Trump Administration Reveals Plans to Lower Drug Prices

In May, President Donald Trump and members of his administration outlined plans to lower prescription drug prices: First, the president unveiled initiatives to remove barriers to generic-drug development and spur competition among pharmaceutical companies.

The U.S. Food and Drug Administration (FDA) simultaneously released a blueprint outlining changes the agency would take to “correct the abuses of the system that impede competition.” Proposed actions would require foreign governments to pay more for drugs created as a result of U.S. innovation and would force drugmakers to publicize list prices in their direct-to-consumer advertising. The blueprint includes more than 50 initiatives, but critics noted that few of them would entail immediate changes.

Three days later, Department of Health and Human Services (HHS) Secretary Alex Azar announced a series of actions the department would take to change the way Medicare and Medicaid pay for prescription drugs and how the FDA approves products. His most ambitious plan is to ban pharmacy benefit managers from negotiating discounts and rebates with drug manufacturers and replace the process with contracts based on a set price.

Mr. Azar also wants to simplify how Medicare pays for drugs by moving expensive medications administered inoffice (like anti-cancer medications) into the standard Medicare Part D program, through which private health insurance companies can negotiate discounts with drug companies.

Following President Trump’s speech, drug-pricing experts who spoke with The Wall Street Journal questioned the effectiveness of these proposed efforts. “Overall, this is quite underwhelming in scope,” said Craig Garthwaite, PhD, director of the Health Enterprise Management Program at Northwestern University’s Kellogg School of Management. “The proposal is vague on details and filled with more slogans than actual sound economic policies.”

“While some of these proposals could help make medicines more affordable for patients, others would disrupt coverage and limit patients’ access to innovative treatments,” the pharmaceutical industry’s trade group PhRMA said in a statement responding to the speech. According to The Wall Street Journal, shares of drug stocks rose after the president’s speech: Merck & Co. increased 2.8 percent and Regeneron Pharmaceuticals jumped 6.2 percent.

Source: The Wall Street Journal, May 11, 2018; FDA news release, May 11, 2018; NPR, May 14, 2018.