The Trump administration faces a lengthy battle to make its plan to lower Medicare drug costs a reality, with resistance coming from its own party, Democrats and large segments of the health care industry.
Conservatives and the drug industry say it’s tantamount to government price controls and socialized medicine. Democrats are beating up the president for not going far enough and doctors are worried their patients could lose access to critical medicines.
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The Trump team will have to tackle political, legal and administrative obstacles, all while keeping voters enthused about a wonky plan that’s limited to one segment of the Medicare program. Any rewards likely won’t materialize for years.
“The politics are really difficult. Pharma is already out there with their dog whistling about socialism and price controls and access rationing. So it’s a really tough row to hoe,” said Peter Bach, who studies drug pricing policy at Memorial Sloan Kettering and served as a senior adviser to Medicare and Medicaid in the George W. Bush administration.
The three-pronged plan the administration rolled out on Thursday would test ways to lower costs for some drugs directly administered by doctors to keep them in line with the far lower prices paid in many other developed countries, whose governments directly influence drug prices. Medicare would tie what it pays to prices in nations like France and Germany. It would also encourage more private sector negotiations between vendors, doctors and drugmakers, as well as change incentives to encourage doctors to prescribe fewer costly drugs.
The demonstration project, which likely couldn’t start until at least 2020 under the government’s rulemaking process, would impact just half of the country, though the administration hasn’t laid out where, and would take five years to fully scale up and realize most of the projected savings. And it only touches on a fraction of drugs, leaving out the medicines patients pick up at pharmacies.
“This is not the speedy ‘drug prices will come down rapidly’ that the president has promised,” said Rachel Sachs, an expert on health policy law at Washington University in St. Louis. “This is a years long process, something [HHS] Secretary [Alex] Azar has recognized is necessary but it also doesn’t match the the rhetoric from this administration.”
It’s also unclear whether HHS can convince private sector vendors to join the demonstration and negotiate lower drug costs on behalf of doctors and hospitals. Then, these vendors have to be able to convince the drug industry to sell them the products at low enough costs that Medicare’s reduced reimbursement rates would be acceptable.
“You could have a situation really easily where a vendor doesn’t have access to some drugs,” Bach said. “This gets pretty dicey politically and pharmaceutical companies know this. This is non-trivial to pull off through this mechanism.”
Douglas Holtz-Eakin, president of the American Action Forum, warned the plan could be foiled if other developed countries chose not to reveal what they pay for certain drugs, believing that information could threaten the discounts drug companies provide to their citizens. He added the drug industry could opt to push higher costs on to private U.S. health insurers to compensate for lower Medicare reimbursements.
HHS is using an Obamacare program known as the Center for Medicare & Medicaid Innovation to run the plan, allowing the administration to test new health policies without needing a congressional stamp of approval. But pushback from lawmakers and lobbyists stopped Barack Obama from using the same program to test a much more narrow change to prescription drug payments — and there’s a very real risk some in Congress could make the case this project exceeds the administration’s executive authority.
“Republicans oppose the Affordable Care Act. They think [the innovation center] authority has always been highly questionable,” and “importing price controls are things Republican ideology would say ‘this is inconceivable,’” said Rodney Whitlock, vice president of ML Strategies and longtime Republican Congressional aide.
Conservatives have repeatedly claimed that the sheer size and scope of such proposals make them new policy, not demonstrations per se, and therefore they must go through Congress, Holtz-Eakin said.
This has already put Azar on the defensive. He made a last-minute, closed-press appearance at a conference held by the drug industry lobby BIO Thursday afternoon to try and sell the plan as market-based and assuage concerns.
In a meeting with reporters, he argued that the current Medicare payment system for physician-administered drugs is akin to price caps, saying this new system would insert more competition into the program.
“Remember right now in Part B fee-for-service… we are handed a bill and we write a check,” Azar said. “That’s it. They make up any price they want and we pay 106 percent of that. That’s the way the system works and that is not tenable.”
Azar also said he did the calculations and it “was mathematically impossible” for the proposal “to put a dent in pharmaceutical innovation,” as the drug industry and some Republicans have feared.
“At most this proposal could pull around $700 million dollars out of [drug companies] R&D budgets per year, when they spend more than $70 billion a year,” he said. “That’s less than 1 percent of pharmaceutical R&D that could even potentially be impacted by this change.”
The health secretary also largely brushed aside concerns that drug companies wouldn’t play ball with this new approach, leaving patients without needed medicine.
“The pharmaceutical industry makes its profit here in the United States,” he said. “The notion that the pharmaceutical industry or any individual company is going to choose to refuse to sell a product at what will eventually be 126 percent above what they have agreed to sell the product to French, Germans, British, Japanese, I find that a little hard to believe.”
As Azar and Trump work to get Republicans on board, they’ll also face skeptical Democrats.
Drug pricing problems “are far broader” than the “limited subset” of physician-administered drugs Trump’s new plan addresses, said Rep. Peter Welch (D-Vt.), who co-chairs the House Democratic task force on drug prices. “He needs to do what he promised: [government] price negotiations across the board and safe importation.”
Physicians and hospitals aren’t making the sales campaign any easier.
Ted Okon, who heads the Community Oncology Alliance, a group of cancer providers and drug industry supporters, worried the Trump team was introducing “middlemen” into Medicare Part B that will lead to delays in treatment or denials in care.
“‘I don’t want this to be basically using cancer patients for an election year sound bite or talking point,” Okon said.
Rachel Roubein and Sarah Owermohle contributed to this report.