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President Trump has unveiled the administration’s much anticipated plan to reduce pharmaceutical prices. Speaking in the White House Rose Garden last month, the president touted what he characterized as “the most sweeping action in history to lower the prices of prescription drugs for the American people.”
Long on rhetoric and short on specifics, the initiative promised action in four areas — fostering competition, enhancing the negotiating power of payers, providing incentives to reduce list prices for pharmaceutical products and lowering out-of-pocket costs for patients.
“We’re going to take on one of the biggest obstacles to affordable medicine: the tangled web of special interests,” Trump said.
“Everyone involved in the broken system — the drug makers, insurance companies, distributors, pharmacy benefit managers and many others — contribute to the problem. Government has also been part of the problem, because previous leaders turned a blind eye to this incredible abuse.
“But under this administration, we are putting the American people first. I’ve instructed Secretary [of Health and Human Services Alex] Azar to begin moving forward on reform that will bring soaring drug prices back down to earth.”
The balance of the president’s remarks and subsequent comments by Azar provided more insight into the administration’s plans. Two agencies that are part of HHS, the Food and Drug Administration and the Centers for Medicare and Medicaid Services (CMS), are wielding their power to bring about lower prescription prices.
The former has developed a Drug Competition Action plan, designed to speed the approval process for generic medications. Under Commissioner Scott Gottlieb, the agency OK’d more than 1,000 generics 2017, 200 more than in any other year. Trump said that the availability of the generics approved last year has already resulted in savings of more than $9 billion. “The FDA will continue to work to ensure that safe and effective generic drugs are approved expeditiously and not hamstrung by unfair practices that brand-name drug manufacturers sometimes use to thwart competition,” said Azar (who, as the president noted in his remarks, was previously an executive in the pharmaceutical industry).
CMS, which administers health insurance, including prescription drug coverage, for some 130 million people, is also taking steps to put downward pressure on expenditures for pharmaceuticals. The president and HHS secretary both pointed to the recent reform of the Drug Discount Program for hospitals that has saved senior citizens some $320 million in out-of-pocket costs this year. In addition, they championed Trump’s budget plan for 2019, which includes provisions to provide free generics to low-income seniors and establish a cap on out-of-pocket costs for Medicare beneficiaries.
Sketchy as many of them are, the administration’s ideas for lowering pharmaceutical prices — which also include new rules on drug rebates, steps to accelerate the approval process for over-the-counter medications and the elimination of restrictions on pharmacists advising patients about how to save money — deserve consideration. Any reasonable action that can be taken to help keep medication costs in check should be welcome.
Trump raised one issue that is long overdue for discussion — the disparity in drug prices in the U.S. versus those in other developed nations. “When foreign governments extort unreasonably low prices from U.S. drug makers, Americans have to pay more to subsidize the enormous cost of research and development,” asserted the president. “In some cases, medicine that costs a few dollars in a foreign country costs hundreds of dollars in America for the same pill, with the same ingredients, in the same package, made in the same plant. And that is unacceptable.
“You can look at some of the countries: Their medicine is a tiny faction of what the medicine costs in the U.S.A. It’s unfair and it’s ridiculous, and it’s not going to happen any longer. It’s time to end the global freeloading once and for all.”
One might disagree with the way Trump couched the message, but it’s hard to argue that people in this country and those in other nations with advanced economies shouldn’t pay similar prices for the same pharmaceutical products. The logic seems clear enough, but the administration will have a very hard time convincing the leaders of other countries to agree to change the current global pricing paradigm.
Critics were quick to assert that Trump’s plan did not go far enough and represents a victory for the status quo. They wanted, among other things, the government to be given the authority to use its immense purchasing power in direct negotiations with pharmaceutical manufacturers. Time will tell how the more modest plan laid out by the president impacts the marketplace for prescription drugs.
Going forward, the administration would do well to not view pharmaceutical costs in isolation. While medication prices are indeed high, and many patients with insurance find it increasingly difficult to deal with rising co-payments and deductibles, prescription drugs account for less than 15% of the $3.3 trillion a year that the U.S. devotes to health care. To really have a positive impact on patients and the American economy, the president and legislators should examine the health care system as a whole and keep in mind the myriad costs for hospitalizations, surgeries and other services that the proper use of prescription drugs forestalls.
