President Donald Trump on Thursday made his biggest move yet to curb soaring drug prices, proposing a mandatory Medicare Part B pay model that would change drug rates and how physicians are paid for those medications. It has analysts, industry members, advocates and politicians buzzing with praise and criticism for the plan.
But it also has everyone looking for more details. Here are the top five questions swirling about the Trump administration's latest move.
1. Will the international benchmark actually come to fruition?
Skeptics doubt the Trump administration will follow through with the splashiest part of the proposal: tying Medicare Part B drug prices to foreign prices for the same drugs, which are often significantly lower. The proposal flies far afield of the Trump administration's usual free market rhetoric and reliance on foreign governments' own price controls.
"The international comparison ties in well with President Trump's 'America First' agenda and political messaging, and in this instance, we believe CMS is using international pricing as a negotiating tactic with manufacturers," analysts from Height Capital Markets concluded.
2. Could HHS stop Big Pharma from gaming the new system?
Even if the CMS ties its drug rates to other countries' price tags, drugmakers could strike deals to hike foreign list prices and apply rebates that lower the ultimate cost of the drug internationally. HHS Secretary Alex Azar told an audience at the Brookings Institution in Washington on Friday that the agency has data sources to show net pricing information, which could be leveraged to stop those workarounds.
Skeptics don't think this is enough.
"If 15 countries are all trying to game the system in the same way, it's basically impossible to administratively police it," said Benedic Ippolito of the center-right American Enterprise Institute.
3. Could the plan look like the Obama administration's failed Part B demo?
Absolutely not, Azar said. The HHS secretary argued on Friday that the Obama-era proposal didn't take aim at the underlying sales price of a drug.
The Obama administration proposed a sharp cut to providers' margins—average sales price plus 6%, or 4.3% under the Medicare sequester—for the drugs they buy and administer for patients.
The Trump administration is instead proposing a flat administrative fee that isn't based on an individual drug's price. It will be calculated based on a drug's class. Azar emphasized that this proposal must be paired with the international benchmark plan.
"Conceptually, what it's trying to do is similar" to the Obama demo, said Matt Fiedler of the Brookings Institution, who worked on the demo in the Obama administration. "If your goal is to weaken the incentive for providers to choose high-priced drugs, the effect is quite similar."
4. Will providers take a hit?
"We will make this work for physicians and hospitals," Azar told the Brookings audience on Friday as he promised that their overall compensation would remain stable.
The HHS secretary added that disentangling provider compensation from drug prices is key. He wants to work with provider groups and find how to make the idea work logistically. Provider groups banded together to help sink the Obama administration's Part B demonstration.
Critics and skeptics of the overall plan agree that the administrative side of Medicare Part B needs significant cleanup and that the incentives are bad for patients' pocketbooks.
5. Is this a step toward direct Medicare drug negotiation?
House Democrats have signaled they want to work with Trump on drug pricing. But many of them want Medicare to negotiate prices—an idea Azar has emphatically rejected.
Azar said the international benchmark keeps the pharmaceutical industry in the driver's seat because it's up to manufacturers to negotiate with the foreign governments.
But the idea of House Democrats cutting deals with the Trump administration over drug pricing has the drug industry worried, and this proposal is the first signal that tighter price controls are on the table.
