Trump Adds A Global Pricing Plan To Wide Attack On Drug Prices, But Doubts Persist

By Sarah Jane Tribble, Senior Correspondent at Kaiser Health News, who previously worked for the Fort Worth Star-Telegram, The (Cleveland) Plain Dealer and Cleveland’s NPR and PBS affiliate. Originally published at

President Donald Trump’s new pledge to crack down on “the global freeloading” in prescription drugs had a sense of déjà vu.

Five months ago, Trump unveiled to address prohibitive drug prices, and his administration has been feverishly rolling out ideas ranging from posting drug prices on television ads to changing the rebates that flow between drugmakers and industry middlemen.

Thursday, Trump proposed having Medicare base what it pays for some expensive drugs on the average prices in other industrialized countries, such as France and Germany, where prices are much lower. The proposal is in the early stages of rule-making and awaiting public comments.

The U.S., Trump said, will “confront one of the most unfair practices, almost unimaginable that it hasn’t been taken care of long before this.”

The proposal was met with hope and skepticism, with several experts saying they were happy the administration was taking on Medicare Part B’s rising drug prices but questioning its approach.

Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, said in an online post that the administration’s proposed solutions were unclear. And, he said, they would “face insurmountable challenges.”

While some industry watchers pointed to the announcement as a political move, Wells Fargo pharmaceutical analyst David Maris said that this is a broader effort by the president and his administration to attack the root causes of high drug prices.

“The reality is he could very easily not take this on and do what other administrations have done and let the prices keep rising.”

Trump, too, promised more to come and said he will soon announce “some things that will really be tremendous.” On Friday, Health and Human Services Secretary Alex Azar said that, as promised in the blueprint, there would be more changes to Medicare Part D, which covers most prescriptions. Ian Spatz, a public policy expert and senior adviser at Manatt Health, said the overall blueprint was “unprecedented in terms of how many different ideas and areas of ideas that it contained.”

Nothing would happen overnight. The proposal to require drug prices in TV ads  by litigation and notably, if implemented, does not include any penalties for companies who fail to post their prices.

The proposed rebate rule was delivered to the Office of Management and Budget . Matt Brow, president of industry consulting firm Avalere Health, said he expects the administration to publish the rule for comment by year’s end.

Trump’s international pricing plan is not as far along as the rebate proposal. Rather, it is an “advanced notice of proposed rule-making.” The proposed rule could come in spring 2019, and Azar said the new model could begin in late 2019 or early 2020.

Yet, on Friday, Azar signaled the proposal could change, telling an audience at the Brookings Institution that the administration is “open to any number of alternative ideas.”

Avalere’s Brow said there is a good chance the proposal will change significantly.

“The sweeping nature of the proposal makes the stakes higher and makes it harder to implement,” Brow said.

If the administration moves forward, it would bypass Congress and implement a pilot under the Center for Medicare & Medicaid Innovation’s purview. The pilot would phase in over five years and apply to 50 percent of the country. Azar said there would be no changes to Medicare benefits and no restrictions on patient access.

The proposal focuses on drugs covered under Medicare Part B, which are administered in hospitals, clinics and doctors’ offices. It also would alter the reimbursement formula for doctors and providers and would allow private-sector vendors to purchase drugs and then sell them to doctors and hospitals. Medicare would reimburse those vendors at the international pricing level.

Currently, doctors and hospitals administering Part B drugs are reimbursed the average price of a drug 6 percent. President Barack Obama’s administration attempted to but drew intense and eventually withdrew a proposed pilot project.

Allan Coukell, senior director for health programs at Pew Charitable Trusts, said removing incentives that reward doctors for purchasing costlier drugs and bringing in a new way to control prices “makes a lot of sense.” Drug spending within Medicare Part B reached $22 billion in 2015, and drug costs have increased by an average of 8.6 percent annually since 2007.

Stephen Ubl, president of the industry trade group Pharmaceutical Research and Manufacturers of America, or PhRMA, said imposing foreign price controls from countries with socialized health care systems would harm patients and hinder drug discovery and development.

