Trump condemns middlemen in drug-pricing speech
Pharmaceutical experts aren't pinning high hopes on President Donald Trump's plan to reduce drug prices.
The president unveiled his blueprint, coined American Patients First, in a Rose Garden ceremony on Friday. The plan recommends bolstering competition, allowing private plans to negotiate discounts for Medicare beneficiaries, creating incentives to lower list prices and reducing consumers' out-of-pocket spending.
Trump took aim at industry middlemen like pharmacy benefit managers, distributors and insurers, claiming they inflate drug prices. He also promised to make it more expensive for "free-riding" foreign countries to produce drugs, arguing that they take advantage of U.S. manufacturers' research and development.
"We are very much eliminating the middlemen," Trump said. "The middlemen became very, very rich … they won't be so rich anymore."
Industry experts were unmoved.
"I don't think there is going to be any measurable impact to the overall pharmaceutical cost trend with the administration's proposed policy actions," said David Henka, CEO and president of ActiveRadar, previously RxTE Health, which manages prescription drug benefits for employers and employees. "Pharma finds a way to maximize profits."
And the negative remarks on industry middlemen didn't seem to shake investor confidence. CVS Health's stock increased 3.2% at market's close. Walgreens nudged up 0.3%, Express Scripts increased 2.6%, Anthem rose 2.8%, Cigna increased 1.6%, AmerisourceBergen was up 1.6%, McKesson Corp. increased 1.3% and Cardinal Health rose 1%.
While overall drug spending has slowed over the past two years, it still makes up a large share of healthcare expenditures, about 10% in 2016, fueled by the rising price of specialty drugs. That trend, coupled with several high-profile cases where drug manufacturers significantly raised the price for common, decades-old drugs, have thrust the issue into the national spotlight.
The administration plans to rein in drug prices by closing loopholes in the regulatory process, including preventing branded manufacturers from restricting access to product samples to stifle competitors, which is the main goal of the Creates Act, a bipartisan bill now pending in Congress.
The policy blueprint also calls for giving health plans flexibility to negotiate lower prices for high-cost drugs without competition. Permitting Medicare Part D plans to pay a different price for a high-cost drug based on its indication could also lower drug prices, according to the plan.
Medicare Part D drug spending grew nearly 45% between 2013 and 2016, and more beneficiaries are reaching catastrophic coverage of at least $5,000 out-of-pocket costs—up 50% from 2013 to 2016, according to a new study from Avalere.
American Patients First included a proposal to hold drugmakers accountable for their price increases, which is the subject of several bills in statehouses across the nation.
The administration also aims to end "gag clauses" that restrict price transparency at the pharmacy counter. It also looks to accelerate approval of over-the-counter medicines.
The blueprint charts a different path than Trump's initial policy goals touted during his presidential campaign, when he promised to authorize Medicare to negotiate directly with drug companies and import drugs from foreign countries, ideas that have drawn criticism from pharmaceutical companies and industry groups.
"The elephant in the room is, are we going to have a system that directly controls prices like the European system does," asked Coleen Klasmeier, head of the food, drug and medical device regulatory practice at law firm Sidley Austin. "If not, all of this other stuff seems like window dressing, important window dressing, but window dressing."
Importantly, this strategic direction will move the Food and Drug Administration down its current path of trying to increase competition by paving the way for more approvals of generics, biosimilars and biologics, Klasmeier added.
But the plan didn't address a safe harbor for value-based arrangements and the legal risks related to kickback laws and off-label promotion, she said. It's also silent on the regulatory requirements that put costly burdens on generic manufacturers to generate data, Klasmeier said.
The speech came with a request for information, which means the policies will take some time to implement as the administration gathers feedback. HHS Secretary Alex Azar hopes that other recommendations, including requiring pharmaceutical companies to disclose prices in their advertisements, move more quickly.
"If you're activating a patient to have a discussion with their doctor about a drug, it's relevant to find out if it's a $50,000 drug or a $100 drug because often a patient is going to bear a lot of that cost," Azar told reporters after the speech.
HHS has 50 actions planned or under consideration, which can be done through administrative and executive action, Azar said, adding that it will likely take months to roll out many of the policies.
"That is a lot of time and effort. We likely won't see any of this happen for a very, very long time," said Edward John Allera, shareholder at law firm Buchanan Ingersoll and Rooney.
Industry experts have closely scrutinized the role that pharmacy benefit managers play in the pharmaceutical supply chain. PBMs, which process drug claims and negotiate drug discounts with pharmaceutical companies, are paid, in part, on the spread between the list price and rebates, which gives them incentive to raise list prices, critics argue. Health plans provide more favorable formulary placement in exchange for the rebates.
Both Azar and FDA Commissioner Dr. Scott Gottlieb have said tweaking the law that protects these rebates, which often aren't passed on to the consumer, could be key to lowering prices.
Trump's plan calls on providers in the 340B drug discount program to report on how they use the savings.
"I'm for transparency, but you have to shed light on the drug manufacturers here too," said Jeff Davis, a senior advisor at the law firm Baker Donelson.
Shrinking the 340B program or making it more difficult for providers to access 340B savings is going to increase drug costs, he added.
An edited version of this story can also be found in Modern Healthcare's May 14 print edition.
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