May 14, 2018

American Patients First: The Trump Administration's Blueprint to Lower Drug Prices

On Friday, May 11, 2018, President Trump delivered a highly anticipated speech addressing high drug prices and unveiling his administration’s blueprint to lower drug prices and reduce out-of-pocket costs. American Patients First: The Trump Administration blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs identifies four challenges in the American drug market, including:

  • High list prices for drugs
  • Seniors and government programs overpaying for drugs due to lack of the latest negotiation tools
  • High and rising out-of-pocket costs for consumers
  • Foreign governments “free-riding” or benefiting from American investment in innovation and payment for drugs

During his speech, the President discussed how each of these challenges above impact the daily lives of Americans and reiterated his commitment to reducing the price of prescription drugs by addressing these challenges through four key strategies. Each strategy for reform is outlined below. Notably, HHS’s blueprint encompasses two phases:

  • Actions the President may direct HHS to take immediately
  • Actions HHS is actively considering and on which feedback is will be solicited through the comment process

Improved Competition

The blueprint calls attention to a business model built on the following:

  • Opaque rebates and discounts that favor high list prices
  • A generational loss of patent exclusivity
  • The Affordable Care Act’s taxes, rebates and expansion of the 340B drug discount program
  • Expansion of international price controls
  • Government programs lacking modern negotiation tools
  • Changes in insurance benefit design that shifted the burden of rising prices to consumers

The plan proposes to take immediate actions to increase competition that include preventing manufacturer gaming of regulatory processes such as Risk Evaluation and Management Strategies (REMS), measures to promote innovation and competition for biologics, and developing proposals to stop Medicaid and Affordable Care Act programs from raising prices in the private market. Actions under review and opportunities for which HHS seeks feedback include considering how to encourage industry sharing of the pharmaceutical samples needed for generic drug development and additional efforts to promote the use of biosimilars.

Better Negotiations

The Trump administration argues that more can be done across the Medicare program to provide beneficiaries with lower cost-drugs as well as greater price. The administration also argues that given the changed landscape from the launch of the Medicare Part D program in 2006, some Part D plan sponsors may be prohibited from doing what private payers outside the Medicare program do to negotiate effectively and keep costs low. Immediate actions to support better negotiations include:

  • Finalizing changes to the Medicare Prescription Drug Program in the 2019 Part C and Part D regulations allowing for faster mid-year substitution of generic drugs onto formularies
  • Experimenting with value-based purchasing in federal programs
  • Allowing more substitution in Part D to address increases for single-source generics
  • Leveraging the competitive Acquisition Program in Part B
  • Working across the Administration to assess the problem of foreign free-riding

Actions under review and opportunities for which HHS seeks feedback include requiting site neutrality in payment, considering further use of value-based purchasing in federal programs, evaluating the accuracy and usefulness of current national drug spending data, and removing government impediments to value-based purchasing by private payers.

Incentives for Lower List Prices

The administration blueprint argues that the list price of a drug does not reflect the discounts or price concessions paid to a PBM, insurer, health plan or government program. Furthermore, obscuring these discounts can shift costs to consumers in commercial health plans and Medicare beneficiaries. The blueprint includes an immediate action of an FDA evaluation of requiring manufacturers to include lists prices in advertising, and updating Medicare’s drug-pricing dashboard to make price increase and generic competition more transparent. Actions under review and opportunities for which HHS seeks feedback include additional reforms to the rebating system, using incentives to discourage manufacturer price increases for drugs used in Part B and Part D, reforms to the Medicaid drug Rebate Program, reforms to the 340B Drug Discount Program, and considering changes to HHS regulations regarding drug copay discount cards.

Lowering Out-of-Pocket Costs

The Trump administration argues that too many people abandon their prescriptions and pharmacy when they discover the price is too high, and too many patients are never informed of lower cost options. Immediate actions to reduce patient out-of-pocket spending include prohibiting Part D Plan Sponsor contracts or “gag” orders from preventing pharmacists’ telling patients when they could pay less out-of-pocket by not using insurance, and improving the usefulness of the Part D Explanation of Benefits statement by including information about drug price increases and lower cost alternatives. Actions under review and opportunities for which HHS seeks feedback include more information for Medicare Part B and D beneficiaries about lower-cost alternatives, and providing better annual, or more frequent, information on costs to Part D beneficiaries.

Summary

Not surprisingly, the biopharmaceutical sector’s immediate reaction was not supportive of the proposals. However, the organizations noted they will be doing an in-depth review. On the opposite side, some stakeholders issued initial reaction saying the plan does not go far enough, particularly in proposing to move Medicare toward direct negotiations or to permit Americans to import drugs from foreign countries. More information can be found on the White House Fact Sheet.

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