Trump unveils plan linking drug payments to cheaper overseas prices

President Donald Trump on Friday unveiled a plan to link government payments for medicines to lower prices paid abroad and another to eliminate rebates, in a last-ditch effort to deliver on a 2016 campaign promise to slash drug prices.

The unusual scramble to release the sweeping drug pricing rules just two months before his presidential term ends comes amid Trump's frustration with pharmaceutical companies that he believes slow-walked positive coronavirus vaccine news, three sources familiar with the discussion told POLITICO this week.

The president reiterated those claims at a press conference Friday, accusing Pfizer "and others" of delaying vaccine trial results for political reasons — without offering evidence to support the accusation. "The drug companies don't like me too much, but we had to do it," he said. "I just hope they keep it. I hope they have the courage the keep it, because the powerful drug lobby, big pharma, is putting pressure on people like you wouldn't believe."

Friday is the last day that the administration can release a rule that could be finalized in the 60 days before President-elect Joe Biden assumes office.

Reaction to the new rules, which are likely to face legal challenges, was swift. "It defies logic that the administration is blindly proceeding with a ‘most favored nation’ policy that gives foreign governments the upper hand in deciding the value of medicines in the United States," said PhRMA president and CEO Stephen Ubl in a statement.

The group is "considering all options to stop this unlawful onslaught," he added.

And Jay Timmons, CEO of the National Association of Manufacturers, called the new rules "socialist policies" that will not help lower health care costs.

Trump first raised the prospect of linking prices to an international index as one of a slew of ambitious proposals pinned to his May 2018 blueprint to lower drug prices. But the idea, which raised drug companies’ hackles and divided the GOP, stalled amid efforts to push through other promised policies, several of which failed in court or drew only scattered Republican support.

The plan would tie Medicare payments for 50 costly medicines administered in the doctor’s office — including pricey therapies for cancer and rheumatoid arthritis — based on a "blending formula" that includes the lowest adjusted international price for the product between a group of OECD countries with similar GDPs to the United States. The policy would except some providers, including hospitals for children, cancer patients and critical care, plus rural health clinics, federally qualified health centers, and Indian Health Service facilities.

The Trump administration plans for the most-favored nations rule to be phased in over the first four years, starting this January, of a seven-year model that gradually shifts from a drug's average sales price to the much-lower cost calculated by the formula.

In what appears to be a bid to control pharmaceutical companies' price spikes in reaction to the rule, Medicare regulators said they would speed up the four-year shift if U.S. prices rise faster than inflation and the most-favored nations price.

The plan is almost certain to draw legal challenges because it was never formally proposed as a draft rule. A draft of the earlier version, dubbed the international pricing index, cleared the White House's Office for Management and Budget review on Nov. 19 after lingering under review for more than a year.

And while the administration estimates that the new plan could save Medicare $85.5 billion over those even years, it notes that “a portion of the savings is attributable to beneficiaries not accessing their drugs through the Medicare benefit, along with the associated lost utilization” — essentially, fewer people having access to certain medicines starting in 2023.

"PhRMA is considering all options to stop this reckless attack on the companies working around the clock to beat COVID-19," a spokesperson said this week.

The rebate rule

Trump also announced a plan to eliminate rebates that drugmakers point to when justifying soaring drug costs.

While the rule is a boon to drugmakers, it also is likely to face legal challenges from payers objecting to its issuance as a final rule, the Trump administration announced it on the last-possible day to clear a 60-day window before president-elect Joe Biden assumes office.

The administration said that “savings to patients may be nearly 30 percent" under the new plan to eliminate rebates that pharmaceutical companies pay to pharmacy benefit managers.

But payers are prepared the challenge the new plan, arguing that the original rebate rule was withdrawn last year. That move effectively restarts the process, meaning the administration must issue a draft plan and solicit public comment before issuing a sweeping reform.

While the president instructed regulators this summer to revise the rule so that it would not cost patients or the government any more money, the rule released Friday contains the same projections as the original: That the rebate plan could cost up to $196 billion in government spending over a decade.

Drugmakers have long pointed to rebates as the unseen costs they pay that drive up medicines’ prices. Pharmacy benefit managers, insures and drug pricing advocates argue that eliminating rebates — which are incorporated in plans’ decisions about which drugs they prefer for patients — removes their leverage to control costs.

Reports from the Goverment Accountability Office and the HHS Office of the Inspector General back the idea that rebates helped control spending in Medicare Part D.

But HHS Secretary Alex Azar, who used to work for drugmaker Eli Lilly, has long been a proponent of eliminating rebates from the system even as White House support wavered.

"Any approach to drug pricing that does not tackle the issue of rebates, whether through our proposed approach or otherwise will simply not get list prices down," he said last year. The secretary also argued that seniors' premiums would not go up — despite government projections that they would under the model — because plans compete on the basis of low premiums.

The origin of most-favored nations

Trump ordered federal officials this summer to work on a similar rule linking prices for pharmacy-bought drugs in Medicare Part D to a basket of lower international costs, but with the clock ticking on his administration is it unlikely that the follow-up plan, encompassing virtually every other medicine sold to consumers, would be rolled out.

It is not clear how either the most-favored nations model or the rebate rule would fare under the Biden administration beginning in January. President-elect Joe Biden has discussed establishing an independent review board to assess medicines' values, another cost-cutting measure that would hit the pharmaceutical industry hard.

Trump first promised to take down high prescription drug costs on the 2016 campaign trail and days before his inauguration accused pharmaceutical companies of "getting away with murder." But while price increases slowed during his presidency, drug costs ultimately did not fall. The rule announced Friday could be Trump's lasting mark on the issue, but could have a narrow path to completion between legal battles and the Biden administration.