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Trump Administration’s Prescription Drug “Blueprint” to Tackle High U.S. Prices Will Need More Action Steps

Prescription drug prices are soaring

Last week, President Trump released his anticipated “blueprint” to tackle high prescription drug prices. Titled “American Patients First: A Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” the document identifies four challenges: 1) high list prices for prescription drugs, 2) lack of negotiation tools in federal health programs, 3) high and rising out-of-pocket costs for consumers, and 4) lower drug prices in other countries. While more needs to be known about whether prices in foreign countries affect U.S. prices, the plan includes making America’s drug prices, out-of-pocket costs, and negotiation tools top priorities. These problems are real and well-documented, but the main culprits driving drug pricing problems are not addressed by the administration’s blueprint.

The blueprint offers four broad strategies — increased competition, better negotiation, incentives for lower list prices, and lower out-of-pocket costs — and 13 “immediate” actions that will be carried out by federal agencies primarily within the U.S. Department of Health and Human Services (see the table below). These include making drug prices and price increases more transparent to consumers by releasing a public dashboard of Medicare prices and banning “gag” clauses on pharmacists that prevent them from telling patients about lower-cost alternatives not covered by their health plans; approving a greater number of similar but cheaper biologic products to treat cancer and other diseases; and giving Medicare Part D plans leverage to negotiate prices with manufacturers, for example, by giving them latitude to remove drugs from their formularies.

Some of the blueprint actions can be carried out immediately: for instance, Medicare published an updated drug pricing dashboard on May 15, and today the Food and Drug Administration published a list of manufacturers that do not share samples of their products with generic drugmakers to block them from making cheaper versions. But most of the actions require agencies to issue and finalize regulations and will take longer to implement. Still others — like stopping Medicaid from raising prices in the private market — need additional work and detail before they can begin to be implemented. The bulk of the blueprint consists of a long list of “further opportunities” to contemplate and an even longer list of questions on which the Trump administration is seeking public comment. Public comments are due in 60 days but no specified timetable was given for further action.

Despite its length, the blueprint does not address the main culprits driving U.S. drug prices. To start with, drug manufacturers too often game the system by filing frivolous patents to create “thickets” around their products or by paying generic companies not to manufacturer cheaper versions. By giving manufacturers more time to charge U.S. consumers whatever they like, these maneuvers keep drug prices high — but the maneuvers can be stopped.

In addition, the blueprint does not identify some of the most effective tools for improved competition and negotiation. The blueprint emphasizes transparency around anticompetitive practices by the drug industry and drug prices to drive competition. The theory is that informed patients can be price arbiters in their drug treatment decisions. But a drug’s clinical value to patients, and more importantly their physicians, should be the aim of transparency, along with price. Value assessments that evaluate a drug’s clinical effectiveness also can be required in federal programs like Medicare and Medicaid to bolster price negotiations with manufacturers. Today, these programs mainly use rebates based on sales volume in these negotiations. Value assessments will be especially useful in allowing formulary substitution of drugs in certain protected classes and sole-source generics, which has been identified as a goal in the blueprint. Value assessments also could be required as part of allowing states the flexibility to exclude coverage of low-value drugs from Medicaid formularies. Other countries such as Germany systematically use clinical value assessments in drug price negotiations with manufacturers and could be examined for lessons for the U.S.

Many have pointed to the president’s campaign promises, which called for allowing Medicare to negotiate drug prices and the importation of drugs from other countries. These ideas are notably missing from the blueprint. Democrats in particular are calling on President Trump to reconsider these steps as part of a broader bipartisan plan. Despite these limitations, the blueprint’s plan appears to be open-ended. HHS Secretary Alex Azar in several speeches has emphasized that the plan is not a “one-and-done” exercise. While this may mean more time before drug prices are lowered and consumers can save money at the pharmacy, it may also mean there’s room for the administration to examine and include more actions that will make its strategies effective and address more of the real culprits of high U.S. drug prices.

