·
President Donald Trump is expected to outline new policies to
deliver on his pledge to bring prices down in a speech that could come this
week.
·
Alex Azar, Health and Human Services secretary, said in a speech
last week that "the entire system is under review."
Published
9:06 PM ET Sun, 6 May 2018 Updated 5:15 AM ET Mon, 7 May 2018CNBC.com
The
need to bring down high drug prices may be one of the few health care issues
that draw bipartisan support in Washington and on Main Street. President Donald Trump is expected to outline new policies
to deliver on his pledge to bring prices down in a speech that could come this
week.
"We'll
be building on the proposals in the president's budget, but he wants to go
further," said Alex Azar, Health and Human Services secretary, in a speech last
week. "The entire system is under review."
Azar's
comments and the uncertainty over how the new policies will impact the drug
supply chain weighed on the stocks of pharmacy benefit managers and drug
distributors last week. Shares of pharmacy giant CVS Health and pharmacy benefit firm Express Scripts fell about 9 percent for the
week, despite strong earnings reports; shares of distributors AmerisourceBergen and McKesson declined 7 percent.
One of
the key issues the Trump administration outlined in its budget earlier this
year was passing on discounts pharmacy benefit managers (PBMs) negotiate with
drug makers to seniors in Medicare Part D drug plans.
Those
discounts, or rebates, have come under fire for pushing pharmaceutical firms to
inflate their list prices, which has contributed to higher out-of-pocket costs
for consumers, from critics including the Trump administration's FDA
commissioner.
"One
of the dynamics I've talked about before that's driving higher and higher list
prices is the system of rebates between payers and manufacturers," FDA
Commissioner Scott Gottlieb said in a speech last Thursday, suggesting the
administration is looking at changing the law.
Under
current laws, Medicare recipients aren't eligible for direct drugmaker coupons
because of anti-kickback laws, Gottlieb suggested that rebates should be
reclassified to fall under regulatory scrutiny.
"Such
a step could restore some semblance of reality to the relationship between list
and negotiated prices, and thereby boost affordability and competition,"
Gottlieb said.
For
now, the administration is looking at requiring that at least 33 percent of
that rebate be passed on to seniors, according to a source familiar with the
discussions. Some published reports say there is a push for 100 percent
pass-through of rebates to seniors.
Insurers
and pharmacy benefit managers argue that passing on all of the discounts to
seniors who buy expensive drugs, will result in higher premiums for all Part D
enrollees.
"Keep
in mind ... as you've heard us and quite frankly others talk about the dynamic
here (is) that 100 percent of that rebate value in Part D is passed through the
plan's design in the form of a lower premiums," said CVS Health CEO Larry
Merlo on his company's earnings call. "So, as it relates to the PBM, that
would have no impact on profitability if that ended up moving forward."
"I
think the concern that exists ... (is) what's the dynamic as it relates to
beneficiary premiums going up?" Merlo said.
While
specialty drug prices have risen, Medicare Part D plan premiums have remained
relatively stable in recent years, another senior plan provider noted.
"It's
going to put pressure somewhere. If it doesn't put it on the Part D premiums,
it's going to likely place it on folks that are likely outside of Medicare age
... people under 65," said Richard Cantu, co-founder of a Medicare
supplement plan that was acquired by eHealth in January.
In
2016, the Congressional Budget Office estimated that
passing on a 23 percent discount for low-income seniors in Part D plans would
result in more than $140 billion in Medicare savings over 10 years, but would
also likely result in higher costs and spending in other parts of the nation's
health system.
"Drug
manufacturers would be expected to set higher 'launch' prices for new drugs as
a way to limit the effect of the new rebate, particularly for new drugs that do
not have close substitutes," reducing the Medicare savings over time, CBO
analysts wrote in their report.
"Employment-based
health insurance plans would probably negotiate larger rebates to offset a
portion of the higher prices, but state Medicaid programs would pay more for
new drugs, which in turn would increase federal spending," the CBO concluded.
"Price
transparency is not going to be enough to slow costs. There also needs to be a
mechanism to either remediate the problem and/or deter future bad
behavior," by drug makers who set high prices, said Les Funtleyder, health
care portfolio manager at E Squared Capital Management.
Azar
said the administration's new proposal will take aim at high list prices on
drugs, as well as expanding the Medicare program's ability to negotiate prices
on more drugs under Medicare Part D drug plans, and the problem of
"foreign governments free-riding off of American investment in
innovation."
https://www.cnbc.com/2018/05/06/health-care-trump-set-to-unveil-drug-price-policy.html?itx[idio]=8812325&ito=792&itq=67b0bb6c-eff6-4353-b92f-f28bd514a4a7
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