As a presidential candidate, Trump had harsh words for the pharmaceutical industry, accusing it of “getting away with murder.” Since becoming president, though, he has received a great deal of criticism for shying away from the major reforms he initially promised. However, with a speech delivered Friday, many are hoping he is finally taking steps in the right direction.
While not incredibly detailed, the Administration’s plan highlights “tougher negotiation, more competition, and much lower prices at the pharmacy counter.” Trump also intends to end the “Pharmacist Gag Rule,” which he claims “punishes” pharmacists for informing patients on how they can save money on medication.
The Administration wants to reduce “regulatory burdens” to speed up the FDA approval process and get generic and over the counter drugs to the market and consumer faster.
There is a concern that Trump’s approach, which is to make the pharmaceutical market more open and competitive in an effort to lower drug costs, will underwhelm consumers. This approach seems to be an attempt to avoid direct confrontation with the powerful industry, evident perhaps in the fact that the plan did not include Trump’s previously campaigned idea to give the federal Medicare program power to directly negotiate prices with drug manufacturers, a concept that the pharmaceutical industry strongly opposes.
In addition to backing away from reforms that directly target drug manufacturers, Trump has also staffed his administration with individuals that have ties to the industry, most notably, former Eli Lilly executive, Alex Azar and FDA Commissioner, Scott Gottlieb.
One thing Trump and Azar certainly get right in their plan is the assertion that drug prices are a complex, nuanced system with many fragments and many players.
“Everyone involved in the broken system—the drug makers, insurance companies, distributors, pharmacy benefit managers, and many others—contribute to the problem,” Trump states early on in his speech. Important to the plan, then, is simplifying and clearing up the system by eliminating the middlemen, who Trump says, “got very, very rich.”
Lack of government regulation is one of the biggest drivers of U.S. drug prices. It allows the system to remain fragmented and with multiple players. Without direct government price regulation, the check on prices comes primarily from buyers in bulk, which include insurance companies and pharmacy benefit managers, resulting in lower pharmaceutical discounts in the U.S. compared to those in other countries.
According to the Organization for Economic Cooperation and Development, the U.S. spent $1,162 per person on pharmaceuticals, more than any other nation. When you compare this to Canada’s $756 per person and the UK’s $479, both of which have government measures to control drug prices, it becomes startlingly clear how drastic a difference government regulation can make.
Lack of transparency is cited as another major factor in soaring prescription drug costs. Scott Gottlied says that this lack of transparency allows drug manufacturers to benefit from rising prices by creating perverse incentives.
A possible solution suggested by Trump officials is requiring Medicare pharmacy benefit managers to share rebate payments with patients, while another proposal would do away with rebates all together. However, benefit managers and insurers have pushed back on this, claiming that doing away with rebates would drive up drug costs because they use those rebates to lower health care premiums overall.
The Administration has also proposed requiring drug manufacturers to include drug prices in their ads. While this would certainly encourage drugmakers to drop prices due to fear of costumer backlash, there are issues to consider. First, drug prices are complicated, and change depending on coverage. Some are also concerned that posting a higher drug price than a consumer might actually have to pay would dissuade them from seeking out necessary or life-saving medication.
And finally, U.S. patent laws are argued to contribute significantly to higher drug prices as well because they last longer than patents in most other countries. U.S. drug manufactures often have dozens of years of competition-free marketing after a drug launches, a time they typically spend increasing the price.
Further, drug manufactures have gotten skilled at evading competition from lower-cost generic drugs by mildly tweaking drug formulations to extend their own patents, or in other cases, paying potential competitors to stay off the market. Trump sates that the Administration will no longer tolerate this type of game-playing, which has allowed for “unfair monopolies.”
The Trump Administration’s announcement is, for many, a welcome one. However, it remains very general, leaving consumers and manufacturers alike eagerly standing by, waiting to hear more about what to expect moving forward.
(Source: The Associated Press; NY Times)