Azar, a former executive at pharmaceutical manufacturer Eli Lilly, told reporters Thursday that “you may hear the tired talking points” that this will affect innovation. He disputed that idea, concluding that “less than 1 percent of pharma [research and development] could potentially be impacted by this change.”

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26 comments

  1. Kasia

    Pretty smart move by Trump, as now he sets up a shakedown situation. He can threated Big Pharm with huge price cuts and gain politically in the run-up to 2020. But if Big Pharm pony up enough cash then he will water down the actual final decision. If Big Pharm run against him or refuse to finance Team GOP then Trump can gleefully inflict huge amounts of pain onto them “pour encourager les autres” big interest groups he decides to shakedown in the future. He wins either way!

    1. DHG

      Trump wins at NOTHING. He can play his shell game all day long. Anyone with critical thinking skills sees right through his game. Prices are irrelevant if insurance is paying for it.

      1. Skip Intro

        Anyone with critical thinking skills sees right through his game

        But what about the remaining 95% of the electorate and the media dysinfotainment complex?

      2. Monty

        You are one of the lucky one’s if your insurance policy is paying for those drugs. The exorbitant costs to the insurance company are passed on to their customers through higher premiums, or lower wages if your company pays those… but any stick to beat a dog, right!? After all, Orange Man Bad.

      3. Yves Smith Post author

        Huh? Trump got his tax bill passed, got some improvements in the old NAFTA, got Kavanaugh appointed and has been packing the Federal bench. He’s been giving away and increasing private sector leasing of Federal lands. He’s weakened environmental regulations.

    2. lenin

      Why is a Kaiser employee commenting on a healthcare issue? Isn’t that the fox guarding the hen house?

      I also don’t appreciate the anti-Trump bias. This may very well fail, but proper government negotiating of prices, like every other country on Earth, would be a game changer. I work in pharmaceuticals and it’s a nightmare of artificial drug shortages, price gouging, and zero original research.

      1. Yves Smith Post author

        Making shit up is against our site Policies. Kaiser Health News has absolutely no connection to Kaiser Permanente, which you could have figured out in all of one minute on Google. You are accumulating troll points.

        And is not an “anti-Trump bias” to point out that Trump, even by the standards of a politician, vastly overpromises relative to what he delivers.

  2. JTMcPhee

    More kayfabe, I would think. Trump is Da Bomb. Kasia has a good take on the structure of it, intentional or not on Trump’s part, relating to the way the game of beFUDdling (“Fear, Uncertainty, Doubt”) the mopery is played these days.

    “All is proceeding as I have foreseen,” say the K Street bandits who run the “administration” of the commercial entity called the US. All kinds of ways to profit from the complicated and sophisticated “administrative process” that is so briefly mentioned in this and other articles on executive initiatives.

    Money talks, as those reading here all know. Loudly. Louder than the little bits of noise that us mopes can generate in our own interest, puny and diffracted and disjointed and dispirited as said interest is. Whereas the truly “interested stakeholders” can concentrate their efforts at many points of attack on the residual savings and labor of the rest of us. We serfs are here to be fleeced, as usual, by parasites who will live large and die before they kill the host. They hope. Or just do not give a dang.

  3. Louis Fyne

    Trump has no vested interest in big Pharma (unlike, say, US senators representing Cambridge, Mass. or Bay Area, Cali.).

    It’s a win-win for him, either Pharma complies or Trump keeps Pharma as his bully pulpit focus for all of 2020.

    Just sayin’. he knows his way around a political street fight.

    1. John Wright

      And Trump beat HRC who had spent a lifetime acquiring political smarts and becoming the “most experienced candidate ever.”

      One can imagine HRC in fits of rage about how this “amateur” made it into the White House.

      Democrats underestimate Trump at their peril..

    2. flaesq

      I think you nailed it as a street fight and the dude is one ruthless street fighter but might it be a win-win-win with the third win a good old fashioned direct money shakedown? Guy doesn’t need more anger targets…and money in the pockets of consumers? Is it really on the radar?

