Healthcare analysts and industry groups still don’t know what to expect from the Trump administration’s plan to combat high drug prices, a week after the president announced what he deemed the “most sweeping action in history to lower the price of prescription drugs.”
Trump’s blueprint laid out a series of proposals, but details for several are sparse, and no concrete regulations have been proposed yet.
Here are the four biggest questions surrounding the plan:
1. Will getting rid of rebates lead to lower prices?
Drugmakers and middlemen called pharmacy benefit managers currently negotiate over rebates to drugs’ list prices, but critics say that not enough of the rebates are not being passed onto customers.
“Pharmacy benefit managers are getting paid by both sides of a transaction: the insurance companies, who pay a fee as their customers, and the drug companies they’re supposed to be negotiating against, who give them a cut of the rebates they receive, along with other administrative fees that are based on list price,” Health and Human Services Secretary Alex Azar said at an event this week.
Instead, he suggested that the administration could eliminate rebate agreements for Medicare drug plans. He said a move to fixed price discounts would eliminate the perverse incentive for drugmakers to set high list prices. A fixed price discount would reduce the list price by a certain amount, either through a flat fee or a percentage. That discount would be applied at a point of sale.
But experts questioned whether the pharmaceutical market would shift to lower prices.
“The devil is in the details,” said Kelly Brantley, vice president of health research firm Avalere. “Right now, we don’t have any markets that you can say they only use discounts as opposed to rebates.”
Discounts would bring more transparency to plans, since rebates are negotiated in secret.
With discounts, a senior could visit Medicare’s plan finder and see that one plan has a better discount on a drug than another plan.
“That is not going to last long,” Brantley said. “You see two gas stations across from each other and you rarely see two different prices.”
Sometimes, competition can drive prices down and sometimes it can drive prices up “because you don’t want to make any less than what the guy across the street does,” she said.
2. Which drugs will move from Part B to Part D?
This part of the blueprint drew the sharpest rebuke from the pharmaceutical industry, but there are many unanswered questions on how it would be applied.
Medicare Part D is the program’s prescription drug plan. PBMs and insurers represent seniors and negotiate with drugmakers for rebates.
Medicare Part B reimburses doctors for drugs that are administered in a doctor’s office. Doctors are reimbursed for the average sales price of the drug plus 6 percent from the drugmaker.
The drugs covered under part B range from vaccines to chemotherapy drugs.
The plan calls for moving some drugs from Part B to Part D, with the hopes that private plans could negotiate with drugmakers for lower prices.
But the administration hasn’t given any details on how many or which drugs could be shifted. So far, there isn’t any word on how many drugs or which ones could move over. Cancer groups have expressed caution on this part of the plan, questioning whether it could hinder access or cause more burdens for patients.
The pharmaceutical industry is also furious over the proposal, barking in a response last week to Trump’s speech that “we must avoid changes to Part B that could raise costs for seniors and limit their access to life-saving treatments.”
3. Will Trump’s plan give lagging efforts in Congress a boost?
Most of the blueprint can be handled through administrative actions, bypassing the need for congressional action. That may be for the best, as drug price bills haven’t had much success in Congress lately.
But after Trump’s speech, some stalled efforts got a shot in the arm.
For instance, House Speaker Paul Ryan said at an event this week that there is momentum for the Creates Act, which aims to clamp down on drug makers that block generic competition. Ryan said committees are in the work on a compromise version of the bipartisan bill, which hasn’t advanced in either chamber.
Trump’s drug plan also shed light on another area Congress is trying to tackle: pharma “gag clauses.” These are clauses in a contract between a PBM and a pharmacist that prohibits the pharmacist from informing the consumer it would be cheaper to pay for a drug with cash than through insurance.
The Trump administration is warning plan sponsors in Medicare Part D to cut out the clauses. A Senate bill to ban the practice overall has gone nowhere, although a Senate aide said this week that it could quickly pass the Senate through a procedure used for noncontroversial bills.
4. Coming soon to a commercial near you: list prices?
The blueprint includes a proposal to require drugmakers to include the list price for any drug in any direct-to-consumer ad. The proposal has created a host of questions for the Food and Drug Administration, including whether it legally can mandate the requirement to whether it would have any effect on prices.
The U.S. is the only country in the world that allows TV advertising for drugs.
The FDA currently goes after drug ads that are misleading or gloss over important details about side effects. But it does not require companies to add the list price.
“When patients hear about a wonderful new drug, they should know whether it costs $100 or $50,000,” Azar said at the American Enterprise Institute this week. “A patient might even pay for a doctor’s appointment to discuss a drug, not knowing that the price puts it totally out of reach.”
Azar said that he has heard from the drug industry that manufacturers can’t put list prices in ads because the prices change too often.
“We’ll go beyond direct-to-consumer advertising: Yesterday, [the Centers for Medicare and Medicaid Services] unveiled updates to its drug-pricing dashboard, which now highlights the drugs in Part B, Part D, and Medicaid that have seen the largest recent price increases,” he added.
But there are other questions about putting list prices in ads, which critical care doctor Adam Gaffney, a member of the single payer advocacy organization Physicians for a National Health Program, pointed out.
“I’m really confused by this proposal to include drug prices in ads. When an ad comes for a new lung cancer drug and says its $10,000, what are you supposed to do, weigh whether your life is worth it?” he tweeted.
