Trump Opts for a Baby Step in the Drug Cost War – Not the Expected Leap Forward

Last week President Trump released his long-awaited “American Patients First” blueprint on attacking out-of-control pharmacy costs. Unfortunately, it’s more of a whimper than a roar. If the regulations are effectively written to support my understanding of the President’s intent, the incremental steps forward were not horrible, they are just not bold enough.

Drug manufacturers will have to disclose the cost of drugs they advertise. The shock value of this will be eye-opening and may impede manufacturers who have been gouging consumers with their outlandish pricing strategies.

And Medicare will be allowed to use some of the cost control measures that employer-based plans implemented long ago. Medicare would now be able to eliminate the onerous two-drugs-for-each-condition minimum and the six sacrosanct therapeutic class categories, such as cancer and HIV/AIDS, where every available drug had to be covered. With these policies eased, at least the government will be able to put up their dukes to fight the manufacturers’ ridiculous cost demands. Medicare will also be allowed to develop policies to encourage dispensing drugs in the most cost-efficient setting (e.g. a doctor’s office instead of hospitals) 

Multi-source drugs will be available sooner as manufacturers will be limited in their ability to use federal safety program rules to extend drug patent lives.

But, surprising to me, is that employer plans would not get much relief at all from the President’s plans. Although there was smoke blown at drug rebate practices, it seems that the President took it easy on rebates, which in my view are a legal kickback scheme that creates unfair incentives and contributes to an opaque pricing system. And trying to pressure other countries to not negotiate as hard on drug costs is almost laughable. Clearly the stock market agrees that the status quo has been maintained. Although stock prices for two large pharmacy benefit managers, Express Scripts and CVS Health, took an initial dive following the President’s speech, the prices are almost back to pre-speech levels.

If it were me, I would end rebates and regulate prices of new specialty drugs. These drugs are priceless to patients seeking a cure and someone needs to advocate for payors to make costs rational. These new drugs are like oxygen to a suffering patient. I had high hopes – but the outcome was just a baby step.

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