Will Trump’s Plans Bring Down Drug Prices?
When President Trump delivered his much-ballyhooed address on drug prices in May, even supporters conceded there were more question marks among his policy ideas than concrete proposals.
But over the past week, the Trump administration has begun to put some periods at the ends of the sentences.
Top health officials are exploring the idea of importing drugs from other countries, despite broad and long-standing opposition from drug makers. There’s a new pitch to lower the prices Medicare pays for new drugs, at least for the first few months they’re on the market. The Food and Drug Administration might soon allow some prescription drugs to be sold over the counter. The same agency also released a polished plan to speed biosimilar drugs to market and promote competition. And the administration got closer, too, to releasing a new plan to change the way pharmacy benefit managers get paid.
Adding to the frenzy: flashy pledges from pharma giants including Pfizer, Novartis, Merck, Sanofi, and Roche to avoid increasing the prices of some drugs or even lower the prices of others, albeit in limited ways.
Through it all, top Trump administration officials were quick to promote their efforts—and to tout how quickly they are getting results.
“We’re driving swift, firm regulatory action and legislative action that’s going to create every incentive to bring prices down in this country,” health secretary Alex Azar said on Fox Business Thursday. “We’re completely resetting the pricing system in the U.S”
“As someone who has worked in various parts of the drug market for decades, I have never seen a time of change like this,” HHS senior adviser Dan Best wrote in a Wednesday blog post.
It’s too soon to tell, however, whether many of the proposals will markedly lower prices.
Trump officials say even the smallest ideas will change the market incentives in big ways—reducing the pressure on drug makers’ to raise their list prices, or helping patients get back some of the money that’s sloshing around in the system.
Some of the ideas on the list really are big ideas. But many of the recent announcements are mere first steps in what will likely kick off a long, intense regulatory battle against entrenched industry players. Others are such small changes as to be effectively meaningless. Still others represent an effort to put a shiny new spin on policies that have been in the works for months or even years.
“They’re clearly still in early stages – a plan is still a plan, and a proposed rule can be a proposed rule for a long time, and a workgroup is just a workgroup,” said Dr. Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh. “But we’re ahead of where we were six months ago.”
Below, STAT unpacks some of the policies that have been in the headlines, and how significant—or insignificant—they might be.
The boldest—and most politically surprising—proposal from the Trump administration centers on an idea long favored by the left, and long and staunchly opposed by drug makers: importing drugs from other countries.
It’s the only idea raised last week that surprised drug pricing experts, too. No Trump administration officials have hinted at it since the plan to bring down prescription drug prices was released in May.
The proposal is relatively straightforward, if limited: FDA Commissioner Scott Gottlieb will form a working group to explore importation in cases where a manufacturer suddenly hikes the price of a drug that doesn’t have any competitors. It will only apply in cases where the drug’s patents and exclusivity protections have expired. There’s almost no chance it will apply to popular and expensive medications that have drawn the ire of so many policymakers.
“It’s fair to say that its impact is likely to be limited,” said Allan Coukell, senior director for health programs at the Pew Charitable Trusts. “Not least because it doesn’t tackle the drugs that are the main driver of increased spending, which are the new drugs that are on patent.”
But even mentioning the idea of importation is an abrupt about-face for Azar and Gottlieb, both of whom have long opposed importation on the grounds that it is too hard to ensure drugs from other countries are as safe as those that the FDA oversees.
There are still a lot of questions. How will the FDA determine which drugs qualify, or how sudden or significant the price increase needs to be? How long will the drugs be imported? And will it actually encourage other companies to get into the market?
Implementing the policy will require “reproducible definitions,” Gottlieb said in a Thursday interview with Vox. And that will be a challenge, he added.
Another potential hurdle he hinted at: the proposal could even require action from Congress—a significant hurdle given the political environment.
Gottlieb also said he is hoping to have policy details by the end of the year.
Changing drug rebates
The administration has long said it wants to target pharmacy benefit managers—and on Thursday, it tipped its hand that the plan is moving forward.
The PBM industry operates by forging deals with drug companies. Insurers have to decide which drugs to cover, and how much to charge patients. They don’t want to pay the full list price set by the drugmaker, so they hire PBMs to negotiate down the list price. That price reduction is called a “rebate.”
In government health programs, like Medicare and Medicaid, rebates are allowed because of a regulatory exception to an anti-fraud law.
But the administration sent a proposed rule to the Office of Management and Budget this week that, based on its title, eliminate that exception.
That’s all the information we have to go on right now, until OMB finishes reviewing the regulation and the administration makes it public. An HHS spokesperson said only that “the president’s [drug pricing blueprint] clearly states that we are looking at removing safe harbor protections for drug company rebates.”
Still, even the mere title of the proposal had Washington abuzz on Thursday. Analysts and experts were surprised at how quickly the proposal had landed at OMB, and some PBM stocks, including CVS Caremark, Express Scripts and UnitedHealth, fell on the news. The Pharmaceutical Care Management Association, the industry’s lobbying group, also reacted swiftly with a comment pushing back on the need for the change.
There’s a reason the regulation had everyone worried: Eliminating the rebates would radically change how PBMs do business.
