Shira Stein, Riley Griffin and Jacquie Lee Bloomberg
July 24, 2020
(Bloomberg)
-- President Donald Trump announced new policies Friday aimed at lowering
prescription drug prices under Medicare by linking them to rates paid in other
countries and allowing Americans to buy medication imported from Canada.
The
changes are included in executive orders that come as Trump seeks to repair his
standing on health-care issues, particularly with senior voters. Polls have
shown sentiment is souring over his handling of the coronavirus pandemic and
efforts to eliminate the Affordable Care Act without having a ready
replacement.
The
president also announced a new policy to require federally-qualified health
centers to pass discounts they receive on insulin and EpiPens directly to their
patients, and a drug rebate rule that removes legal shields for reimbursements
paid by drugmakers to middlemen and insurers.
\The
orders “represent the most far reaching prescription drug reforms ever issued
by a president,” Trump said at an event in Washington. They will “completely
restructure” the prescription-drug market, he said.
Democrats
and drugmakers quickly pushed back. House Speaker Nancy Pelosi said the moves
“take no real action” to lower prices and will put Medicare beneficiaries at
risk of higher premiums. Industry lobbyist Stephen Ubl, head of the
Pharmaceutical Research and Manufacturers of America, called the pricing policy
“radical and dangerous.”
The order
tying prescription-drug prices to international benchmarks, which Trump
described as the “most favored nations” clause, won’t go into effect until Aug.
24 to give drugmakers time to come up with alternative measures for lowering
costs, Trump said. Several top pharmaceutical companies have requested a
meeting on the issue, which will be held on Tuesday.
$17
Billion Savings
The
international drug price rule is the only policy backed by the administration
that would boost the government’s ability to decide what it will pay for
medications. Health officials estimate the policy change proposed by Trump will
save Medicare $17 billion in the first five years. In 2018, Medicare spent $335
billion on prescription drugs, a 2.5% rise from the previous year.
“We pay
for all of the resources and all of the development and foreign countries pay
absolutely nothing,” Trump said. “Americans are funding the enormous cost of
drug resource for the entire planet.”
Trump’s
plan to import cheaper drugs from Canada is less likely to be effective.
Canada’s pharmaceutical market is likely not big enough to satisfy the U.S.
demand for drugs.
Secretary
of Health and Human Services Alex Azar said that personal importation of
insulin would be allowed, after not allowed last year under the previous importation
proposal.
Rebate
Rule
Trump
also revived his drug rebate rule, stripping legal shields for reimbursements
paid by drugmakers to middlemen and insurance plans providing coverage through
Medicare’s Part D drug program or Medicaid.
Those
payments create incentives for higher drug prices, drug companies have argued,
because they push companies to raise prices in order to meet discount demands
by drug middlemen. Instead of middlemen receiving discounts based on the price
of drugs, they’d get a fixed fee under the policy change.
The
pharmaceutical industry supported the plan, which was one reason for its
initial demise. Trump was also apparently concerned in the past that the policy
would raise insurance premiums. Lawmakers criticized the rule for its massive
price tag too. It would cost taxpayers $177 billion over a decade, according to
the Congressional Budget Office.
Jon
Conradi, an outside spokesman for the Campaign for Sustainable Rx Pricing,
which represents insurers, pharmacy benefit managers, and hospitals, lambasted
Trump for bringing it back to the table.
“A reboot
of the Rebate Rule, after the administration’s own admission it would increase
premiums on Medicare beneficiaries and cost taxpayers hundreds of billions,
would be a stunning cave to Big Pharma at the expense of American seniors and
taxpayers,” Conradi said before the executive order was announced.
Discount
Program
The plan
to use the federal drug discount program, known as 340B, for hospitals to get
cheaper insulin and EpiPens is also new. The 340B program requires drug
companies that want to sell their drugs through state Medicaid plans to offer
steep discounts to hospitals that serve primarily low-income patients. The
program has grown considerably in the last few years.
Health
centers will be required to pass on to patients any savings that they get from
drugmakers for insulin and epinephrine, Health Resources and Services
Administration head Thomas Engels said on a call with reporters.
Drug
industry representatives warned that the overarching spirit of four-fold
executive order could put jobs and progress on coronavirus therapeutics at
risk, while also predicting that implementation was unlikely to make major
waves.
‘Cripple’
Companies
Drug
industry representatives warned that the overarching spirit of four-fold
executive order could put jobs and progress on coronavirus therapeutics at
risk, while also predicting that implementation was unlikely to make major
waves.
Michelle
McMurry-Heath, CEO of the Biotechnology Innovation Organization, said adopting
foreign price controls will “cripple the small, innovative companies developing
the vaccines and therapies that will help end this pandemic and get the
American people back to work.”
Ubl,
meanwhile, said setting prices “based on rates paid in countries that he has
labeled as socialist, which will harm patients today and into the future.”
The
Nasdaq Biotechnology Index, a market gauge that includes established drugmakers
and smaller makers of innovative medicines, closed down 2.1% on Friday, a
steeper decline than the broader stock market. The S&P 500 declined 0.62%.
Diverging
Reactions
As might
be expected, Congress had diverging reactions.
Pelosi
said if Trump was committed to lowering drug costs, he should throw his weight
behind a bill sponsored by House Democrats that she said better addressed the
issue.
Meanwhile,
Senate Finance Committee Chairman Chuck Grassley commended Trump, stating that
he doesn’t blame the president for taking action “where Congress has failed” to
advance legislation. “For those who don’t like these executive actions, there’s
time to get to the table and back a legislative solution.”
Congress
self-imposed a Nov. 30 deadline to pass drug-pricing legislation, but the
Covid-19 pandemic and contentious 2020 election has led many to believe action
was unlikely.
“This is
going to end up being political noise,” said Alexander Karnal, a partner and
managing director at Deerfield Management Co., a healthcare-focused fund. “The
types of things the president has talked about doing would only put limitation
and risk to the sector. When they come to implementation moving forward, people
are going to stand by our industry because of the potential for what it can
do.”
(Adds
pharmaceutical industry comment starting in the fifth paragraph)
©2020
Bloomberg L.P.
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