Will Trump’s Latest Plan to Lower Drug Prices Work?

trump next to down chart; lower drug prices

The Trump administration is taking another pass at lowering drug prices. On October 25th, the administration announced plans to reduce the prices Medicare pays for physician-administered drugs covered under Medicare Part B. According to a recent report from the Department of Health and Human Services (HHS), Medicare pays 80 percent more than any other industrialized nation for physician-administered medicine. However, the Trump administration is trying to change that.

The proposal

Currently, drugs covered by Medicare Part B that are administered in an outpatient setting are set at extravagant prices for several reasons. First, the drug manufacturer can set any price for these drugs. Second, because these drugs typically don’t have generic alternatives, the prices stay high due to lack of competition. Third, these drugs are covered by Part B (not Part D prescription drug coverage) meaning beneficiaries will have to pay 20 percent of the cost of the drug after they’ve met their deductible.

In an attempt to rein in drug prices, specifically drugs administered by physicians, the administration wants to “fix” prices according to an international index as opposed to the average U.S. price. The proposal would follow models set by countries like Austria, Canada, and France, who pay far less for physician-administered drugs.

Since early in his campaign days, Trump promised to allow Medicare the authority to negotiate drug prices. However, this is another move that undercuts that promise. Once drug prices are set according to an international index, they become non-negotiable.

Incentive to keep prices high

According to the Medicare Modernization Act of 2003, doctors get a 6 percent commission from physician-administered drugs. This incentivizes doctors to steer patients toward more expensive drugs. Under this proposal, doctors would be paid comparable amounts for expensive drugs and cheaper drugs.

Benefits of the proposal

The administration estimates this proposal would save Medicare $17 billion over five years. Medicare beneficiaries would also see a significant drop in prices as well since they will continue to pick up 20 percent of these Part B drugs.

Pharmaceutical lobby resistance

Pharmaceutical Research and Manufacturers of America (PhRMA) have met this with fierce resistance, saying this “jeopardizes access to medicine for seniors and patients with disabilities living with devastating conditions such as cancer, rheumatoid arthritis and other autoimmune diseases.”

Biotechnology Industry Organization (BIO) said it would continue “a troubling trend towards undermining the Medicare Part B drug program.

No matter what happens, most people are in agreement that drug prices are too high and need to come down.

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