President Donald Trump proposed what he called “revolutionary” changes to how his administration will approach drug pricing and reimbursement under Medicare Part B in a speech Thursday, including allowing Medicare to set prices of drugs based on what is paid in other countries. But experts were left questioning the effects the proposal will have.
In the speech, delivered Thursday afternoon at the Department of Health and Human Services, Trump excoriated other countries for what he called “freeloading” off of American biopharmaceutical innovation by forcing American patients to pay more for drugs than their overseas counterparts. “For decades, other countries have rigged the system so that American patients are charged more for the same drug,” he said. The administration’s “American Patients First” blueprint for lowering drug prices, released in May, also proposed tackling what it calls “freeloading” by other countries.
In response, the administration is proposing that Medicare Part B would use reference pricing, allowing Medicare to determine what it pays based on what other countries pay.
However, Howard Deutsch, principal at management consulting firm ZS, said that while it is well-established that people in other countries pay less than Americans, calling it “freeloading” was a misrepresentation. “Each country is making its own decisions around pricing and reimbursement for a drug based on their own budgets and mechanisms and policies and so on,” he said in a phone interview. “I would not go so far as to say they’re all freeloading.”
Moreover, Deutsch said, the policy is more likely to affect drugmakers than other countries. “How exactly is Belgium getting punished? Who’s actually getting hit by this? Of course, it’s the pharma industry.”
For its part, the industry quickly criticized the new proposal, which has not yet been submitted to the Federal Register.
Drug industry lobby the Pharmaceutical Research and Manufacturers of America, or PhRMA, quickly criticized the proposal in a statement that appeared to be meant as a dig at universal healthcare – something that a growing number of political leaders have proposed for the US – in addition to defending the US pricing system. “The administration is imposing price controls from countries with socialized health care systems that deny their citizens access and discourage innovation,” PhRMA President Stephen Ubl wrote. “These proposals are to the detriment of American patients. The United States has a competitive marketplace that controls costs and provides patients with access to innovative medicines far earlier than in countries with price controls, and it’s why we lead the world in drug discovery and development.”
Drug companies often seek approval with the European Medicines Agency after applying with the US Food and Drug Administration. But even after EMA approval, they must negotiate a price with authorities in each individual country that the agency covers, a process that can take months to a year or longer. In the UK, for example, a drug company will go to the National Institute for Health and Care Excellence, or NICE, offering confidential discounts or rebates off of a drug’s list price. If the result exceeds NICE’s cost per quality-adjusted life year threshold of 30,000 pounds, then the agency will reject it, forcing the drugmaker to negotiate further until they come to an agreeable final price.
However, Deutsch pointed out that what the Trump administration is proposing differs from European-style negotiations that Medicare is statutorily prohibited from implementing. Rather, the idea would be to set a price that Medicare would pay. “It doesn’t sound like any ‘negotiation’ I’ve ever had,” he said.
Still, even if implemented, the rules would not take effect until Spring 2020 and would only last through Spring 2025. The administration’s authority to implement the rule exists under the authority of the Center for Medicare and Medicaid Innovation, which was created under the Affordable Care Act, explained Rachel Sachs, an associate professor of law at Washington University in St. Louis, in a phone interview.
Another limitation, she said, is that it only affects a particular slice of Medicare beneficiaries whose drugs are covered under Part B, which related to medicines administered in a clinical setting. “This isn’t doing anything for the Americans who have employer-sponsored insurance,” she said. “It’s not helping seniors having trouble affording medicines at the pharmacy.” Drugs sold at the pharmacy are covered under Medicare Part D.
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