President Trump’s timely speech Thursday about high drug prices addressed key problems that make drugs unaffordable for so many Americans, and for taxpayers in general. With less than two weeks until the midterm elections, and drug prices a key issue for voters, the speech sent a message that the administration recognizes voters’ concerns, and is doing something about them.
Although the effort put into addressing drug pricing by the Trump administration is impressive, the solutions proposed Thursday face insurmountable challenges. I worry that the plan will meet the same (ruinous) fate as prior proposals to change how we pay for drugs in Medicare Part B.
In both oral and written arguments Thursday, the administration articulated three important problems in drug pricing:
- Physicians are paid for prescribing drugs in ways that lead to higher prices and the use of higher-cost drugs.
- There is no mechanism in place to lower these costs and prices in Medicare Part B.
- Drug prices are substantially higher in the U.S. than in many other countries, leaving the U.S. to foot the bill for new drug development and company profit.
While the problems were clearly articulated, the solutions weren’t so clear. Thursday’s announcement gave notice of a rule the administration may propose in the spring of 2019 to address prices starting slowly in 2020. There was no real action taken on Thursday, but rather a set of ideas accompanied by many questions for how they might work.
The proposal includes an experiment to phase down the Medicare Part B payment for drugs to more closely match prices paid in other countries and allow private-sector vendors to negotiate these prices and take purchasing out of the hands of physicians. The proposal would also reduce the add-on payment physicians receive for administering drugs, lessening their incentive to prescribe higher-priced drugs.
The insurmountable challenges I see in these proposals are threefold: political, logistical, and structural.
There are two political challenges. First, by taking aim at revenue for physicians and pharmaceutical manufacturers, the administration will cause doctors and industry to join at the hip to oppose whatever might be proposed. This self-inflicted wound rekindles the same alliance that brought down the Part B demonstration project that the Obama administration proposed to test reductions in physician payments for Medicare Part B drugs. When you create a solution to address drug prices that aligns the financial interests of both doctors and drug companies, you are fueling massive resistance.
The second political mistake is tying action on U.S. drug prices to the prices paid in foreign countries that use price controls. The administration is essentially saying it wants U.S. prices to reach the same prices that other countries achieve through price controls — while at the same time criticizing price controls because they reduce access and innovation in new drug development.
Justifying U.S. action on Medicare Part B prices — a legitimate problem in U.S. policy — by matching them to prices in European countries is a softball to the proposal’s opponents, inviting them to argue that government price controls are anathema to U.S. policy. No sooner was the policy announced than the biopharmaceutical industry made that exact point.
Logistical challenges also threaten the success of the administration’s proposals. These are the same challenges faced by the “blueprint” for lower drug prices when it was announced earlier this year. Namely, there is no concrete plan, just a set of ideas with innumerable questions and uncertainties. Questions about the proposals are good ones, but they are challenging and show just how many hurdles must be crossed for the plans to succeed. How do you accurately measure prices internationally? What countries do you include? How does this proposal impact 340B pricing? How do you actually get prices low, and what happens if companies balk? These are tough questions and major logistical challenges, and their presence opens the door for each stakeholder to further complicate the effort.
Finally, there are major structural challenges for these ideas. One is that targeting Medicare Part B won’t directly lower drug costs in tangible ways for most Medicare beneficiaries. More than 80 percent of Medicare beneficiaries have additional coverage that helps with out-of-pocket costs, either through Medicaid, employers, or private insurance. So the benefit of lower drug prices will, for most people, primarily diffuse down to them through the thickets of their insurance carriers or employers. And there is no guarantee these savings will be passed on to beneficiaries. Yes, premiums might not go up as quickly if companies face lower prices, but that is theoretical and would have minimal visible impact on patients. It is true that some Medicare beneficiaries who actually face the 20 percent cost sharing for drugs would experience lower drug prices, but they are the vast minority of patients in Medicare.
Another huge structural challenge is the time frame for enactment. The comment period would start in the spring and take effect in 2020, and who knows what Washington will look like at that time. This plan is not structured to make any dent in affordability for patients any time soon.
I support efforts to reform Medicare Part B prices, and also support experimentation around policy. The administration deserves credit for proposing these ideas. But they are just that — ideas. They face major political, logistical, and structural barriers before they turn into real solutions for patients.
Walid F. Gellad, M.D., is an associate professor of medicine and director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh.