On this week’s episode of the Patient’s Rising podcast, Terry and Bob discuss President Trump’s executive orders on prescription drug prices. Recently, Trump signed a series of Executive Orders that direct U.S. Health and Human Services to take steps to try to lower drug prices
The orders include:
- Ending billions of dollars of kickbacks to pharmacy benefit managers (PBMs), which are middlemen between drug manufacturers and insurers. PBMs demand massive rebates from manufacturers in return for placing their drugs on insurance formularies, the lucrative list of drugs that insurers promise to cover. The Trump order calls for PBMs to direct these rebates to patients in the form of lower cost medications. American seniors paid more than $30 billion in kickbacks in 2018 — about 30 percent of list prices for medications.
- Requiring hospitals and health centers that are part of the 340B program, which ostensibly requires medications to be provided at less expensive prices, to pass along their savings directly to medically underserved patients. This rule will end the arbitrage opportunity that 340B hospitals have long been exploiting, where they pay pennies on the dollar for medications but then turn around and sell them at far higher rates to vulnerable patients. This rule will lower prices for insulin and epinephrine for the 28 million patients who visit 340B health centers each year, nearly one quarter of whom are uninsured.
- Finalizing a rule allowing states to develop importation plans for certain prescription drugs. Yet as Terry has written, drug importation is more style than substance. As a matter of broad public policy, wholesale importation is not a solution to lowering drug costs. Canada’s population of 37 million isn’t much bigger than the combined size of Florida and Illinois, the two largest states currently pursuing importation legislation. The Canadian drug supply is nowhere near the scale that would be necessary to provide drugs to the massive American market. According to a study published last year in Health Economics, if just 20 percent of U.S. prescriptions were filled using Canadian prescription drug sources, the Canadian drug supply would run out in 183 days. There are also legitimate safety concerns associated with importation.
- Creating an international price index so that Medicare does not pay more for drugs than any economically comparable OECD country. Yet as Terry has written, international price indexes threaten innovation on which patients in the rare disease community depend. While the president claims that his pricing plan will fight “global freeloaders,” it does this by copying the freeloaders’ strategy of setting prices. The administration seems to want to have its cheaper drugs and eat what’s needed to create them too. According to a paper by the National Bureau of Economic Research, cutting prices by 40 to 50 percent in the United States — as Trump’s proposal implies — will lead to between 30 and 60 percent fewer research and development projects being undertaken in the early stage of developing a new drug. The authors conclude: “A short-run benefit for consumers could lead to a long-run negative impact on social welfare.”
Terry interviews Katy Talento, an epidemiologist, licensed benefits consultant, and former lead health advisor to President Trump on the Domestic Policy Council, who makes the case for each of these orders. Terry highlights why some of these initiatives are good for patients and some are not.
Field correspond Kate Pecora interviews Jack about his struggles with his new copay accumulator program. He explains how he’s been with his present employer for 11 years but wasn’t told that it was switching to a copay accumulator program this year, sticking him with a $4,500 annual tab. As a result of this new expense, he must choose between his son’s school and his medications. He points out that his medications are a lot less expensive for his insurer to cover than losing his foot if he’s forced to stop taking them.