Three months after President Donald Trump announced his blueprint to bring down drug prices, administration officials have begun putting some teeth behind the rhetoric.
Many details have yet to be announced. But experts who pay close attention to federal drug policy and Medicare rules say the administration is preparing to incrementally roll out a multipronged plan that tasks the Centers for Medicare & Medicaid Services (CMS) and the Food and Drug Administration with promoting competition, attacking the complicated drug rebate system and introducing tactics to lower what the government pays for drugs.
Mark McClellan, director of the Duke-Margolis Center for Health Policy in Durham, N.C., and a former CMS administrator, said that although none of the initial steps has 鈥渇undamentally transformed drug prices,鈥� there is 鈥渁 lot going on inside the administration.鈥�
Two HHS officials who are rolling out the plan, Dan Best and John O鈥橞rien, described their efforts to Kaiser Health News not as a public relations strategy but a push to reform the system.
鈥淭his administration is trying to go after root causes鈥� of high drug prices, said Wells Fargo analyst David Maris.
But others are not so optimistic.
Ameet Sarpatwari, an instructor in medicine at Harvard Medical School in Boston, said policies the administration has rolled out thus far 鈥渁lone will not translate into meaningful cost savings for most Americans.鈥�
Broadly, the strategy falls under a handful of steps:
1. Attacking The Rebates
Health and Human Services Secretary Alex Azar 鈥渄o not have a real market for prescription drugs鈥� because drug middlemen and insurers get a wide range of hidden rebates from drugmakers, but those savings may not be passed on to consumers or Medicare. In July, the administration submitted a proposed rule that could change the way rebates are handled.
Details of the proposal have not been made public. But O鈥橞rien, a deputy assistant secretary at HHS, explained during a recent conference on federal drug spending sponsored by the Pew Charitable Trust: 鈥淵ou don鈥檛 have to use market power to get rebates, you can use market power to obtain discounts, to actually lower the price of the drug on the front end.鈥�
Umer Raffat, an investment analyst with EverCore ISI, said 鈥渋t鈥檚 not clear [that drug prices are going down]鈥� but the 鈥渞ebate structure is changing.鈥�
2. Bringing More Negotiation To Medicare
This week, CMS Administrator Seema Verma announced that Medicare Advantage insurers can use a step-therapy approach to negotiate better prices for Part B drugs 鈥� those administered in hospitals and doctors鈥� offices. These private plans will be allowed to require patients to first select the least expensive drug before stepping up to more costly drugs if the original medications aren鈥檛 working.
The administration is also looking at ways to introduce more competition into Part B drug purchasing. That idea was mentioned deep inside the released last month.
Peter Bach, director of Memorial Sloan Kettering鈥檚 Center for Health Policy and Outcomes in New York, pointed to the possible introduction of a competitive purchasing program in which a firm negotiates with drugmakers to buy their drugs and then sells them to the doctors and hospitals that will administer the medications. Bach said that helps ensure that hospitals and doctors can鈥檛 make more money by prescribing more expensive drugs.
Currently, Medicare pays the average sales price plus 6 percent to doctors or hospitals when they purchase drugs, a pricing mechanism that can benefit the providers if the drug costs go up. If there were a third party buying the drugs, it would 鈥渉ave a huge effect,鈥� Bach said.
3. Paying For Value
Trump鈥檚 blueprint calls for CMS to encourage 鈥渧alue-based care鈥� to lower drug prices, shifting from paying a set fee for drugs to basing payments on how well the patient does on them.
Louisiana鈥檚 Medicaid program could show the way. The state is working with CMS to explore a to pay for hepatitis C medicines. Louisiana would pay a fixed price to a drug manufacturer that would then get unlimited access to treat patients enrolled in Louisiana鈥檚 Medicaid program or in prison.
The program would move 鈥渇rom a big payment upfront to paying less over time based on actual outcomes,鈥� said McClellan, who also serves on the boards of health care giant Johnson & Johnson and insurer Cigna.
CMS also approved a Medicaid from Oklahoma in June. Medicaid programs are allowed to negotiate drug prices. Oklahoma鈥檚 plan would expand that to negotiate additional prescription price reductions based on value-based purchasing agreements.
Still, CMS鈥� recent rejection of a related Massachusetts proposal makes it difficult to believe negotiating drug prices will really happen, said Sara Rosenbaum, a professor of health law and policy at George Washington University.
That proposal would have allowed Massachusetts鈥� Medicaid program to choose drugs based on cost and how well the medicines work.
鈥淭hey have been very good and quite careful with their [Medicaid] program and so why not let them try this?鈥� Rosenbaum said.
4. Tackling Foreign Drug Costs
Pharmaceutical makers often sell their drugs at substantially lower prices in many foreign countries than they do in the United States. Trump in May that 鈥渋t鈥檚 time to end the global freeloading once and for all,鈥� saying U.S. consumers were paying part of the cost of the medicines that patients in other countries use.
He directed U.S. Trade Representative Robert Lighthizer to address the situation. Lighthizer鈥檚 office declined to comment.
When Sen. Todd Young (R-Ind.) asked during a whether trade agreements with other countries should be used to 鈥渓evel the playing field,鈥� Azar鈥檚 response was swift: 鈥淲e absolutely believe we should be using our trade agreements to get them to pay more even as we have our job to pay less.鈥�
Avalere Health President Matt Brow, who has been involved in talks with the administration, said it鈥檚 clear the focus on overseas pricing isn鈥檛 going away and the administration is 鈥渢alking a lot about how to get the president what he wants.鈥�
5. Increasing Competition
FDA Commissioner Scott Gottlieb has become the Trump administration鈥檚 lead proponent for increasing competition among drugmakers.
Competition resonates with Americans 鈥渂ecause people see it every day in their experience in Costco and other places,鈥� said Rena Conti, an associate professor at the University of Chicago.
Gottlieb has announced plans to bolster the use of generic drugs and an 鈥渁ction plan鈥� to encourage the development of biosimilars, which are copycat versions of expensive biologic drugs made from living organisms.
And to combat anti-competitive behavior in the market, Gottlieb said the FDA has passed along information to the Federal Trade Commission and hinted at potential action to come: 鈥淚 think we鈥檝e handed them some pretty good facts.鈥�
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