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Trump’s plan to bring down drug prices in Medicare Part B

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President Donald Trump talks about drug prices during a visit to the Department of Health and Human Services in Washington, Thursday, Oct. 25, 2018.
President
Donald Trump talks about drug prices during a visit to the
Department of Health and Human Services in Washington, Thursday,
Oct. 25, 2018.

AP

  • President Donald Trump on Thursday gave a speech on ways to
    curb drug pricing.
  • The speech focused on spending in the part of Medicare that
    pays for seniors who get drugs administered in a doctor’s
    office. 
  • Trump has decried “global freeloading” as a reason why the US
    pays high drug prices, but the administration’s plans to bring
    down costs actually piggybacks on what other countries have done
    to lower prices themselves.
  • If the plan moves forward, it’s likely to face a lot of
    opposition from the healthcare industry, including pharma
    companies and doctors.

President Donald Trump’s plan to lower drug prices sounds a lot
like what the “global freeloaders” he often criticizes do
themselves to curb high prescription costs. 

Trump’s administration plans to 
set up an
“international pricing index,” in which some US drug prices would
be linked to what European nation like Germany and France pay,
according to a
proposal
published Thursday. Trump touted the plan as part of
his broad goal to reduce drug prices in a speech on Thursday at
the Department of Health and Human Services

“Americans pay more so that other countries
can pay less, very simple, that’s exactly what it is,” Trump said
on Thursday. “It’s wrong, it’s unfair.”

The HHS is asking for feedback on the plan before it plans
to propose it more formally in early 2019. It could go into
effect in 2020, and would say $17.2 billion over five
years.

The speech was a a continuation of an effort set in motion
in May,
when the Trump administration
laid out a 44-page
drug-pricing blueprint,
 calling out middlemen in the
pharmaceutical industry and “freeloading” by other countries that
pay less than the US for prescription drugs. 

The speech also comes at an interesting time given the
proximity to the midterm elections. So far, Republicans have been
on the defensive when it comes to healthcare, especially when it
comes to
the GOP’s attacks on preexisting condition protections
, so
the speech was also an attempt to reframe the healthcare
conversation as Americans head to the polls.

The Trump administration proposal is focused on prices paid
for drugs that are covered under a portion of the Medicare
program known as Part B. Those are typically drugs that are given
in a doctor’s office and include drugs used in cancer treatment,
as well as eye medications like Eylea and Lucentis.

The proposal won’t extend to the drugs Americans pick up at
the pharmacy counter, or beyond the Medicare program.

In 2015, Medicare spent $26 billion on Part
B
 drugs. Most of the drugs in the Part B plan
are a kind of drug called a “biologic,” or drugs made
of living organisms (usually cells). They’re typically made by
one drugmaker, which means there isn’t a lot of competition over
price. Put in perspective, the US spent $647.6 billion on
Medicare, meaning Part B spending makes up about 3% of Medicare’s
total spending. 

By tying the price Medicare is willing to pay to the price
in other countries, Trump is effectively piggybacking on the
efforts by governments in those countries to lower drug costs.
Those are the same initiatives he’s recently slammed as
“freeloading.” 

Other options Trump is considering

The Department of Health and Human Services released
a report on Thursday
 showing that the prices paid in the
US for drugs that are part of Part B are 1.8 times higher than in
other countries like the UK, France and Canada.

To cut back on that, the Trump administration is also
considering two other changes:

  • Increasing the role of companies known as
    pharmacy-benefit managers in managing drugs and pricing in the
    Part B program.
  • Changing up the incentives for doctors, so they’re paid
    based on a flat fee rather than a percentage of the price of a
    drug, as a way to push them to use lower-cost drug
    options. 

Similarities to ‘global freeloaders’

While Medicare is
barred from explicitly negotiating prices
with drug
companies, Trump’s proposed changes are designed to use the
collective power of the growing Medicare market to force
drugmakers to bring down their prices or lose access to a
potentially lucrative market. The approach bears some
similarities to price negotiations by government healthcare
programs in European countries like the UK.

In those countries, the government health systems directly
negotiate with pharmaceutical makers over the price of their
drugs. If the two sides don’t agree on a price, the drug may not
make it to the country’s market at all, costing the maker a large
chunk of change. In addition to direct negotiation, the countries
use a variety of other methods,
such as reference pricing
, that bear similarities to the
Trump proposals.

Already, however, there is skepticism about how much this will
impact the drug industry.

“This is the first time a US administration appears to have taken
a real step in their direction (how committed they are, we will
see),” Bernstein analyst Ronny Gal said in a note Thursday ahead
of the speech. “Some of the ideas like introducing indexing
prices to other countries would be viewed by the drug industry as
outright antithetical to their interests.”

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