Nov 14, 2019

A political race to the bottom on drug prices

Caitlin Owens, author of Vitals

Illustration: Sarah Grillo/Axios

President Trump wants the U.S. to pay less than other countries for some prescription drugs covered by Medicare — a benchmark even lower than what congressional Democrats want.

Between the lines: The administration has moved the goalposts on its one major drug pricing policy left on the table, which could take a hatchet to the U.S. pharmaceutical system's business — if it's ever implemented.

Driving the news: Health and Human Services secretary Alex Azar said at an Axios event yesterday morning that Trump started talking about "most favored nation status" over the summer because there had been a shift in what policy he wanted.

  • The administration had previously pitched the idea of tying what Medicare pays for some Part B drugs to the average of what some other countries pay. The target price would have been 126% of that average price, or a 30% reduction from what the U.S. currently pays.
  • But Azar said that wasn't good enough for Trump. "[Trump's] view — which he’s articulated publicly — is that America ought to be getting the best deal among developed countries," Azar said.

The irony: Just last week, the White House publicly rejected House Speaker Nancy Pelosi's drug pricing bill, with head of the Domestic Policy Council Joe Grogan calling it "unworkable."

  • The Pelosi bill would allow Medicare to negotiate the price of some drugs, and allow private payers to also obtain that price. But the ceiling for those prices would be 120% of what other countries pay.

What they're saying: The administration's latest idea “could blow the Pelosi number out of the water for these part B” drugs, said the American Enterprise Institute's Ben Ippolito, who has warned about the implications of the Pelosi bill on the drug market.

  • "This would ratchet up all of those concerns to 11," he said. "It’s a more aggressive [policy] that really says, 'Jesus take the wheel.'"
  • "No matter how they are structured, international reference pricing schemes are the wrong approach for America," said Holly Campbell, a spokeswoman for PhRMA.

The policy could also have international implications.

  • Some countries get deals on just one drug. If a "most favored nation" policy was implemented in the U.S., that could lead to fewer special deals for individual countries, said Gerard Anderson, a professor at Johns Hopkins.

The bottom line: "The lower target price is obviously a change for the worse from industry’s perspective," Cowen Washington Research Group wrote in a policy note.

  • "However, in the absence of other changes to enforce the “target price,” it remains highly uncertain whether the proposal could ever actually be implemented in the US."

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