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Trump drug speech will propose more competition to lower costs

President Donald Trump stands outside of the Oval Office, May 1, 2018. (Oliver Contreras/SIPA USA/TNS)

President Donald Trump will propose a sweeping effort to bring down U.S. drug prices Friday, in a long-awaited plan meant to fulfill a promise he has been pushing since his bid for the White House, according to senior administration officials.

The blueprint is called American Patients First, and is meant to increase pharmaceutical competition and lower patients’ out-of-pocket costs. It would lift rules that prevent government programs from getting better drug discounts, push other developed nations with tighter price controls to pay more in the interest of fair trade, would create incentives for drug companies to lower list prices, and would try to prevent drugmakers from extending monopolies by gaming the system.

The outline of the plan was described Thursday night by senior administration officials who spoke on the condition of anonymity to discuss the plan ahead of Trump’s speech, which is scheduled for 2 p.m. Friday at the White House.

“One of my greatest priorities is to reduce the price of prescription drugs,” Trump said in a statement distributed by the officials.

For the drug industry and investors, many of the proposals may not come as a surprise. Some were previously proposed by the Trump administration as part of a budget request made to Congress in February. Others have been publicly discussed by administration officials in past weeks.

The plan as described by the administration officials doesn’t go as far as what Trump threatened to do just before he took office in January 2017: have the government negotiate some drug prices directly. At the time, Trump’s comments — including a remark that the industry was “getting away with murder” — sent drugmakers’ stock prices plunging.

Along with the legislative proposals, which would need action by Congress, the administration will propose new regulations. The Department of Health and Human Services is set to take some actions immediately, while seeking feedback on others, according to an outline of the plan.

Health and Human Services Secretary Alex Azar has previously said he plans to go beyond the budget proposals, and he and other industry officials have singled out the drug plans that negotiate drug prices on behalf of companies and insurers. Known as pharmacy-benefit managers, the companies include Express Scripts Holding Co., CVS Health Corp. and UnitedHealth Group Inc.’s Optum unit.

In a speech last week, Food and Drug Administration Commissioner Scott Gottlieb proposed re-examining a safe harbor in anti-kickback laws for rebates drugmakers negotiate with insurers and pharmacy-benefit managers. The remarks sent PBM stocks downward as investors speculated the industry could take a hit in the plan.

David Maris, an analyst at Wells Fargo & Co., said last week that many in the industry and investors “do not see the trouble brewing.”

“The U.S. is on a longer-term arc toward price controls and lower margins,” Maris wrote.

The rebates between drug plans and drugmakers are used as a negotiating tactic for pharmaceutical companies to get more favorable access to patients than their competitors. Some rebates are passed directly on to consumers, and in other cases insurers and pharmacy-benefit managers keep or redistribute them. The pharmaceutical industry has attempted to pass the blame for high drug prices to pharmacy-benefit managers for keeping the rebates.

Other ideas previously proposed by the administration include:

— Limiting Medicare payments for drugs administered in hospitals or doctors offices if price increases are above the inflation rate.

— Ensuring a minimum portion of the savings pharmacy-benefit managers negotiate for Medicare are passed on to patients.

— Providing seniors in Medicare free generic drugs.

— Shrinking an incentive for doctors in Medicare to prescribe higher-cost drugs.

— Redistribute savings generated by a prescription drug-discount program for hospitals that treat a large number of poor patients.

Food and Drug Administration Commissioner Scott Gottlieb has also made speeding generic-drug approvals a priority to give patients more low-cost options. He also wants to limit the ability of brand-name and generic companies to block competition.

Pharma has also pointed a finger at insurers for increasingly forcing patients to shoulder more of the cost of drugs through rising co-pays and deductibles. Insurers and pharmacy benefit managers say high prices set by drugmakers are the root of the problem.

Meanwhile, the money keeps flowing to Washington. The pharmaceutical industry set a lobbying record in the first three months of 2018 under pressure on prices. The Pharmaceutical Research and Manufacturers of America spent $9.96 million on federal lobbying in those three months, increasing its spending by nearly $2 million over the same period in 2017.


© 2018 Bloomberg News

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