The Trump plan to reduce drug prices — are American patients first?
Cancer drug prices continue to increase by 10 to 12 percent every year. Spending on cancer drugs doubled in the past five years, and will double again by 2022. All cancer drugs approved by the Food and Drug Administration in 2017 were priced above $160,000 per year.
Patients are additionally burdened with crushing out-of-pocket prescription expenses. Effective solutions to lower cancer drug prices were outlined in many commentaries, and became part of the 2016 presidential campaign agendas.
The most important elements are ones that do not rely on market forces, which have not worked historically in health care. As in other countries, bending the astounding trajectory of unaffordable high drug prices should rely on three key measures:
- Allow Medicare to negotiate drug prices
- Mandate that any annual drug price increase by more than 5 to 10 percent be justified
- Permit importation of drugs for personal use; and create a post-FDA process to recommend a fair price for newly approved drugs.
Presidential candidate Trump incorporated these elements into his campaign agenda. Unfortunately, pledges to voters are harder to implement once the president faces the powerful pharmaceutical industry, which spends the most on lobbying of any U.S. industry.
Unlike President Obama, who did not address drug prices, President Trump did to his credit, releasing in May 2018 through the Department of Health and Human Services a 40-page document titled “American Patients First-The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Cost.”
The plan proposes 50 broad points, but is short on practical, effective steps to lower prices. Some of the proposals are political “dog whistles” signaling reductions of benefits to the poor, or reduced spending on Obamacare (stop Medicaid and Affordable Care Act programs that purportedly increase prices in the private market).
The six key elements of the plan are: lower drug prices for seniors; eliminate foreign governments’ “free-riding” and pressure them to pay more for American drugs; require drug advertisements to include the cost; prohibit “gag clauses” that prevent pharmacists from telling patients that paying cash for a drug may be cheaper than buying it through insurance; prevent “pay-for-delay” and other strategies that keep generics off the market; review the existing “rebate system” and assess if it constitutes a form of illegal kickback.
The myth of the foreign “free-riders” was invented by the drug industry, and debunked in several analyses. The reality is that research and development costs of drug companies do not justify the higher prices in the U.S.; European countries absorb their share of research costs; and Americans are paying twice — once to fund research that benefits the drug industry, and a second time for unjustified prices 3-10 times higher than other countries. We blame others for self-inflicted wounds caused by policies that prevent the federal government from negotiating effectively.
In the “rebate system,” simply stated, a drug is priced through a complex and intricate procedure determined by four key players (drug companies, pharmacy benefit managers (PBMs), insurance companies, and hospital/pharmacy outlets).
Rebates received by PBMs from insurers as well as drug companies could be a form of double-dipping, and require scrutiny. Also the rebates do not benefit patients.
Back to the essential question: Will the “American Patients First” plan succeed? This is unlikely. The plan’s intent is “to deliver on campaign promises,” which have changed since the elections, and after President Trump met with drug industry representatives.
For any plan to succeed, it must address controlling drug prices through reducing the launch price of new drugs; prohibiting unjustified annual increases of prices, and protecting patients from excessive out-of-pocket expenses. The “American Patients First” road map ignores all three. It does not allow Medicare to negotiate drug prices, does not address the annual increases in drug prices, and does not permit drug importation for personal use.
In the propaganda war over high drug prices among competing interest groups, Americans have given up trying to understand the issues, but the drug companies understand them well. This is reflected by one concrete reality: Stocks of the drug companies rose after the plan was announced.
This is the clearest indication that “American patients first” is a green light for “drug companies first” to continue their unfettered pricing schemes. The Trump administration should reconsider thoughtfully the proposals and modify them.
Hagop Kantarjian, M.D., is a leukemia specialist and a fellow in health policy at Rice University’s Baker Institute for Public Policy. Vivian Ho, Ph.D. is the James A. Baker III Institute chair in health economics and director at the Center for Health and Biosciences.