to prescription drugs is a matter of public health. I applaud President Trump for making this one of the administration’s priorities and introducing a bold plan that puts patients first in advancing actions to address the rising list prices of prescription medicines. The FDA shares the goal of ensuring that American patients have access to quality and affordable care that meets their needs. This is why we’re prioritizing actions to encourage the timely development and approval of generics and biosimilars.”

Verma, meanwhile, has won some praise from community oncologists for moving to end abuses of the 340B program, but they were dismayed by her recent remarks that doctors are motivated by “perverse incentives” to prescribed higher priced drugs in Medicare Part B.

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