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Analysis

Trump Unveils Sweeping Reforms to Lower Drug Prices

By John Commins  
   November 20, 2020

The administration will eliminate Medicare Part D drug rebates for "middlemen" and impose a Most Favored Nation pricing policy on some Part B drugs.

President Donald J. Trump on Friday unveiled two final rules; one that eliminate drug rebates to "middlemen" under Medicare Part D, and one that peg prices for some Part B drugs to the lowest price charged in other industrialized nations.

"The first action will save American seniors billions of dollars by preventing middlemen, famous middlemen they call them, from ripping off Medicare patients with high prescription prices," Trump said Friday afternoon at a media briefing.

"Currently, drug companies provide large discounts on the price of prescription medicines including nearly $40 billion in rebates to Medicare Part D plans last year alone," Trump said. "Yet often middlemen stop those discounts from going to the patients ­­­­-- which is what we're interested in not the middlemen -- who need it the most."

Critics say eliminating the rebates does nothing for beneficiaries but provides a $100 billion bailout for drug makers.

President Donald J. Trump on Friday pushed forward two final rule to eliminate prescription drug rebates in Medicare Part D.

The Campaign for Sustainable Rx Pricing said eliminating the drug rebate does nothing to help Medicare beneficiaries, and could give drug makers billions in additional profits.

"The Big Pharma-backed Rebate Rule is a misguided proposal that the administration's own actuaries found would do nothing to lower drug prices while increasing premiums on Medicare Part D beneficiaries, costing taxpayers more than $200 billion and handing drug companies a more than $100 billion bailout," said CSRxP executive director Lauren Aronson.

"CSRxP looks forward to working with the next administration and lawmakers to halt and reverse implementation of this disastrous policy in order to focus drug pricing efforts instead on market-based solutions to increase transparency, boost competition and hold Big Pharma accountable," Aronson said.

Most Favored Nation

Trump said the Most Favored Nation Model, which will begin in January, will peg payments for some Medicare Part B drugs to the lowest price charged in other advanced nations, could save taxpayers $85 billion over the next five years.

Trump said Friday that Most Favored Nation "will transform the way the U.S. government pays for drugs to end global freeloading on the backs of Americans.

"Until now, Americans have often been charged more than twice as much for the exact same drug. as other medically advanced countries," he said. "In case after case our citizens pay massively higher prices than other nations pay for the same exact pill from the same factory, effectively subsidizing socialism abroad with skyrocketing prices at home," Trump said.

Health and Human Services Secretary Alex Azar said the MFN model is needed to stem the skyrocketing costs of Medicare Part B drugs, the cost of which have increased by 11.5 % over the past five years. 

The 2020 Medicare Trustees report said Medicare Part B drugs have been a major contributor to overall Medicare Part B spending trends, accounting for 37% of the change in Medicare Fee-for-Service Part B benefit spending from 2015 to 2019.

Medicare Part B drug spending of $30 billion in 2019 made up 14% of total Medicare FFS Part B spending, up from 11% in 2015.

By law, Medicare Part B must pay for most drugs administered by physicians at the average sales price in the United States, plus a percentage-based add-on payment.

Centers for Medicare & Medicaid Services Administrator Seema Verma says the current system "creates incentives for drug manufacturers to price Medicare Part B drugs as high as they can in the U.S. system because the program pays doctors more when they prescribe more expensive drugs, even when a lower cost, clinically-equivalent alternative is available."

"The Most Favored Nation Model will lead to lower drug prices for seniors," Verma said.

Unapproved Drugs Initiative

Also Friday, Trump announced that he is eliminating the Unapproved Drugs Initiative to stop price gouging by drug makers.

"In the past, drug companies have been allowed to identify certain very old, generic drugs that have been widely available for decades and exploit this misguided program" to gain market exclusivity, he said. "Then they jacked up the prices by as much as 1,000% to 5,000%. This program has also caused shortages of essential medicines."

It's not clear if the incoming Biden administration will keep the rules in place but Trump said he "hope(s) they have the courage to keep it because the powerful drug lobby, big PhRMA, is putting pressure on people like you wouldn't believe."

“In case after case our citizens pay massively higher prices than other nations pay for the same exact pill from the same factory, effectively subsidizing socialism abroad with skyrocketing prices at home.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

Trump says the MFN model is needed to stem the skyrocketing costs of Medicare Part B drugs, the cost of which have increased by 11.5 % over the past five years.

Medicare Part B drug spending of $30 billion in 2019 made up 14% of total Medicare FFS Part B spending, up from 11% in 2015.

Trump announced that he is eliminating the Unapproved Drugs Initiative to stop price gouging by drug makers.


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