Christopher Holt May 18,
2018
The early responses to
the Trump Administration’s “Blueprint” for reducing drug prices (released
last week) do not match the significance of the proposals. The stocks of
pharmaceutical manufacturers and supply-chain companies continue to perform
strongly in the absence of headline-grabbing policies like reimportation of
drugs or direct negotiations of prices by Medicare in the Part D program,
leading some to dismiss the Blueprint as mere window dressing. This reaction is
both unfair and premature. A more accurate assessment would be to recognize the
Blueprint as a deliberative, thoughtful approach to achieving sustainable,
long-term, system-wide change.
American Action Forum
President Douglas
Holtz-Eakin has already addressed the dual policy issues of
Medicare’s noninterference provision and drug reimportation here, the absence of which from the Blueprint
has generated scorn. Suffice it to say that neither policy would provide any
real or sustained downward pressure on drug prices. The absence of silly,
poorly understood pseudo policy initiatives from the Blueprint is a testament
to its seriousness.
The prescription
medication marketplace is a vast and complex system of interconnected and often
obscure players, factors, and policies, as both the president and Secretary of
Health and Human Services Azar have alluded to, and as illustrated here. Changes to one piece of the system can
have significant downstream effects on seemingly disconnected programs. Federal
policymaking on pharmaceuticals is riddled with attempts to patch holes created
by previous federal policy initiatives, such as the Medicaid “best price” rule
and the 340B program. The Trump Administration is
striking a delicate balance between aggressive initiatives aimed at positive
disruption of the drug market and avoiding the negative side effects that could
result from a less deliberative approach.
Much has been made about
the questions that the Blueprint, and the accompanying request for information,
ask, as if asking questions shows indecision. Gathering information on
potentially transformative regulatory actions before implementing them is
hardly something to criticize. The administration is embarking on a sustained
effort to increase the accessibility of generic medications, to target bad
actors and bad actions by all the players across the drug supply chain, and to
look at potential changes to how Medicare pays for inpatient and
physician-administered drugs. Whether all these initiatives will come together
in ways that are truly transformative remains to be seen, but the Blueprint is
a serious effort to make good on the president’s directive to lower the cost of
drugs for American patients.
Chart Review
Tara O’Neill Hayes, Deputy Director of Health Care Policy
Tara O’Neill Hayes, Deputy Director of Health Care Policy
The Affordable Care Act
included a provision to slow temporarily the growth rate of the Medicare Part D
catastrophic coverage threshold, as shown in the chart below. The effect was a
shortened coverage gap that resulted in more beneficiaries entering
catastrophic coverage where the federal government covers 80 percent of costs,
dramatically increasing the government’s reinsurance costs, as detailed
in this recent AAF study.
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