U.S. Markets closed

Trump Just Pulled His Punch on Drug Prices

Max Nisen
Trump Just Pulled His Punch on Drug Prices

(Bloomberg Opinion) -- The Trump administration makes a lot of noise about drug pricing. Its actions so far aren’t as resounding.

This dynamic was on display Thursday, when the administration moved forward with a regulation that will help privately run Medicare Advantage plans that cover about 20 million seniors negotiate prices on some medicines. But at the same time, it decided not to go ahead with a planned change that could have cut costs in a larger program. The net result is that the overall impact is dulled. 

Thursday’s rule focuses on Medicare Part B, which pays for drugs administered in the doctor’s office or hospitals. If it is implemented, Medicare Advantage plans would be able to require patients to try a cheaper drug first and prove that they need a more expensive option, giving them a previously unavailable tool to push for lower prices. 

The new rule was also set to give health plans more negotiating leverage in Medicare Part D, which covers most drugs and accounts for three times as much drug spending. Right now, plans are hampered by a requirement that they cover six so-called protected classes of medicines in Part D in their entirety. The rule would have allowed exceptions for drugs in those classes that spike in price or are only tweaks to existing medicines. Instead, under pressure from patient groups worried about drug access and pharmaceutical companies looking to maintain pricing power, the administration caved and left that part out.

The Part D tweak was projected to deliver larger savings for the government and beneficiaries than the chunk of the rule that stuck. And Trump’s capitulation now raises questions about whether pharma’s least favorite pricing effort –  the White House’s plan to index what Medicare pays for certain drugs to the much lower prices charged in other countries – will ever actually be implemented.(1)

The administration’s discarded plan focused narrowly on drugmakers that hike prices and keep them high with modest changes to their medicines. The fact that even that drew aggressive opposition is a reminder of how hard change will be. Actually cutting costs will require leaning into that difficulty instead of ducking it.

(1) The precedent isn’t exactly promising. The Obama administration attempted to make changes to protected classes and lower payment rates for certain drugs; both efforts failed.

To contact the author of this story: Max Nisen at mnisen@bloomberg.net

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

For more articles like this, please visit us at bloomberg.com/opinion

©2019 Bloomberg L.P.