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Trump administration gives insurers power to lower Medicare drug prices

Trump administration gives insurers power to lower Medicare drug prices
© Victoria Sarno Jordan

Insurers participating in Medicare Advantage will be able to negotiate directly with drugmakers in an effort to lower the cost of prescription medications under a new policy announced by the Trump administration.

The policy aims to allow Medicare Advantage plans access to the same tools as private insurers to try to lower the costs of treatments delivered in a physician's office or hospital under Medicare Part B.

The change will impact more than 20 million people enrolled in Medicare Advantage plans. In 2017, Medicare Advantage plans spent $11.9 billion on Medicare Part B drugs, according to the Centers for Medicare and Medicaid Services (CMS).

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Administration officials said the new policy will help increase competition and help lower the price of prescription drugs. It’s a key part of President TrumpDonald John TrumpTrump to fundraise for 3 Republicans running for open seats: report Trump to nominate former Monsanto exec to top Interior position White House aides hadn’t heard of Trump's new tax cut: report MORE’s blueprint to lower drug costs, which he released in May.

“By allowing Medicare Advantage plans to negotiate for physician-administered drugs like private-sector insurers already do, we can drive down prices for some of the most expensive drugs seniors use,” Health and Human Services Secretary Alex Azar said in a Tuesday statement.

Government programs often pay higher prices than necessary for drugs because they lack the tools needed to negotiate discounts, HHS said in a fact sheet. For many physician-administered drugs covered by Medicare Part B, private insurance plans negotiate discounts of 15 to 20 percent or more, while Medicare essentially pays full price.

Under the new guidance, health plans will be able to require patients try cheaper drugs first, and will cover more expensive ones only if necessary — a process called step therapy.

According to CMS Administrator Seema Verma, this can create leverage for insurers to push for higher rebates from manufacturers in exchange for not steering patients to cheaper treatments from rival companies.  

Plans will be allowed only to apply step therapy to new prescriptions, not to people who already use the drug. Patients will also be able to ask their plan for an exception if they feel they need access to a specific drug.    

Plans will be required to pass on to patients more than half of the savings generated from the negotiations. Patients can receive benefits in the form of gift cards and other rewards programs, Verma said.