President Trump blames high cost of drugs on 'freeloading' countries

Kenny Tucker
October 29, 2018

"Americans pay more so that other countries can pay less", he added.

"Over time this would cause major shifts in drug development and commercialization priorities - for example, manufacturers are likely to under-invest in office-administered injectables, and emphasize self injectable or oral products preferentially", wrote Leerink's Geoffrey Porges in an October 25 note.

The proposal focuses on drugs covered under Medicare Part B, which are administered in hospitals, clinics and doctors' offices. The plan calls for Medicare, starting in 2020, to seek the much lower prices that European countries get for some of the most expensive drugs dispensed by doctors. Medicare now pays the average sales price of a medicine in the United States, plus an extra fee based on a percentage of that price.

Trump's administration plans to set up an "international pricing index", in which some USA drug prices would be linked to what 16 other countries pay, ultimately to get to a lower price in line with what those countries are paying, Politico reports.

That assumes drug companies couldn't increase prices in Europe or Japan, Azar noted, and that they couldn't create efficiencies elsewhere in their budget.

"President Trump promised that he would bring down drug prices and put American patients first", HHS Secretary Alex Azar stated in an official press release. Republicans did not support the 2010 passage of the ACA, which enacted them, and the majority of them voted to repeal and replace Obamacare previous year. His administration has worked to chip away at several ACA requirements, including supporting GOP repeal of the individual mandate in the party's tax overhaul and supporting waivers for Medicaid work requirements.

In advance of Trump's speech, HHS released a report that found US prices for the top drugs administered in doctors' offices are almost twice as high as in foreign countries.

The high prices resulted in Medicare and its beneficiaries "bearing unnecessary, potentially avoidable costs for Part B drugs", CMS stated in a fact sheet on the IPI payment model. On Thursday, Trump proposed cutting what Medicare pays for many costly drugs that are administered in hospitals and clinics, using a new index of prices that would bring USA government payments closer to what European countries pay. "It's unfair and it's ridiculous, and it's not going to happen any longer", Trump said during a May 15 speech on drug pricing. In the US, large swaths of the poor and uninsured can be left out. Medicare, which covers 55 million elderly and disabled Americans, is responsible for 29 percent of the nation's prescription drug spending.

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"The reality is he could very easily not take this on and do what other administrations have done and let the prices keep rising".

While some industry watchers pointed to the announcement as a political move, Wells Fargo pharmaceutical analyst David Maris said that this is a broader effort by the president and his administration to attack the root causes of high drug prices. "President Trump asked us to fix this problem and here's how we plan to do it".

In addition to trying to cut the base price of the drugs, the administration, through HHS, is proposing changing how doctors who deliver these drugs are paid. "There was only a single case in which the USA was paying lower than the worldwide average". Under the Trump administration proposal, private-sector vendors would negotiate down drug prices and supply the medicines to doctors and hospitals.

While Part B spending on drugs has doubled since 2006, Part D spending on drugs has risen much more slowly. It could also lower some of seniors' out-of-pocket costs, which are based on the total price paid by Medicare for a given drug.

The report "provides troubling insight into how the current worldwide drug pricing system has put America in last place, " Azar tweeted.

The proposed changes are related to the Medicare Part B program that pays for medications that patients receive in hospitals or in doctor's offices. He made his latest announcement just ahead of the November 6 elections, with health care high among voters' concerns. In a March Kaiser Family Foundation poll, eight in 10 respondents said drug costs are unreasonable and 92 percent said passing legislation to bring down the cost of prescription drugs should be a top or important priority. "It really changes business as usual for a lot of institutions that make money off of high prices of drugs". When Pfizer and Novartis announced over the summer they were pulling back on some planned price increases, Trump touted it as proof his pressure tactics were working. However, the add-on payment would not be tied to drug prices.

Analysts, however, noted these envisioned changes would likely carry only a modest impact on most large pharma companies.

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