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President Trump on Thursday offered a plan to drive down the price Medicare pays for some drugs, a move that could save taxpayers billions of dollars but also faces resistance from the pharmaceutical industry.
The approach would test a plan to lower costs for some drugs over five years by basing them on their costs in other countries. It marks a push by the administration ahead of the Nov. 6 midterm elections to challenge assertions from Democrats that it has done too little to tackle high drug prices.
“This is a revolutionary change,” said Mr. Trump, who outlined the proposal in remarks at the Department of Health and Human Services. “No one has had the courage to do it or just didn’t want to do it.”
The proposal wouldn’t likely go into effect until late 2019 or 2020 and would cover only some drugs in Medicare in parts of the country. Some Democrats said the idea would do little in the short term and fall short of Mr. Trump’s more aggressive campaign promise on drug prices.
Under the proposal, the Centers for Medicare and Medicaid Services would issue a proposed rule this spring to change how it pays for infused and injected drugs administered by physicians in half of the country. The changes would only apply to some drugs in Medicare’s outpatient program known as Part B, and not the most commonly used medicines sold at pharmacies.
Medicare spent $28 billion on drugs used in Part B in 2016, up 59% from $17.6 billion in 2011, CMS said in a statement. The agency said its planned experiment would reduce spending on the drugs by about 30% and save seniors money by lowering their coinsurance payments.
Compared with the U.S., drug prices are far lower in many overseas countries. In Europe, governments directly or indirectly control their costs. In some cases, the national health service buys drugs and sets a price that manufacturers must meet to sell their product. The U.S. prices are set on the open market and through negotiation by insurers and hospitals
The proposal aims to strong arm pharmaceutical companies into lowering prices for some of the highest-cost drugs in Medicare. But it is set to face heated opposition from the pharmaceutical industry, which has said it relies on U.S. spending on its drugs to fuel innovation and research.
“Adopting foreign price controls on American innovation puts America’s patients last and diminishes their hope for a better future,” said James C. Greenwood, chief executive of the Biotechnology Innovation Organization, a drug-industry group whose members’ sales rely on Medicare Part B.
PhRMA, the trade group representing large pharmaceutical companies, said it had “serious concerns with any changes to Medicare Part B that threaten patient access to lifesaving medicines, undermine physician care quality or discourage continued medical progress.”
HHS Secretary Alex Azar said drugmakers are always free to raise the prices they charge in other countries or focus on reducing inefficiencies in their operations to make up cost differences. Mr. Trump has called other countries “freeloaders,” saying they’re reaping the benefits of U.S. drug innovation while paying far less.
The proposal drew mixed reactions from lawmakers and consumer advocacy groups. Some derided it as a public-relations effort to drum up voter support for Republicans, who have been looking for a winning message on health care before the midterms.
The Trump administration has “concocted a dog-and-pony show to trick the American people into thinking they are taking real action to lower drug prices—they are not,” said Sen. Ron Wyden (D., Ore).
Republicans, however, praised the proposal.
“Tennesseans often struggle to afford prescription drugs, and this proposal appears to put patients and taxpayers first,” said Sen. Lamar Alexander (R., Tenn.).
The U.S. experiment would last from 2020 to 2025 and would only apply to certain drugs made by a single manufacturer and those known as biologics, which are made from living organisms.
The federal government, as part of the proposal, would also look at having vendors negotiate prices instead of doctors and hospitals and paying doctors a flat fee for administering medications instead of a percentage of the purchase price.
Under current policy, doctors’ practices and hospitals buy outpatient drugs and then bill Medicare for reimbursement. The government pays doctors based on average net sales price data submitted by pharmaceutical companies for each drug, plus an additional 4.3% of the sales price. Critics have long held that the percentage-based “add-on” fee create incentives for doctors to use higher-priced drugs, a concern that CMS cited Thursday.
CMS said it would test ways to replace the percentage-based payment with a fixed fee that would remove incentives to prescribe higher-cost drugs, without reducing overall payments to doctors.
—Thomas M. Burton contributed to this article.
Write to Stephanie Armour at [email protected] and Joseph Walker at [email protected]
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