The Trump administration has scrapped a proposal that would have saved Medicare beneficiaries billions of dollars on prescription drugs. Trump has been promising to reduce drug prices since his early campaign days, but the most feasible plan to do so has just been taken off the table without much explanation.
The now-defunct proposal, part of the administration’s “blueprint” to reduce drug prices, would have forced the hand of insurance companies to pass savings along to consumers instead of pharmacy benefit managers (PBMs).
As it currently stands, PBMs act as middlemen between insurance companies and drugmakers. They negotiate with drugmakers and determine which drugs will be covered by what plans and to what degree, and they receive generous, undisclosed rebates (or kickbacks) in return. This arrangement incentivizes drugmakers and PBMs to keep drug prices high, which also keeps profits high.
This proposal would have forced PBMs to pass rebates larger than 30 percent on to consumers at the pharmacy counter. However, with the cancellation of this proposal, PBMs have continued to increase their profit margins and stocks. Cigna, CVS, and UnitedHealth Group have increased their shares between 5 and 9 percent.
Why was the proposal cancelled?
A senior administrator within the administration spoke with Reuters about cancelling the proposal on the condition that he remain anonymous.
“The decision was made that… it was not prudent to go forward with the rule right now, that it would be too disruptive, that the risk was probably too high, and that it might upset a legislative deal, which is our primary focus,” he said.
Judd Deere, White House spokesman, said in a statement, “Based on careful analysis and thorough consideration, the President has decided to withdraw the rebate rule.”
Other proposals to reduce drug prices
The Trump administration and Health and Human Services (HHS) Secretary, Alex Azar, have created another proposal to bring down drug prices. This one would allow cheaper drugs manufactured outside of the United States to be imported into the country. Drugmakers are also opposed to this measure.
A proposal to allow Medicare to negotiate drug prices directly with drugmakers is also on the table. However, proposals of this nature have been introduced to the administration only to be repeatedly shot down.