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Trump plan for drug prices won't include direct negotiations

May 11, 2018

President Donald Trump is set to unveil his long-awaited plan for reducing drug prices after more than a year of bold promises to tackle pharmacy costs that are squeezing millions of Americans.

But the strategy to be outlined in a speech Friday will not include a key Trump campaign pledge to use the massive buying power of the federal government's Medicare program to directly negotiate lower drug prices for seniors.

Instead, administration officials are previewing a raft of old and new ideas to increase competition and improve transparency in the notoriously complex drug pricing system with the ultimate aim of wringing more savings for consumers.

It's an approach that avoids a direct confrontation with the powerful pharmaceutical lobby, but it could also underwhelm Americans seeking relief from escalating prescription costs.

"Consumers are ultimately going to be the judge of this announcement," said Dan Mendelson, a health care consultant. "If they don't address the cost that patients see at the pharmacy counter, it's not going to be seen as responsive."

Trump touted his upcoming plans Thursday during an Indiana event in Elkhart. Trump told the crowd that Obamacare is “failed experiment,” then added “but wait till you see the plans we have coming out, literally, over the next four weeks, we have great health care plans coming out.”

A majority of Americans say passing laws to bring down prescription drug prices should a "top priority" for Trump and Congress, according to recent polling by the Kaiser Family Foundation.

As a candidate, Trump railed against the pharmaceutical industry, accusing companies of "getting away with murder." But as president he has shied away from major reforms and staffed his administration with appointees who have deep ties to the industry, including health secretary, Alex Azar, a former top executive at Indianapolis-based Eli Lilly.

Azar and other Trump officials have described the problem in stark terms and promised bold action.

"Every incentive is toward higher list prices because everyone in the system gets a cut off that list price except the patient," said Azar, speaking on "Fox and Friends" on Friday morning.

He said one new proposal would allow senior citizens enrolled in Medicare who hit the catastrophic period to pay nothing out of pocket, "so really relieve a huge burden on our senior citizens."

Parts of the plan were previously released in the president's budget proposal and would require action by Congress. Those steps include requiring insurers to share rebates from drug companies with Medicare patients and changing the way Medicare pays for high-priced drugs administered at doctors' offices.

Trump staffers said the new steps coming Friday could be taken immediately by the administration without congressional lawmakers, who are mainly focused on November elections. The measures aim to increase competition, create incentives for drugmakers to lower initial prices and stop foreign governments from "freeloading" off U.S. pharmaceutical research. But the officials gave few specifics.

Public outrage over drug costs has been growing for years as Americans face pricing pressure from all sides: New medicines for life-threatening diseases often launch with prices exceeding $100,000 per year. And older drugs for common ailments like diabetes and asthma routinely see price hikes around 10 percent annually. Meanwhile Americans are paying more at the pharmacy counter due to health insurance plans that require them to shoulder more of their prescription costs.

Trump officials have hinted for weeks that the plan, in part, will untangle the convoluted system of discounts and rebates between drugmakers and insurers, pharmacy benefit managers and other health care middlemen. FDA Commissioner Scott Gottlieb — another Trump official with industry ties — says this lack of transparency creates a perverse system of incentives in which drugmakers and other health care companies benefit from rising prices.

"Right now, we don't have a truly free market when it comes to drug pricing, and in too many cases, that's driving prices to unaffordable levels for some patients," Gottlieb said in a speech last week.

Experts who study drug pricing are encouraged that the discussion has moved from outrage to more sophisticated proposals for reform.

"This is progress and I think there's no question that opening up the machine to make it more clear how it works will lead to change — hopefully to constructive change," said Dr. Peter Bach, director of Memorial Sloan Kettering's Center for Health Policy and Outcomes.

But others warn there is no guarantee that unraveling the current pricing-setting bureaucracy will lead to lower prices, because it all starts with drugmakers' initial prices.

Drugmakers generally can charge as much as the market will bear because the U.S. government doesn't regulate medicine prices, unlike most other countries.

Medicare is the largest purchaser of prescription drugs in the nation, covering 60 million seniors and Americans with disabilities, but it is barred by law from directly negotiating lower prices with drugmakers. Democrats have long favored giving Medicare that power, but Republicans traditionally oppose the idea.

Allowing Medicare to negotiate prices is unacceptable to the powerful drug lobby, which has spent tens of millions of dollars since Trump's inauguration to influence the Washington conversation around drug prices, including a high-profile TV advertising campaign portraying its scientists as medical trailblazers.

The drug industry's top lobbying arm, Pharmaceutical Research and Manufacturers of America, spent nearly $26 million to sway federal decision makers last year, according to records tallied by the non-profit Center for Responsive Politics. That spending total was the group's highest since the 2009 congressional battle that led to Obamacare.

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