BIOREGNUM — The view from John Carroll
President Donald Trump has found the enemy on drug prices, and they’re outside our borders.
Administration officials offered reporters a preview of Trump’s speech this afternoon, and the detailed notes provided in a slate of stories about the backgrounder includes the president’s assault on other countries’ single-payer systems. Those countries, or rather the rest of the industrialized world, he says, have been “free-riding” on the US, where high drug prices subsidize an industry forced to cut prices abroad.
It’s uncertain how a full throated roar against “socialist” drug pricing policies will do anything to cut US prices — or if raising prices abroad would even help achieve the administration’s goal of lowering outlays for drugs here. But politically the president’s planned speech this afternoon is shaping up as a major win for a biopharma industry that has been scrambling to get out of the way of a threatened political avalanche.
Instead of a full-scale frontal assault against companies that have been “getting away with murder,” this administration is kicking the can down the road for another day.
There are other measures included in the Trump plan, to be sure, but they involve changing government rules that shape what Medicare recipients pay. I’ll get to that in a second. First, it’s important to note what is not in the plan.
Primarily, there’s no provision seeking authority to get Medicare started on negotiating drug prices — let alone a proposal for a Medicare formulary to leverage lower prices. There’s also no move to gain an approval to allow for importing drugs from other countries where prices are lower.
That stands as a big win for the industry lobbyists, as either move could pave the way to a changeup in the pricing structure. In the past, Trump has voiced his support for Medicare price negotiations, triggering considerable fretting among manufacturers who rely on this country to provide the bulk of their profits.
The thrust of the president’s proposed policies will be to get “government rules out of the way that are preventing seniors from getting better deals.”
To do that, it appears the president wants to continue a push that would allow Medicare Part D plans some room to fashion more creative drug plans, end rules that encourage doctors to prescribe pricier meds and try to force pharmacy benefit managers to share more of their rebates from manufacturers with members. Look for more outcomes pricing strategies in Medicare.
When you inflate drug prices it gives benefit managers a chance to take a slice of a bigger discount for themselves, while also adding to out-of-pocket expenses. This gets at the industry’s criticism that much of the problem with the current pricing system is that benefit managers rigged the game to line their own pockets at consumers’ expense.
But you’ll notice that Trump’s focus is on some of the rules for how the game is played, rather than on the game itself. This tweet from Walid Gellad — an associate professor of medicine and health policy at the University of Pittsburgh, where he leads the Center for Pharmaceutical Policy and Prescribing — underscores the gist of it, where the focus is on who pays rather than on what everyone pays.
In tomorrow's drug pricing speech, i'll be looking for the balance between a focus on drug cost (the amount patients pay) and drug 'price' (the list price or cost to the system).
I hope it is a price speech, but I think it will be mostly a cost speech.
— Walid Gellad (@walidgellad) May 10, 2018
In addition, it looks like we’ll see a pushback against any practices that allow manufacturers to delay or prevent cheaper competition from generics and biosimilars. FDA commissioner Scott Gottlieb has been helping on that front by tackling a backlog of generics applications.
Add it all up, and what you see here is some important, though limited, tinkering with a system that leaves the current drug pricing system baked in. Biopharma companies will likely celebrate all this quietly today.
At some point, as analysts like David Maris have noted, the pressure to reform drug prices may grow to the point where price controls are adopted.
But after railing against drug prices for months, Trump’s unwillingness to push Medicare price negotiations leaves pricing power in the hands of the industry. And that means old drugs like Humira will continue to cost more each year, while the sticker shock for new ones will continue to rattle the public.
This issue is far from resolved.
Image: President Donald Trump in 2017. SHUTTERSTOCK
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