President Trump recently unveiled his plan to lower drug prices, called “American Patients First.” Trump says he blames high drug prices on foreign governments, middlemen such as pharmacy benefit managers, the expiration of some key patents, an opaque business model around drug pricing, and complicated laws and regulations which make it more difficult to control drug prices.
In his blueprint to lower drug prices and reduce out-of-pocket healthcare costs, Trump sites four key elements to drive down prices.
- Improved competition.
Trump says the FDA needs to take steps to prevent manufacturer gaming of regulatory processes such as Risk Evaluation and Mitigation Strategies. He says drug companies are gaming current regulations to block competition from generics, which keeps prices higher. Trump also says he wants the FDA to write new policies to educate consumers on biosimilar biologics, which could lead to more uptake of less expensive medications. Furthermore, Trump says he wants to develop proposals to stop Medicaid and ACA programs from raising prices in the private market.
Some experts say an important element of improving competition needs to be addressing patent protection problems. “Improved competition can only be achieved by reducing the period of time of patent protection, allowing for brand drugs to convert to low-cost generics,” says Thomas Borzilleri, CEO and founder, InteliSys Health, a drug price transparency provider.
- Better negotiation.
One of Trump’s strategies to achieve this includes experimenting with value-based purchasing in federal programs. Trump also wants to allow Medicare Part D to switch out generics in a formulary during a plan year if a price spikes and allow Medicare Part D plans to negotiate drug prices with manufacturers like private health plans are able to do. Trump would also like to explore putting tariffs or other restrictions on foreign countries buying domestic drugs.
J. Bart McCollum, JD, president and chief operating officer, Ameriflex, a healthcare benefits administration firm, believes this is a misguided approach. “Increasing the prices foreign countries pay will not necessarily lower prices that Americans pay,” he says. “Drug companies are profit-maximizing enterprises, accountable to shareholders. They won’t look at windfalls in one market as an opportunity to reduce revenue in another.”
Says Leah Binder, president and CEO, The Leapfrog Group, a healthcare nonprofit, “Medicare negotiation would not necessarily lower prices for the 185 million working Americans covered by employers. Indeed, a good deal for Medicare could make it more difficult to control pricing for everyone else.”
- Incentives for lower list prices.
Trump may require drug manufacturers to include list prices in advertising to increase transparency. He’d also like to require Medicare’s drug-pricing dashboard to make price increases and generic competition more transparent. Trump might also limit rebates on prescription drugs, which the Administration has suggested may obscure drug prices.
“The right reforms in this area could help Americans access lower list prices and out-of-pocket costs,” says Meena Datta, JD, partner and global co-leader, Sidley Austin LLP Healthcare Team, an international law firm. “The wrong reforms could make matters worse or cause new problems.”
- Lower out-of-pocket costs.
Trump would like to see “gag” clauses removed, which prevent pharmacists from telling Medicare Part D patients when they could pay less by not going through Part D. “This would increase transparency, so it may be advantageous,” McCollum says. Trump is also proposing regulations that will increase the amount of data in a Part D explanation of benefits, including price increases and lower-cost alternatives.
Upon reflecting on what Trump’s plan lacks, Nadina Rosier, pharmacy practice lead, Willis Towers Watson, says it does not have a timeline, it doesn’t clearly outline key milestones for success, nor does it highlight how success will be measured.
“In the meantime, plan sponsors should ensure their pharmacy benefits program contracts are structured to increase stakeholder alignment, facilitate better transparency, and provide for greater disclosure that enables them to implement programs aimed at addressing rising drug spend,” Rosier advises.
Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.