WASHINGTON — President Trump on Thursday blasted pharmaceutical companies for having “rigged the system” against American consumers by charging higher prices in the U.S. than they do abroad, announcing a new proposal he says will help even out those differences.
“We’re taking aim at the global freeloading that forces American consumers to subsidize lower prices in foreign countries through higher prices in our country,” Trump said. “It’s almost unimaginable that it hasn’t been taken care of long before this.”
He called the status quo “wrong” and “not fair,” and suggested the new policy would “allow Medicare to determine the price it pays for certain drugs based on the cheaper prices paid by other nations.”
His idea, articulated in some detail in an HHS proposal posted as he spoke, would tie the amount of money that the government pays for certain drugs to their cost in other countries. The proposal is essentially a pilot program within the Medicare Part B program, which covers drugs administered by doctors. It’s unclear exactly how this target reimbursement amount would be determined. The proposal lays out “potential calculation steps” and asks for feedback.
Trump’s speech came as his administration has made its work on drug pricing a priority — and as that work, too, has increasingly taken direct aim at pharmaceutical companies. Last week, top officials unveiled a new proposal that would require drug makers to include the prices of their products in TV commercials.
The timing, just two weeks before the midterm elections, also bolsters the administration’s argument that it is acting aggressively to curb soaring drug prices, even as Democrats around the country have made health care costs and perceived greed within the pharmaceutical industry central to their campaigns.
Right now, the government pays for drugs in Part B according to a formula based on each drug’s average sales price, plus a 6 percent markup for the provider. And the government is required to cover every FDA-approved drug.
Trump also described a proposal to nix the 6 percent markup in favor of a flat fee. The details aren’t clear, but health policy experts have widely promoted a similar idea as a way to encourage doctors to prescribe the treatment that is most medically appropriate as opposed to the treatment that will bring in the most cash. The HHS proposal lays out a framework that could increase the markup for some drugs and decrease it for others.
The ideas — which weren’t even officially proposed as rules at this time — faces an uphill battle in Washington. Spurred by widespread criticism from drug makers, hospitals, and doctors, Republicans and even some Democrats excoriated the Obama administration when it tried to reduce how much the government paid for these drugs in 2016. It’s unclear what will be different this time around.
Trump has previously pledged to make other countries pay more for drugs, saying in May that it was “unfair” and “ridiculous” that “their medicine is a tiny fraction of what the medicine costs in the USA,” implying that people in other countries should be paying more.
Trump reiterated this point in his speech Thursday, saying that Americans are paying for much of the world’s medical innovation.
“American middle class is effectively funding virtually all drug research and development for the entire planet, so we are paying for, we are subsidizing it, everybody else is benefitting,” Trump said. “And they are paying nothing for research and development.”
Today’s proposal would not directly force anyone else to pay more for research and development, or increase prices in other countries.
In fact, Health and Human Services Secretary Alex Azar himself warned at a Senate hearing in June that tying the U.S. price of a drug to the price overseas might actually cause companies not to sell a drug in other countries.
Azar said that he looked at the idea of giving the U.S. “favored nation” status, which Trump in his speech suggested would be a good idea. But, Azar, said, “I don’t think it would be effective” because it might cause drug companies to stop selling drugs in other countries for low prices so that they can keep selling them in the U.S. for high prices.
In a question-and-answer session with reporters later on Thursday, Azar acknowledged that he was initially concerned about the idea, but that he eventually changed his mind.
“I expressed concerns about how one might approach that,” Azar said. “Sen. [Tim] Kaine actually challenged me, ‘Well, you have those concerns, could you actually try something as a demonstration?’ And I actually took that to heart and said, ‘You know what, let me think about that.’ And we did.”