WASHINGTON — Is there a Trump effect on drug prices?
President Trump has not yet made his much-ballyhooed speech on drug prices, and a rumored executive order never came to pass. And yet in Washington there are already suggestions among some administration officials that the political climate created by the president — to say nothing of his comments about drug makers “getting away with murder” — has helped keep prices in check.
“It looks like retail list price increases were flat last year. Is that because of President Trump’s tweets?” one Health and Human Services Department official asked at a briefing last month.
“There’s some reality to that. Manufacturers heard they were in the crosshairs, and a number of them came out and said they weren’t going to take their prices up above double digits,” a second HHS official responded.
Such an explanation would be a political boon for the Trump administration. But it is also, according to experts, likely untrue.
It’s true that spending on prescription drugs has slowed. Spending last year grew by just 0.6 percent after accounting for rebates and discounts, the slowest rate of growth since 2012. Net prices for brand drugs grew by just 1.9 percent, after taking into account rebates, discounts and other factors.
But experts argue that the slowdown has been driven by a series of factors unconnected to the White House. There have been relatively few (expensive) blockbuster drugs released over the past year. Fewer people are using some of the blockbuster drugs of years past. Pharmacy benefit managers continue to negotiate rebates to help bring down the prices people actually pay at the pharmacy counter. And generic prices are decreasing, too.
“Net prices are really slowing down. That’s news …. But to say that that those facts are due to anything that’s going on on Twitter — I mean, you might as well associate to what’s going on in Syria. It’s just like, it’s completely … ridiculous,” said James Robinson, a professor of health economics and management at UC Berkeley’s School of Public Health.
Experts cast doubts, too, on the idea that mere rhetoric — like the kind likely to fill Trump’s coming speech on drug pricing issues next week — could ever have a meaningful impact on the prices patients face at the pharmacy counter.
“Without any regulatory or legislative changes, I think we’re going to see much more of the same,” said Gerard Anderson, a professor of health policy and management at Johns Hopkins University. “Drug companies know that they have high prices, they know that the American public is concerned about them, but they also have stockholders and investment bankers who tell them, ‘You should maximize your profits.'”
The data that inspired the HHS officials came from the IQVIA Institute for Human Data Science. Trade associations for the industry and for pharmacy benefit managers, who have a role in negotiating those rebates in some settings, have been trumpeting the data in ads and statements as proof that prices aren’t out of control.
But the trends highlighted in that report have more to do with industry dynamics than with public pressure.
“I’m looking at the data and if we take the IQVIA projections, it looks like the trend continues much like it has been,” said Allan Coukell, the senior director for health programs at the Pew Charitable Trusts, pointing to the group’s projections for the next five years, which show 2 to 5 percent net price growth.
He said this year’s smaller growth rates were more likely an outlier at least partly attributable to lower spending on hepatitis C drugs — partly because net prices for those drugs fell, and partly because utilization of those drugs has also decreased.
Even if Trump can’t claim credit for such broad industry trends, several of the experts admitted public scrutiny and opinion likely had inspired, or at least encouraged, the relatively recent and relatively broad “pledges” to keep price increases in the single digits — an open promise from companies like AbbVie, Allergan, Merck, Johnson & Johnson, and Novo Nordisk.
Trump, however, may not have been the animating force.
“That 9.9 percent was not a response to President Trump — you don’t need President Trump. Everybody that doesn’t work for a drug company thinks that drug prices are too high. Drug companies know that, they know that they have a problem. So they try to manage that,” Robinson said.
Allergan CEO Brent Saunders also dismissed presidential pressure as a possible impetus for slowing price hikes.
“I didn’t pass this social contract, nor would I advocate for another company to do their own thing, because they’re worried about a [Trump] tweet or one bad action,” he told Fortune just after Trump’s inauguration.
There are hints, too, that those corporate pledges may not last if companies deem the scrutiny is letting up.
“AbbVie believes that the intensity of the drug pricing debates and political risks is waning, and does not see any indication that the commercial pricing environment has become more challenging,” Leerink analyst Geoff Porges wrote in a note to investors. “Accordingly, management suggested that it has the flexibility to revert to more than one price increase per year and to double-digit increases in 2018 and beyond.”
AbbVie later called those comments “incorrectly characterized,” and insisted it is keeping its pledge through 2018. It also said it will “continue to act responsibly with respect to drug pricing.”
Pledge or no pledge, a 9 percent price hike is still far more than the normal increase for inflation, or for other industries, as Anderson and Coukell pointed out.
“I totally applaud it, but 9.9 percent is four times the inflation rate! If anybody else said, I’m going to keep my price increases to below 10 percent and had no increased costs, I think we’d say, ‘That’s ridiculous,'” Anderson said.
In the end, the bully pulpit is often a limited tool — one better suited to capturing the public’s sentiment at a given time than to achieving meaningful, lasting change, said George Edwards, a professor of political science at Texas A&M.
Edwards, who authored a book on the limits of the presidential bully pulpit, could point to only one example where a president’s speech had convinced a set of companies to lower their prices: a 1962 speech from John F. Kennedy imploring steel manufacturers to reverse a planned 3.5 percent price increase that Kennedy believed contradicted an earlier agreement.
Kennedy’s speech, decrying the executives “whose pursuit of private power and profit exceeds their sense of public responsibility,” along with key actions against the companies from other agencies, including the Department of Defense and the attorney general, led the companies to abandon the increase.
Edwards said it was likely the coupling of the speech with other more meaningful public policy changes — like switching the Department of Defense steel contracts to other suppliers — that forced the manufacturers to reverse course.
It’s possible, of course, that Trump’s speech next week could be a similar moment for the drug industry, particularly if it, too, is coupled with other policy changes, Edwards said. But he also noted the government faces limitations with respect to negotiating drug prices.
If Trump really wants credit for lowering prices, he may have to put a sustained an aggressive spotlight on one company.
“If you’re going to embarrass somebody and pressure somebody, you’re going to have to call them out by name and you’ve got to sustain that in some fashion,” Edwards said. “I don’t think he’s going to do that — he can’t focus.”