Under the new proposal unveiled at an event at the Department of Health and Human Services on Thursday, President Donald Trump and health secretary Alex Azar said that the administration would create a reference price for high-cost medicines paid for by Medicare, based on comparable prices from other countries.
Medicare Part B, which covers drugs administered in a doctor's office, now pays 106 percent of the "average sales price" for drugs, based on data submitted by drugmakers.
"We are taking aim at the global freeloading that forces American consumers to subsidize lower prices in foreign countries through higher prices in our country", Trump said in a speech Thursday at the Department of Health and Human Services.
In a major policy speech on drug process, Trump said the American middle class is effectively funding virtually all drug research and development for the entire planet.
Trump said that with this new policy, the U.S. will finally begin to confront one of the most unfair practices that drives up the cost of medicine in the United States.
"Same company. Same box".
However, he says under his administration's new plan Medicare will be allowed to negotiate directly with drug companies and Americans will be able to pay the lower price other countries are paying. But the proposal only applies to drugs administered in doctors' offices and outpatient hospital settings- "medicines like cancer treatments and injectable treatments for rheumatoid arthritis or eye conditions", Politico explains.
The speech was a a continuation of an effort set in motion in May, when the Trump administration laid out a 44-page drug-pricing blueprint, calling out middlemen in the pharmaceutical industry and "freeloading" by other countries that pay less than the USA for prescription drugs.
"All of this means that the Medicare program and its beneficiaries spent an additional $8.1 billion-47% more-on these drugs than it would have if payments were scaled by the calculated worldwide price ratios", HHS Secretary Alex Azar said in a post on Twitter.
In another twist, the plan is structured as an experiment through a Medicare innovation center empowered to seek savings by the Affordable Care Act.
The announcement, which Trump teased at a Wisconsin rally late Wednesday - "very soon, drug prices will go plunging downward" - came as the President is working to mobilize his loyal Republican base ahead of the midterms by revisiting his 2016 promises to un-rig the U.S. economy. But his populist proposal didn't appear likely to budge the national debate around health care, just days ahead of the midterm elections.
In tweets Thursday morning, HHS Secretary Alex Azar referred to Trump's criticisms of other governments that pay significantly less for drugs than does the USA government. "These proposals are to the detriment of American patients".
President Trump said his administration is taking immediate action to stop the "global freeloading" by foreign nations when it comes to the price that American patients are paying for prescription drugs.
Drug pricing expert Peter Bach of Memorial Sloan Kettering's Center for Health Policy and Outcomes called the plan "a pretty substantive proposal" but one that faces "serious political challenges".
"Americans pay more so other countries can pay less". But that's "quite literally the opposite of what is being proposed". "Some of the ideas like introducing indexing prices to other countries would be viewed by the drug industry as outright antithetical to their interests".
Democratic leaders on Capitol Hill were dismissive.
"We will no longer accept the inflated prices being charged to our seniors", Trump said in the announcement.
The main health insurance industry trade group, at odds with drugmakers over prices, applauded the administration's action.
The administration has moved twice this month to lower drug prices in other ways.
"The administration is imposing foreign price controls from countries with socialized health care systems that deny their citizens access and discourage innovation", PhRMA Chief Executive Stephen Ubl said in a statement.
Before that visit, the department released a report that finds USA prices for the top drugs administered in doctor's offices are almost twice as high as in foreign countries. The proposal would also allow HHS officials to charge a flat incentive fee for doctors who prescribe certain medications; now, doctors can receive higher fees for more expensive drugs.
The bottom line: The administration estimates that the new pricing index, would save American taxpayers and patients $17.2 billion over five years. However, HHS officials said the plan is designed so it would not cut into doctors' reimbursements. The arrangement gives physicians an incentive to prescribe the most expensive medications, because they will collect a higher fee, Trump said. Matt Brow, president of industry consulting firm Avalere Health, said he expects the administration to publish the rule for comment by year's end.