“If they got rid of it, it would be a huge change, and I think it would involve changing almost every arrangement involving the [buying] and the [selling] of drugs in this country,” Sean Sullivan, a health care attorney at Alston & Bird who counts pharmacies among his clients, said before the proposed rule was submitted.
Without more details, however, it’s impossible to assess how substantial the regulatory change will be—or whether it will lower prices or change the market in other ways.
Lowering the price Medicare pays for new drugs
This idea was one of the administration’s seemingly smaller policy changes, but it’s also the closest to taking effect.
It centers on the relatively obscure way Medicare pays for drugs administered by doctors. For most products, Medicare pays hospitals and doctors a drug’s average sales price, plus a 6 percent administrative fee, whenever they administer a given medicine. For new products, when there’s no real way to calculate the average sales price, Medicare reimburses doctors using the drug’s wholesale acquisition cost, plus the same 6 percent fee.
Under the new proposal, Medicare will only pay a 3 percent add-on fee. Once the drugs’ average sales price can be calculated, however, the existing structure kicks back in.
The administration says the proposal will save Medicare money, which could translate into lower premiums. It will also mean lower co-pays for any beneficiary who might need a new drug when it first comes onto the market, since those payments are based on how much a drug costs. The administration is hoping to finalize the regulation this fall, after a mandatory comment period.
The proposal is limited. It would only be in effect for a few months, and it only applies to new drugs that fall into the right regulatory category. It’s tough to estimate how big of an impact the proposal will have, since it’s hard to guess how many new drugs might launch in the future and at what prices.
It’s notable, however, because it is one of the few drug-pricing proposals on the administration’s list that actually takes aim at drug maker prices, said Rachel Sachs, an associate professor at the Washington University in St. Louis School of Law.
“It is small, because it’s only about the first couple of quarters after a drug has been approved, but it’s also something that potentially antagonizes the pharmaceutical industry in a way that the other proposals we’ve seen them put forward don’t,” she said. “The administration will get pushback even on this limited reform … and it will be interesting to see if they respond the way [other administrations have responded].”
A biosimilar plan
The FDA earned a whole host of accolades this week for its “Biosimilars Action Plan,” a document the agency has been talking up since January. It contains meaningful ideas that could, eventually, bring down prescription drug prices for some of the priciest medicines. But some of them have been in the works for months or even years.
“I don’t think it’s a groundbreaking document,” said Kurt Karst, an attorney at Hyman, Phelps & McNamara. “Because there’s not a lot that’s new in there. It’s aspirational.”
The plan focuses on biosimilars—highly similar drugs that function as generic versions of expensive and complex biologic drugs. But the eight-page document serves as more of as an update on existing policy than a bold new strategy.
For example, one of the goals in the plan is to release updated guidance on how a biosimilar could be certified as “interchangeable.” But the government has been working on that for at least eight years. Congress tasked the FDA in 2010 with determining how a drug company could demonstrate that it is safe for a patient to use a biosimilar even if the doctor prescribes the brand biologic. Seven years later, the FDA issued a draft guidance, but the agency hasn’t finalized it. The plan says that “final or revised draft guidance” is coming.
Take another example. Gottlieb said in February that his lawyers were looking at ways to allow companies to use European versions of biologics in studies to demonstrate the biosimilars are indeed similar to the biologic. That same idea was also highlighted again in the plan.
The plan does lay out a handful of internal FDA changes that could speed up the drug review process. But it doesn’t do anything to address intellectual property issues, which are a major reason why, of the 11 approved biosimilars, only three are actually being sold right now. That would be outside the agency’s jurisdiction.
“You can have all the BAPs, BIPs, whatever you have acronym-wise in the biologics world, but unless you have products that are marketed, for which there is uptake, you don’t have a biosimilars industry,” Karst said. His acronyms refer to the Biosimilars Action Plan and the Biosimilars Innovation Plan, two names for what eventually became the document released last week.
More drugs available over the counter
On Wednesday, the FDA announced new steps to make some prescription drugs available over the counter. It isn’t clear, however, that the proposal would do much at all about the price of the medicines.
The proposal is light on details, and is still in draft form. Broadly, it would create a new category of drugs that aren’t quite as restricted as prescription medicines, but aren’t as easy to get as Tylenol or Claritin.
The new category of medicines might have to include more information on their labels. Or patients might have to demonstrate they know how to safely use the drug, perhaps by watching a video online.
The FDA’s proposal also leaves it up to pharmaceutical companies to decide whether and how to take advantage of the new category. An FDA spokesperson said that this guidance is just the first step in that longer process, and that further details are forthcoming.
Administration officials are including the policy everytime they tick off all the actions they’ve taken to lower drug prices—but they haven’t articulated a strong argument for why this would lower drug prices.
Instead, most of the positives they highlight center on increasing patient access to medicines by saving them a trip to the doctor’s office for the prescription. That might cut down on costs broadly, but it doesn’t see aimed at a specific drug’s price.
“We’re very mindful of the time and financial cost to patients and the health care system to fill a prescription medicine—particularly one taken repeatedly for chronic conditions,” Gottlieb said in a statement announcing the proposal. “Our hope is that the steps we’re taking to advance this new, more modern framework will contribute to lower costs for our health care system overall.”