Administration Unveils Changes to Medicare Drug Payments

In a speech at the U.S. Department of Health and Human Services (HHS) last month, President Donald Trump outlined a proposal for a pilot program to reduce Medicare payments for prescription drugs. The program would bypass Congress by using a pilot program to evaluate three methods for lowering U.S. drug prices, one of the Trump administration’s top health-care policy goals.

Though the plan still needs to go through the federal rule-making process, the president described three new policies HHS is exploring. For example, the administration would create an international pricing index to compare drug prices in the U.S. to prices in 16 countries with similarly developed economies, but where target drug prices are 44-percent lower. Over five years, U.S. prices would slowly be lowered to match the international index.

To achieve these price reductions, the Trump administration hopes to allow private sector vendors to negotiate directly with drug manufacturers, an approach modeled on Medicare’s Part D program. Additionally, the administration would pay doctors a flat fee for prescribing drugs, rather than a percentage of the total cost, eliminating the incentive for doctors to prescribe more expensive drugs.

Drug companies and manufacturing trade groups have already released statements expressing opposition to the plan, which Pharmaceutical Research and Manufacturers of America said could limit patient access and discourage innovation. The Biotechnology Innovation Organization, likewise, said that the program would “severely chill investment in new cures and therapies for America’s seniors.”

Source: Politico, October 26, 2018.