  4. kurtismayfield

    Imagine if food, housing taxes, or gas went up at 8.8% per year. There would be riots in the streets. The rent extraction of the medical industry has to end.

    1. carl

      Yes, that figure made my hair stand up. 8.8%/year isn’t remotely sustainable. Then again, neither are any of the other costs in this grotesque system.

  5. Anony20

    For all Trump’s inability to articulate good solutions, and for all his underlying weddedness to the interests, he’s at the very least a useful propagandist for important issues, in that phrases such as “the global freeloading” are being used at all.

    Sometimes I wish Bernie Sanders would strike a more conciliatory note on Trump generally. I think immediately after the 2016 election, and before the Russia narrative and others had the chance to be established, he issued a statement to the effect of “I’m looking forward to working with Trump on issues where our interests overlap, but I will oppose him vehemently where those interests cross.”

    Here’s an opportunity for Bernie to, with a straight face, take the President at his word. Imagine if in the 2019 primary debates, while the other candidates speak about Trump in the usual terms, Bernie were to simply speak about how he saw an opportunity to help people pay less for healthcare, and was happy to press it to its logical conclusion. Without qualifications – he would, again with a straight face, simply express puzzlement at why his Democratic colleagues did not take the same opportunity.

  6. chuck roast

    The proposal is in the early stages of rule-making and awaiting public comments. By my reading, this means that a Notice of Proposed Rulemaking has been published in the Federal Register (FR) and is in the public comment period.

    Is there a link to this FR notice?

  7. flora

    Good.
    Med. Part D. was a gift to Pharma. Even when the Dems controlled everything (2009-2011) they didn’t change the rules.

    From 2016:

    When the Republican-controlled Congress approved a landmark program in 2003 to help seniors buy prescription drugs, it slapped on an unusual restriction: The federal government was barred from negotiating cheaper prices for those medicines. Instead, the job of holding down costs was outsourced to the insurance companies delivering the subsidized new coverage, known as Medicare Part D.

    The ban on government price bargaining, justified by supporters on free-market grounds, has been derided by critics as a giant gift to the drug industry. Democratic lawmakers began introducing bills to free the government to use its vast purchasing power to negotiate better deals even before former President George W. Bush signed the Part D law, known as the Medicare Modernization Act.

    All those measures over the last 13 years have failed, almost always without ever even getting a hearing, much less being brought up for a vote. (my emphasis)

    Shortly after part D passed prices on drugs started going up more rapidly than historical norms for drug price increases.

    I thought the last pres would stop the pharma give away. Didn’t happen. Hope Trump has better luck.

    1. Big River Bandido

      Med. Part D. was a gift to Pharma. Even when the Dems controlled everything (2009-2011) they didn’t change the rules.

      Once Congress authorizes and funds a program, its actual administration is done by the executive branch, which has wide discretion in how it chooses to implement the law, so long as its rule-making is public. At that point, Congress retains oversight power — but this is always after the fact. Congress can’t make administrative rules; prior to that, all they can do is write universal statements, restrictions and exemptions into the law.

      I can understand the political reasons why a Democrat-controlled Congress might not wish to challenge a President of the same party. But in this case, that’s just a smokescreen for the entire party engaging in corruption and supporting bad public policy.

      1. Yves Smith Post author

        Ahem, the Administration could have changed the regulations if they thought the ones implemented under Bush were wrong-headed (yes, there is a rule-making process but changing regulations is hardly unheard of, look at net neutrality) or they could have changed the statute.

        1. Other JL

          Yves is exactly right. Big River, your comment sounds as if the Democrat-controlled Congress faced a Republican president (which was practically true, but I digress).

          The obvious conclusion is that the Obama administration didn’t try to change those rules, appoint more judges, etc, because they were pretty happy with the status quo.

  8. marym

    When Trump said in January 2017 that he was going to address drug costs he said the high costs were “because of the drug companies.” He said they had “a lot of lobbyists and a lot of power” and were “getting away with murder.”

    In February 2017 he met with drug company execs.

