Trump Administration Sinks Teeth Into Paring Down Drug Prices, On 5 Key Points

Three months after President Mr . trump announced his blueprint to lower your drug prices, administration officials have begun putting some teeth behind the rhetoric.

Many details haven't yet been announced. But pros who seriously consider federal drug policy and Medicare rules say the administration is preparing to incrementally roll out a multipronged plan that tasks the Centers for Medicare & Medicaid Services (CMS) and the Food and Drug Administration with promoting competition, attacking the complicated drug rebate system and introducing tactics to lower exactly what the government will pay for drugs.

Mark McClellan, director from the Duke-Margolis Center for Health Policy in Durham, N.C., along with a former CMS administrator, said that although none of the initial steps has “fundamentally transformed drug prices,” there is “a lot happening within the administration.”

Two HHS officials who are rolling the plan, Dan Best and John O'Brien, described their efforts to Kaiser Health News not as a public relations strategy but a push to reform the machine.

“This administration is trying to go after root causes” of high drug prices, said Wells Fargo analyst David Maris.

But other medication is not so optimistic.

Ameet Sarpatwari, an instructor in medicine at Harvard School of medicine in Boston, said policies the administration has rolled out thus far “alone will not result in meaningful cost savings for many Americans.”

Broadly, the strategy falls under a number of steps:

1. Attacking The Rebates

Health and Human Services Secretary Alex Azar has said Americans “do not have a real marketplace for prescription drugs” because drug middlemen and insurers obtain a number of hidden rebates from drugmakers, but those savings might not be passed on to consumers or Medicare. In July, the administration submitted a proposed rule that could change the way rebates are handled.

Details from the proposal have not been made public. But O'Brien, a deputy assistant secretary at HHS, explained throughout a recent conference on federal drug spending sponsored by the Pew Charitable Trust: “You do not have to use market power to get rebates, you can use market power to obtain discounts, to really lower the price of the drug on the front end.”

Umer Raffat, a good investment analyst with EverCore ISI, said “it's unclear [that drug prices are going down]” but the “rebate structure is changing.”

2. Bringing More Negotiation To Medicare

This week, CMS Administrator Seema Verma announced that Medicare Advantage insurers can use a step-therapy method of negotiate better prices for Medicare part b drugs – those administered in hospitals and doctors' offices. These private plans will be permitted to require patients to first choose the most affordable drug before upgrading to more expensive drugs if the original medications aren't working.

The administration is also looking at methods to introduce more competition into Medicare part b drug purchasing. That concept was mentioned insidewithin all the annual Medicare outpatient payment rule released last month.

Peter Bach, director of Memorial Sloan Kettering's Center for Health Policy and Outcomes in New York, pointed towards the possible introduction of the competitive purchasing program in that your firm negotiates with drugmakers to purchase their drugs and then sells them to the doctors and hospitals that will administer the medications. Bach said that ensures that hospitals and doctors can't make more money by prescribing more costly drugs.

Currently, Medicare pays the average sales price plus 6 % to doctors or hospitals when they purchase drugs, a pricing mechanism that can benefit the providers when the drug costs increase. If there have been a third party buying the drugs, it might “have a huge effect,” Bach said.

3. Paying For Value

Trump's blueprint calls for CMS to encourage “value-based care” to lower drug prices, shifting from paying a set fee for drugs to basing payments how well the individual does on them.

Louisiana's Medicaid program could show the way in which. The state is working with CMS to understand more about a subscription-based model to pay for hepatitis C medicines. Louisiana would pay a set price to some drug manufacturer that will then get unlimited use of treat patients signed up for Louisiana's Medicaid program or perhaps in prison.

The program would move “from a large payment upfront to paying less with time based on actual outcomes,” said McClellan, who also serves on the boards of healthcare giant Johnson & Johnson and insurer Cigna.

CMS also approved a Medicaid waiver from Oklahoma in June. Medicaid programs can negotiate drug prices. Oklahoma's plan would expand that to negotiate additional prescription price reductions based on value-based purchasing agreements.

Still, CMS' recent rejection of a related Massachusetts proposal makes it difficult to believe negotiating drug prices will really happen, said Sara Rosenbaum, a professor of health law and policy at George Washington University.

That proposal would have allowed Massachusetts' Medicaid program to select drugs according to cost and how well the medicines work.

“They happen to be very good and quite careful with their [Medicaid] program and so why not let them do this?” Rosenbaum said.

4. Tackling Foreign Drug Costs

Pharmaceutical makers often sell their drugs at substantially affordable prices in lots of foreign countries than they do in the usa. Trump emphasized in May that “it's time to end the global freeloading for good,” saying U.S. consumers were paying area of the price of the medicines that patients far away use.

He directed U.S. Trade Representative Robert Lighthizer to deal with the problem. Lighthizer's office declined to comment.

When Sen. Todd Young (R-Ind.) asked during a Senate health committee hearing in June whether trade agreements with other countries should be used to “level the arena,” Azar's response was swift: “We absolutely believe you should be using our trade agreements to get them to pay more even as we have our job to pay less.”

Avalere Health President Matt Brow, who has been involved in talks with the administration, said it's pay off the focus on overseas pricing isn't going away and also the administration is “talking a lot about how to obtain the president what he wants.”

5. Increasing Competition

FDA Commissioner Scott Gottlieb has become the Trump administration's lead proponent for increasing competition among drugmakers.

Competition resonates with Americans “because people see it every single day within their experience in Costco and other places,” said Rena Conti, an associate professor at the University of Chicago.

Gottlieb has announced intends to bolster the use of generic drugs as well as an “action plan” to inspire the development of biosimilars, that are copycat versions of pricey biologic drugs made from living organisms.

And to combat anti-competitive behavior in the market, Gottlieb said the FDA has transpired along information towards the Ftc and hinted at potential action in the future: “I think we've handed them some very good facts.”