[Editor’s note: Corie Lok co-authored this report.] In a much anticipated speech at the White House this afternoon, President Trump unveiled a long-awaited plan meant to cut the cost of prescription drugs in the U.S.
The administration’s “American Patients First” plan, released via a speech and an accompanying 38-page “blueprint” document, laid out some relatively modest actions aimed at spurring generic competition, making it easier for Medicare (the government-funded health program for seniors) to manage high drug costs and negotiate discounts, making drug prices more transparent to consumers in advertising, and allowing pharmacists to tell consumers when they can save money on cheaper drugs.
“We are getting tough on the drug makers that exploit our patent laws to choke out competition,” Trump said. “Our patent system will reward innovation but it will not be used as a shield to protect unfair monopolies.”
The plan went on to float some “even bolder actions” that the Department of Health and Human Services said it is reviewing and seeking feedback on. These proposals include targeting the secretive pricing rebate deals between drug makers and pharmacy benefit managers (PBMs), and addressing the “global freeloading” where foreign countries pay less for U.S.-made drugs.
It’s unclear just how or how much those measures will ultimately lead to lower drug prices. And it’s also still unclear how those changes will help the roughly 160 million Americans with private insurance. Some observers commented on the shortage of detail in the blueprint. “A lot of good questions in the plan but very little actual action, especially against PBMs,” tweeted Walid Gellad, a drug policy expert at the University of Pittsburgh.
In a statement, the patient group Patients for Affordable Drugs, while praising some of the proposals, said that others were “a slew of technical changes” that do not say how exactly they will bring down prices.
For the more ambitious proposals, including reforming the rebating system, the plan said HHS would seek public comment and some may require Congressional approval. HHS Secretary Alex Azar, who also spoke Friday, seemed to warn that some of these changes would take time. “This is not a one-and-done deal. It is a comprehensive process…and it will take time to reorder an entire complex multibillion dollar system of our economy,” Azar said.
Indeed, despite Trump’s consistent rhetoric about pharmaceutical companies “getting away with murder,” the administration hasn’t taken action on drugmakers, which have so far largely benefited from his administration. Last year was a record-breaking year for new drug approvals from the FDA. And tax reform lowered the corporate tax rate and eased the repatriation of overseas profits, a victory for drug firms. Their shareholders also benefited as the cash that pharma companies brought back from overseas was used to buy back shares, which in turn boosted pharma stock prices.
The biopharma industry notched another key victory this afternoon: Trump’s plan isn’t giving the U.S. government the power to directly negotiate drug prices, a step Trump supported as a presidential candidate and has pressed multiple times since—and one the industry vehemently opposes. Medicare will continue to be prohibited from directly negotiating prices by law.
Biopharma investors breathed a sigh of relief today. Though the Nasdaq Biotechnology Index was steady much of the day, it rose following Trump’s remarks and closed up 2.68 percent. Despite Trump’s comments about “eliminating the middlemen,” an apparent reference to PBMs, stocks of these companies also rose. Express Scripts (NASDAQ: [[ticker:ESRX]]) shares closed at $72.80, up nearly 2.6 percent, while CVS Health (NYSE: [[ticker:CVS]]) shares closed at $64.41, up 3.1 percent.
Rather than bestow price negotiation power, the administration is trying a variety of approaches to Medicare reform in hopes of curbing drug costs. Among the immediate changes that could be coming: enabling Medicare plans to adjust their formularies, mid-year, in certain cases; giving Part D plans “flexibility” to deal with high-cost drugs that don’t provide rebates or negotiated prices; and moving some drugs given under Medicare Part B, like certain expensive cancer medicines, to Part D.
In the report today, HHS laid out some “immediate” actions to try to encourage drug makers to lower their list prices by increasing transparency. Many people, including PBMs, have pointed fingers at drug makers for setting high prices in the first place that then ripple through the healthcare system down to the patient. The HHS will ask FDA to look into requiring drug makers to include