    Then the doors were closed. When they opened again, Trump had not only abandoned his promise to use the government’s bargaining power to bring down drug prices, he was now totally against it!

    “I’ll oppose anything that makes it harder for smaller, younger companies to take the risk of bringing their product to a vibrantly competitive market,” he said, according to the pool reporter. “That includes price-fixing by the biggest dog in the market, Medicare, which is what’s happening.” (Yes, he accused an agency that has no power to negotiate prices of “price-fixing.”)

    ()

    In November 2017 he nominated a drug company exec as head of HHS.

    Now he frames the problem as “global freeloading.” This is much more in his apparent comfort zone of hurting vulnerable people as the approach to any issue.

    It always seemed likely that if the US were to negotiate drug prices broadly as other countries do, that prices would likely rise for those countries.

    Maybe pursuing this as a goal rather than seeing it as a (potentially reasonably fair) consequence won’t make a material difference, and Trump’s just saying the quiet part.

    In any case, as details emerge presumably analysis will include the potential impact on drug costs in other countries, and on the costs and demographics of impact in the US for drugs not covered by the proposed changes.

    Adding: Giving Medicare statutory power to negotiate drug prices would be a great building block toward M4A. Doing it by rule-making is the kind of “government overreach” the small government R’s would whine about under a Dem administration, and is also more easily reversible.

    1. flora

      Yes.

      adding from the MotherJoness link above”

      What’s more, Part D often pays far more for drugs than do Medicaid or the Veterans Health Administration—which, unlike Part D, mandate government measures to hold down prices. One report found that Part D pays 80 percent more for medicines than the VHA and 73 percent more than Medicaid. While researchers aren’t unanimous in their views, an array of experts have concluded that federal negotiating power—if backed up by other cost controls—would bring Part D drug costs more in line.

      Price negotiation cost benefit would also apply to Med Part B if used, imo.

  9. hoonose

    This new proposal is related to mainly IV drugs administered in the doctors offices. Chemos, and recent rheumatoid arthritis and eczema Rx’s as on TV. This is Part B not D meds. And Medicare has had controls in there for some time. Our medical group used to make good money on outpatient chemo. But as Medicare clamped down, it became less a profit center. And eventually this all went over to the hospital, as they can make a profit on it for other reasons. Including better reimbursements and collecting on facility fees.

    Some of these enormously powerful and expensive new meds can about only be given at the hospital because of their great cost. 100’s, 10’s and 100’s of thousands for seemingly simple shots and more complex treatments like CAR-T. And what happens there many times, is the actual payments made are pre-negotiated by 3rd party plans. Where for instance an Obamacare plan might pay 1/3. Or if the patient has no coverage or means, the drug might be administered for free. Either the drug company or the hospital eats the cost.

    1. Ken

      Yep. The Mrs. gets a bi-monthly infusion of a rheumatoid arthritis biologic med. The hospital bills about $11k for the med and the infusion service. Medicare Part B pays much less, and her Medigap Plan F pays the remainder. Her rheumatologist has told her that he understands the financial incentive to use these intravenous meds for Medicare patients. A different drug that she would self-inject would cost her a lot through her Part D coverage.

  10. Unna

    A bit off point but America’s solution will not be buying drugs in Canada. As far as I understand, Canada has a complicated process but with the pricing finally being set at the average of what the price is in a number of countries – so lower than the US but not as low as it should be. Quantities to be purchased based on that price is my understanding.

    So here’s the problem. The US has ten times the population of Canada. If only 10% of Americans shopped in Canada that would wipe out Canada’s yearly supply of drugs. If 1% shopped, that would be 10% of Canada’s drugs – if my math is correct. No Canadian government would allow that and there are many ways that could be prevented. Canada’s reaction to “drug importation from Canada” is something Bernie maybe hasn’t thought about.

    Canada needs a national pharma care program because even though drug prices are lower, many people still fall through the holes. And that’s not Trudeau’s BS patchwork program that help’s a few people out leaving higher prices for the rest, and preserves Big Pharma’s profits. So, PharmaCare for All in both countries.

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