By Katie Thomas and Abby Goodnough
July 11, 2019
President Trump’s
plan to lower prescription drug prices hit two major obstacles this week. He
killed a proposal on Wednesday that would have reduced out-of-pocket costs for
older consumers out of concern that it would raise premiums heading into his
re-election campaign. And a federal judge threw out a new requirement that drug
companies disclose their prices in television ads.
Administration
officials rushed to assure the public that the double setback did not reflect
failure on one of the president’s signature issues, one that has fueled public
outrage and drawn the attention of both parties.
He has hinted that he
is focusing in on a more audacious proposal, especially from a Republican
president. It would tie some drug prices to those set by European governments,
an idea that is tantamount to price controls and opposed by members of his own
party. Yet Mr. Trump is said to be particularly taken with the idea because it
fits with his “America First” approach.
“The American senior
and the American patient have been too long been asked to overpay for drugs to
subsidize the socialist systems of Europe,” said Alex M. Azar II, the secretary
of health and human services. “It’s time for the American patient to stop
propping up the socialism of Europe.”
The administration
and leading members of Congress have also been discussing legislative proposals, including negotiating
directly with companies to set price caps on some drugs, and placing a limit on
out-of-pocket spending by Medicare beneficiaries. The government efforts pack a
broad populist appeal, particularly with older Americans, who remain one of the
nation’s most reliable voting blocs.
But many of these
plans face stiff opposition from the powerful pharmaceutical and insurance
lobbies, which have already taken the administration to court on some issues.
Another of Mr.
Trump’s goals — ending so-called surprise medical billing, when patients
receive medical care, then get unexpected bills from providers who are not in
their insurance network — is also on shaky ground. Doctors and hospitals are
pushing back fiercely against legislation moving through Congress.
During a
question-and-answer session with reporters, Mr. Azar tried to rebuff
impressions that the administration’s efforts to tackle drug prices were
flailing.
A former Eli Lilly
executive, Mr. Azar had been the architect of the proposal abandoned on
Thursday that would have eliminated drug rebates that companies pay pharmacy
benefit managers, like CVS Caremark or Express Scripts. Some argue that the
hidden rebates help to drive up prices because the discounts are not passed on
to consumers.
His briefing also
seemed a calculated attempt not only to convince the public that Mr. Trump was
making progress, but also that he had strong ideas for improving the nation’s
health care system over all.
Democrats
successfully used Mr. Trump’s attacks on the Affordable Care Act in last year’s
midterm elections, and are gearing up to do so again in 2020, focusing on the
administration’s decision to join forces in a court case with several states
seeking to invalidate it.
Mr. Trump’s decision
to withdraw the rebate rule represented a rare loss for the drug industry,
which has long cultivated a friendly relationship with Republicans. It had
strongly backed the rebate measure, in its attempt to blame pharmacy benefit managers for rising
prices.
The stocks of several
major drugmakers, such as Merck, Eli Lilly and Pfizer, closed lower on
Thursday, while the stocks of large insurers and pharmacy benefit managers were
up.
“Now that the
administration has abandoned what it was going to do to address the middlemen,
pharma is the only one sort of standing there with a target on its back,” said
Rob Smith, a director at Capital Alpha Partners. “I don’t think they’ve ever
been in a worse situation.”
In a statement, the
Pharmaceutical Research and Manufacturers of America, the lead trade group,
called the president’s decision to drop the rebate rule disappointing.
Mr. Azar contended
that Congress might have better tools to rein in drug prices, and for now, the
legislative package that is still being honed in Congress may offer Mr. Trump and
Republicans a rallying point on the campaign trail. Mr. Azar and Joe Grogan,
the director of the White House Domestic Policy Council, met on Capitol Hill on
Tuesday with Republican lawmakers to discuss some of the proposals.
Last Friday, Mr.
Trump alluded to an executive order that would require pharmaceutical companies
to offer the federal government among the lowest prices in the world. And on
Wednesday in announcing a kidney-care initiative, he mentioned drug prices
again, saying, “I think we have some very big moments coming up very shortly.”
