Trump's Budget Director Hints at Mandatory Drug Rebates in Medicare

Pressure is mounting for Congress or President Trump to do something about rising drug costs, as polls show there is broad support for government intervention on this issue.

White House Budget Director Mick Mulvaney has suggested that mandatory drug rebates, like those seen in Medicaid, might be an answer to the rising cost of prescription drugs in Medicare.

Mulvaney’s remarks at a Stanford healthcare conference were first reported in The Washington Post and have set off alarms within the pharmaceutical industry. Holly Campbell, spokeswoman for the Pharmaceutical Research and Manufacturers of America (PhRMA), said in an e-mailthat the “risks of these types of proposals clearly outweigh the benefits,” and that such a proposal would make it harder for seniors to gain access to drugs.

But some proposal to prescription drug costs seems likely, as Mulvaney told the Stanford group that President Trump is anxious for a solution to the problem, which is the one healthcare issue where there is broad agreement among Democrats and Republicans. Polling by the Kaiser Family Foundation and others has found that Americans overwhelmingly think drug prices are too high and that a majority of Republicans support government intervention to control them.

Since the advent of Medicare Part D in 2006, the program has barred direct negotiations with drug manufactures to control prices, although private insurers who administer benefits can—and do—get some discounts. In Medicaid, it’s a different story—prices cannot go up higher than inflation. A 2009 study found that the discounts in Medicaid were more than twice those in Medicare: 45% to 19%.

Some say the arrival of Medicare Part D opened the door to more research and innovation on drugs that benefit seniors, and price controls would curtail this. “Any type of government price-setting in Medicare Part D would limit access to needed medicines and increase costs for beneficiaries,” PhRMA’s Campbell said in an e-mail to The American Journal of Managed Care®.

Campbell said a recent study found that Medicare Part D plans receive an average 35% discount from manufacturer list prices. “We believe the focus should be on advancing market-based, common sense, practical solutions that bring down healthcare costs and lower out-of-pocket costs for everyone,” she said in the e-mail.

But Mulvaney reportedly said President Trump is intrigued by the idea of mandatory rebates. According to the Post, Mulvaney told the Stanford group, “We’ve floated the idea with the president, to be a little bit heavier-handed on the rebates they have to pay in order to drive the prices down.”

Elsewhere, HHS Secretary Tom Price, MD, has been holding “listening” groups on rising prescription drug prices with stakeholders that include patient groups and PhRMA. A Senate proposal to allow drug imports from Canada was defeated, but lawmakers sense the issue isn’t going away—both Trump and Democrat Hillary Clinton vowed to take on drug prices as candidates last fall.

Some call for giving the FDA a role in the process, which would hand authority to newly appointed FDA Commissioner Scott Gottlieb, MD.