Last week, President Trump released his anticipated “blueprint” to tackle high prescription drug prices. Titled “American Patients First: A Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” the document identifies four challenges: 1) high list prices for prescription drugs, 2) lack of negotiation tools in federal health programs, 3) high and rising out-of-pocket costs for consumers, and 4) lower drug prices in other countries. While more needs to be known about whether prices in foreign countries affect U.S. prices, the plan includes making America’s drug prices, out-of-pocket costs, and negotiation tools top priorities. These problems are real and well-documented, but the main culprits driving drug pricing problems are not addressed by the administration’s blueprint.

The blueprint offers four broad strategies — increased competition, better negotiation, incentives for lower list prices, and lower out-of-pocket costs — and 13 “immediate” actions that will be carried out by federal agencies primarily within the U.S. Department of Health and Human Services (see the table below). These include making drug prices and price increases more transparent to consumers by releasing a public dashboard of Medicare prices and banning “gag” clauses on pharmacists that prevent them from telling patients about lower-cost alternatives not covered by their health plans; approving a greater number of similar but cheaper biologic products to treat cancer and other diseases; and giving Medicare Part D plans leverage to negotiate prices with manufacturers, for example, by giving them latitude to remove drugs from their formularies.

Some of the blueprint actions can be carried out immediately: for instance, Medicare published an updated drug pricing dashboard on May 15, and today the Food and Drug Administration published a list of manufacturers that do not share samples of their products with generic drugmakers to block them from making cheaper versions. But most of the actions require agencies to issue and finalize regulations and will take longer to implement. Still others — like stopping Medicaid from raising prices in the private market — need additional work and detail before they can begin to be implemented. The bulk of the blueprint consists of a long list of “further opportunities” to contemplate and an even longer list of questions on which the Trump administration is seeking public comment. Public comments are due in 60 days but no specified timetable was given for further action.

Despite its length, the blueprint does not address the main culprits driving U.S. drug prices. To start with, drug manufacturers too often game the system by filing frivolous patents to create “thickets” around their products or by paying generic companies not to manufacturer cheaper versions. By giving manufacturers more time to charge U.S. consumers whatever they like, these maneuvers keep drug prices high — but the maneuvers can be stopped.

In addition, the blueprint does not identify some of the most effective tools for improved competition and negotiation. The blueprint emphasizes transparency around anticompetitive practices by the drug industry and drug prices to drive competition. The theory is that informed patients can be price arbiters in their drug treatment decisions. But a drug’s clinical value to patients, and more importantly their physicians, should be the aim of transparency, along with price. Value assessments that evaluate a drug’s clinical effectiveness also can be required in federal programs like Medicare and Medicaid to bolster price negotiations with manufacturers. Today, these programs mainly use rebates based on sales volume in these negotiations. Value assessments will be especially useful in allowing formulary substitution of drugs in certain protected classes and sole-source generics, which has been identified as a goal in the blueprint. Value assessments also could be required as part of allowing states the flexibility to exclude coverage of low-value drugs from Medicaid formularies. Other countries such as Germany systematically use clinical value assessments in drug price negotiations with manufacturers and could be examined for lessons for the U.S.

Many have pointed to the president’s campaign promises, which called for allowing Medicare to negotiate drug prices and the importation of drugs from other countries. These ideas are notably missing from the blueprint. Democrats in particular are calling on President Trump to reconsider these steps as part of a broader bipartisan plan. Despite these limitations, the blueprint’s plan appears to be open-ended. HHS Secretary Alex Azar in several speeches has emphasized that the plan is not a “one-and-done” exercise. While this may mean more time before drug prices are lowered and consumers can save money at the pharmacy, it may also mean there’s room for the administration to examine and include more actions that will make its strategies effective and address more of the real culprits of high U.S. drug prices.

Publication Details

Publication Date: May 17, 2018
Contact: Shawn Bishop, Vice President, Controlling Health Care Costs and Advancing Medicare, Programs, The Commonwealth Fund
Email: smb@cmwf.org
Citation: Shawn M. Bishop, Christina Ramsay, and Lovisa Gustafsson, “Trump Administration’s Prescription Drug “Blueprint” to Tackle High U.S. Prices Will Need More Action Steps,” To the Point (blog), Commonwealth Fund, May 17, 2018.