What Mr. Trump meant
was not immediately clear. He may have been referring to a more modest plan
already under review, which would apply only to drugs administered in doctors’
offices or hospitals.
But his remarks hewed
to a familiar theme: The president has long railed against what he describes as
“global freeloading” — the fact that other countries negotiate far lower prices
for drugs than what pharmaceutical companies charge in the United States.
Debate Over the Rebate Rule
Mr. Azar has been the
leading champion of trying to eliminate rebates as a centerpiece of the
administration’s plans to offer relief to consumers from rising drug costs. He
was still promoting it as recently as June,
to showcase how the market for drugs is broken.
But fiscal
conservatives at the White House had long balked at the potential cost, and
others had worried about angering Medicare beneficiaries in an election year.
Though it would have
lowered out-of-pocket costs for older Americans with expensive drugs, the rule
was expected to raise drug-plan premiums for all Medicare beneficiaries. In
May, the nonpartisan Congressional Budget Office concluded that
the rule, if adopted, would cost taxpayers $177 billion within 10 years.
The initiative was
intended to eliminate after-the-fact rebates that drugmakers pay to the private
companies that operate Medicare’s Part D drug plans, and instead required that
any discounts be passed to consumers at the pharmacy counter.
Medicare
beneficiaries with high drug costs often pay close to the list price, or a
percentage of it, during certain phases of their coverage. They were required
to do so even though, in many cases, the companies operating the plans were
collecting rebates on the same drug.
The rule had been
opposed by the insurers and pharmacy benefit managers, who contended that they
wielded the rebates to pressure drug companies to keep prices low, and used the
savings to keep Medicare premiums low.
But the drug
industry has been campaigning for years that
it is unfair for insurers to keep the rebates when consumers are paying the
list price through high deductibles.
“At the end of the
day, while we support the concept of getting rid of rebates and I am passionate
about the problems and the distortions in system caused by this opaque rebate
system, we are not going to put seniors at risk of their premiums going up,”
Mr. Azar said.
He then tossed the
ball to Congress, saying it could take up the rebate issue.
International Pricing Options
A pilot program
announced last year has struck fear among drugmakers, who, like some
Republicans in Congress, have described it as akin to foreign
price controls. That project, unveiled in October, would tie the price of some drugs
administered in medical offices like many cancer treatments to an international
index of prices. The test program, under final review at the Office of Management
and Budget, would last five years.
Senator Chuck
Grassley of Iowa, the powerful Republican chairman of the Senate Finance
Committee, denounced the idea last month, saying it could discourage research
investments for new treatments. Conservative groups like Freedom Works and
Americans for Tax Reform have been campaigning against the idea, too.
Even if Mr. Trump
signs a broader executive order tying federal spending to overseas drug prices,
it is not clear how much impact it would have. Most Americans are covered by
commercial health insurance, which negotiates with drugmakers themselves. In
many other countries with nationalized health care, the government is the
negotiator.
The federal
government buys drugs for small populations, like veterans and federal
prisoners. Medicare’s prescription drug program farms out its purchasing to
private companies and is barred from negotiating directly.
Trump’s Health Care Mission
Mr. Azar pleaded with
reporters to “focus your energies” on a measure that will let employers provide
money to workers to buy health insurance on their own, rather than enrolling in
an employer-sponsored health plan.
And he pointed to an
executive order Mr. Trump signed last month, intended to require insurance
companies, doctors and hospitals to provide more transparent prices for medical
care.
He also sought to
play down the importance of the federal health law known as Obamacare.
“One of my
frustrations is that the Affordable Care Act dominates so much of the
discussion,” Mr. Azar said. “I’ve got to deliver affordable health care for 350
million Americans.”
He added, however,
that the administration would provide “an ironclad protection for those who
have pre-existing conditions” — the most popular of the health law’s consumer
protections — no matter what happens with the court case.
Correction: July 11, 2019
An earlier version of this article misstated the day on which
President Trump killed a proposal that would have reduced out-of-pocket drug
costs for older consumers. It was Wednesday, not Thursday.
A version of this article appears in print on July 11,
2019, Section A, Page 1 of the New York edition with the
headline: Goal to Rein In Prices of Drugs Faces Setbacks.
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