Trump Targets Drug Prices With 2 Orders Using International Pricing, Ending Rebates

November 21, 2020
Allison Inserro
Allison Inserro

President Donald Trump issued 2 orders Friday aiming to lower drug prices paid by Medicare by invoking a "most favored nations" policy and also by targeting rebates paid to pharmacy benefit managers.

President Donald Trump issued 2 rules aimed at lowering prescription drug prices that affect Medicare beneficiaries. The moves come with just 60 days left before President-elect Joe Biden takes the oath of office.

The rules, which were swiftly denounced by a number of organizations, follow up on executive orders that Trump signed in July.

One rule, known as “most favored nation,” would require Medicare to tie the prices it pays for drugs to those paid by other wealthy countries. The other rule would limit rebates paid to pharmacy benefit managers (PBMs) by drugmakers in Medicare.

"The famous middlemen they call them," Trump said, ad libbing from prepared remarks.

It is not clear whether the incoming Biden administration will keep the rules, but during his remarks, Trump, who has not yet conceded the race to Biden, said he "hoped they would." Reuters reported that Wall Street analysts do not expect the rules to take effect.

The administration first proposed to base Medicare’s prices on international drug prices in 2018. In the United States, Medicare is barred from negotiating prices directly with drug companies. Other countries regulate their health care spending more heavily, including for prescription drugs.

In a fact sheet distributed by CMS, the administration called the pricing policy a "payment model" and said it was an interim final rule with a comment period and would take affect January 1, 2021. The policy affects Medicare Part B drug costs, which are typically infused or injected drugs used in oncology and in other conditions that require biologics or biosimilars.

The policy affects Medicare Part B drug costs, which are typically infused drugs used in oncology and in other conditions that require biologics.

The intent is to cap the cost of those drugs at the lowest price that drug manufacturers receive in other countries and to pay providers a flat add-on amount for each dose of a drug, instead of a percentage of each drug’s cost.

CMS said the rule would be mandatory and will focus on 50 single source drugs and biologic drugs, including biosimilars, that comprise the largest majority of Medicare Part B drug spending.

The Rebate Proposal

HHS said the rebate rule targets Medicare Part D and said that last year Part D rebates totaled $39.8 billion, representing an average discount of nearly 30% for brand drugs. Last year, the administration withdrew a plan to curb rebates due to concerns it would raise Medicare premiums.

The rule unveiled Friday would take effect January 1, 2022. It would require drug companies to give Medicare beneficiaries rebates that now go to insurers and PBMs. The nonpartisan Congressional Budget Office estimates it would increase taxpayer costs by $177 billion over 10 years.

The lobbying group for insurers, America’s Health Insurance Plans (AHIP), called it a “$100 billion bailout” for drug companies.

“It is inconceivable that the Administration would now do a complete about face and violate its own Executive Order by asserting that the rule would not increase federal spending, beneficiary premiums, or patients’ total out-of-pocket costs,” said Matt Eyles, AHIP’s president and CEO.

“This rule threatens health care affordability just as Americans are continuing to battle the COVID-19 crisis and its impact on their health and financial stability.”

Additional Reaction

The Pharmaceutical Research and Manufacturers of America (PhRMA), which is opposed to any form of pricing based on international drug prices, said in a statement that the action “defies logic” and that it is “considering all options to stop this unlawful onslaught on medical progress.”

Regarding the rebate issue, the lobbying group said it was still reviewing it but said they “are hopeful it will guarantee that seniors will finally see the savings at the pharmacy counter from discounts their health plans negotiate with biopharmaceutical companies.”

During his press conference, Trump claimed, without evidence, that Pfizer had delayed the successful results of its vaccine for SARS-CoV2 until after the November 3 presidential election to hurt his chances of winning. In her statement, the head of the Biotechnology Innovation Organization (BIO) appeared to refer to his assertions and said his rule was “ill considered” and “legally suspect.”

Trump’s “routine politicization of science has needlessly hurt our nation’s response to the pandemic,” said Michelle McMurry-Heath, MD, PhD, BIO’s president and CEO. “Now, in the waning days of his administration, the president is rushing to impose arbitrary foreign price controls on the very researchers trying to develop vaccines and treatments to end this public health crisis. And to add insult to injury, this is being done as retribution against America’s researchers because they refused to put the president’s political interests ahead of science and patient safety in their efforts to develop a vaccine for Covid-19.”

In an interview with The American Journal of Managed Care®, Ted Okon, executive director of the Community Oncology Alliance (COA), called the announcement “brazen and unhinged,” said it is an attempt to bypass Congress and current law setting Medicare reimbursement, and threatens struggling community oncology practices during the pandemic.

The flat rate proposed in the rule— $148.70, instead of average sales price plus 6%—is not enough to cover costs, he said.

“This is a political stunt. It was done on the last day,” Okon said, referring to the rule being released 60 days before Biden takes office (the majority of rules are released with a 60-day comment period). “I don't say that politically. I'm an independent. But this is a political stunt. I've never seen anything like this in 20 years. And I thought I've seen it all in 20 years in Washington DC, and I've never seen a political stunt like this that that literally puts cancer patients on the line.”