Trump's Plan On Prescription Drug Prices Looks Nothing Like What He Promised

Candidate Donald Trump promised Americans a war on the pharmaceutical industry. President Donald Trump isnt going to give them one.

On Friday afternoon, the Department of Health and Human Services released a policy blueprint for helping Americans pay for prescription drugs that, with every passing year, get harder and harder to afford.

Today, my administration is launching the most sweeping action in history to lower the price of prescription drugs for the American people, Trump said of the plan during a speech in the White House Rose Garden.

Whether and how much the approach will ultimately reduce drug prices is unclear, and will probably remain so for some time. But while some of the ideas Trump endorsed have bipartisan support and the potential to help people, few experts expect the administrations plan to have the kind of dramatic impact Trump once promised.

The health care industry certainly doesnt seem scared. Stocks climbed following the speech, while analysts dismissed it loudly, using phrases like non-event and waste of time.

A missive from the health care trading desk at Jeffries said simply, Jay-Zs Blueprint far more impactful than HHS version.

For those who think President Trump is taking on the drug companies, the industry and investors think otherwise --- shares are up. By a lot. pic.twitter.com/BXbssQm9JN

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For those who think President Trump is taking on the drug companies, the industry and investors think otherwise --- shares are up. By a lot. pic.twitter.com/BXbssQm9JN
Jared S. Hopkins (@JaredSHopkins) May 11, 2018

Trumps speech and a 39-page blueprint have been weeks in the making, although their roots lie in the 2016 presidential campaign, when Trump promoted himself as a different kind of Republican one who would stand up for average Americans and protect them from powerful corporate interests.

The drug industry was high on the list of predators. He railed against them regularly, even after taking office, famously saying drugmakers were getting away with murder by charging such high prices for life-saving medications.

More controversially, Trump also endorsed an idea Democrats had long championed and Republicans had long opposed: having the federal government negotiate prices directly with drugmakers, just like the governments of other developed countries do. Name-brand drugs in those countries are far less expensive than they are in the U.S.

A year and a half into his presidency, and following some well-publicized meetings with precisely the sort of pharmaceutical industry leaders he once denounced, Trump has backed away from that rhetoric. Hes no longer calling to have the federal government negotiate with drugmakers over prices and, more generally, he no longer identifies the drug industry as the primary culprit behind high prices.

Blaming Big Government More Than Big Pharma

Instead, Trump has adopted a more nuanced and in many ways more traditionally Republican argument for why prescriptions are so expensive. This view, which the White House Council of Economic Advisers laid out in a February report, blames high prices more on the excesses of big government than on the excesses of Big Pharma.

According to this argument, government insurance programs make drugs unnecessarily expensive. An example is the requirement that Medicare Part D plans the private insurance policies that provide seniors with prescription coverage include at least two drugs from each class. If the insurers who provide those plans could have just one drug from each class, administration officials say, insurers would have more negotiating leverage and could cover drugs more cheaply.

Another issue is the way Medicare pays for drugs that specialty physicians, such as oncologists, deliver on an outpatient basis. Trump administration officials say this payment scheme gives the doctors incentive to provide the most highly priced therapies when cheaper drugs might be just as good, if not better, on a clinical basis. Trump is expected to call for restructuring those payments, in order to reduce that incentive.

The administration has some other changes in mind, too. It wants to straighten out a complicated scheme of rebates and payments among insurance companies, drugmakers and a group of middlemen known as pharmacy benefit managers. PBMs have received a great deal of scrutiny in recent years, because their payment arrangements are secret.

In theory, they are supposed to help insurers bargain for lower prices, which can then benefit consumers. In practice, critics say, PBMs strike deals that drive up their own profits without providing much relief for the people who get drugs.

The precise details of how the administration plans to address these and other issues remain unclear, even in the blueprint. Absent more information, its impossible to know how aggressive the administration intends to be or what could be done through regulatory action, which the administration can handle on its own, versus legislation, which would require Congress to act.

But the break with campaign rhetoric is clear and, in this respect, Trumps approach to prescription drugs has a lot in common with the approach he has taken toward the insurance reforms of the Affordable Care Act.