The Trump administration's bold proposal to peg Medicare Part B drug payments to the much lower prices paid in other advanced countries surprised many. But veteran policywatchers say they'd be stunned if the plan goes anywhere given pharma's deep pockets, congressional Republicans' coolness to the proposal and congressional Democrats' skepticism.
Meanwhile, physician and patient advocacy groups, which helped kill a somewhat similar Obama administration proposal two years ago, were guarded in their reactions pending release of further details about President Donald Trump's plan.
“Pharma is one of the smartest, most sophisticated, wealthiest industries represented in Washington,” said Lawrence Jacobs, a health policy and politics professor at the University of Minnesota. “Does the White House really want to make this a fight they give blood on?”
Most observers believe the administration announced the plan less than two weeks before the Nov. 6 congressional elections to improve voters' perceptions about Republican healthcare policies. Polls show Democrats hold a big edge on healthcare issues.
But the complex proposal would take effect in 2020 at the earliest and would phase in over five years, likely failing to change the current campaign narrative.
“When you promise to bring down prices tomorrow, that's one thing. But this is not a tangible instant delivery,” said Thomas Miller, a conservative health policy scholar at the American Enterprise Institute.
The plan, which won't be issued as a rule until next spring, would move Medicare Part B payment rates for selected outpatient drugs to rates more comparable to those paid by 16 other wealthy nations. The U.S. would go from paying 80% more than what those other countries pay to 26% more. That would save more than $17.2 billion over five years, a fraction of the nearly $19 billion in Part B drug spending annually.
If adopted, the plan could open the door to similar international reference pricing for medical devices and other products, as well as for prescription drugs in Medicare's Part D program, said Gerard Anderson, a health policy and management professor at Johns Hopkins University. “There's never been anything like that,” he said. “Most people were afraid to even suggest it. The device industry should be nervous about this.”
The proposal also would change how doctors are paid for administering Part B drugs, which include many expensive cancer and arthritis medications. They would receive a flat fee, unlike the current system where they get a higher payment for using more expensive drugs.
The CMS would contract with private-sector vendors to procure the drugs, store them, and distribute them to providers, theoretically saving providers cost, hassle and risk. These private companies would aggregate purchasing, seek volume-based discounts and compete for providers' business.
Miller said that approach could soften opposition from oncologists and other affected physicians because their bottom lines might not be hurt, unlike under the Obama administration's Part B reform proposal two years ago.
The American Society of Clinical Oncology sounded wary. “We strongly believe that such a demonstration should be voluntary so that this approach can be tested and refined in a manner that best meets the needs of patients,” ASCO CEO Dr. Clifford Hudis said in a statement.
The International Pricing Index model would depend on drug manufacturers being willing to accept the lower Medicare Part B prices, and the CMS being willing to exclude their products if they did not. Many of the drugs that would be affected have no competition.
“That's how other countries do it,” said John Rother, CEO of the National Coalition on Healthcare, who formerly headed the Campaign for Sustainable Rx Pricing. “You have to be able to say no and condition market entry on a more reasonable price.”
A consumer group lobbyist who didn't want to be identified said his group is concerned about maintaining access to drugs as well as lowering prices. But he said it wouldn't be easy for manufacturers to walk away from the Medicare market.
The drug industry hardly sounded receptive. “This administration is imposing foreign price controls from countries with socialized healthcare systems that deny their citizens access and discourage innovation,” the Pharmaceutical Research and Manufacturers of America said in a written statement.
Despite the obstacles, political observers believe the administration's plan could move forward in 2019 with the cooperation of Democrats if they win control of at least one chamber of Congress in the upcoming elections.
For now, House Minority Leader Nancy Pelosi and other House Democrats question whether Trump and his administration are serious about addressing high drug prices, citing Trump's reversal on his campaign promise to have Medicare negotiate drug prices.
But that could very well change after the election, given Democrats' strong interest in the issue.
The question is whether the Democrats will be able to move the administration to push for broader reforms, including the application of international reference pricing to the far larger Medicare Part D program as well as to medical devices and other products. “This will certainly migrate over time to Part D and other government programs,” Miller predicted.
Jacobs said Trump would be politically shrewd to take on this tough fight against the unpopular drug industry to establish pro-consumer credibility heading into his 2020 re-election campaign. It might even help him if the issue splits moderate Democrats willing to settle for Part B reforms from left-progressive Democrats who demand broader changes.
“After following a traditional Republican agenda of cutting taxes and regulation, it would be a smart move for Trump to zag back to the middle with a hard-edge populist campaign against drug manufacturers,” said Jacobs, who's skeptical about Trump's intentions. “If he pursues it, that's a nice spot for him.”