Health and Science

Trump plan won't allow Medicare to negotiate prices but will propose some drug plans share discounts

President Donald Trump addresses a news conference in the East Room of the White House in Washington, DC.
Kevin Lamarque | Reuters
Key Points
  • President Donald Trump will unveil a plan to lower drug prices.
  • Trump has repeatedly chastised drug companies, even accusing them of "getting away with murder."
President Trump to lay out plan to tackle drug prices
President Trump to lay out plan to tackle drug prices

President Donald Trump will unveil a plan to limit prices on some costly drugs, though it will not go as far as some Democrats want, according to senior administration officials.

The plan, set to be released Friday, will require Medicare Part D plans share a portion of discounts they receive from drug manufacturers with patients, the officials said. It will include ways to allow the government to better negotiate, they said, though it will stop short of allowing Medicare to directly work with manufacturers on prices.

The government program is currently prohibited from doing this. Democrats have pushed to change this, and Trump supported the idea on the campaign trail. His Health and Human Services Secretary Alex Azar, though, has rejected the idea.

"We're not calling for Medicare negotiation in a way that Democrats have called for," one official said. "We clearly want to make important changes that will dramatically improve the way negotiation takes place inside the Medicare program."

This is what Medicare does and doesn’t cover
Medicare coverage explained

Trump has repeatedly chastised drug companies, even accusing them of "getting away with murder." Despite his criticisms as a candidate and as president, he didn't do much to lower prices during his first year in office. He's slated to outline his proposals to tackle prices in a speech Friday.

The proposal will require Medicare Part D plans to share a portion of drug manufacturer discounts with patients, the officials said. This could be a relief to pharmacy benefit managers, as some reports suggested there would be a push to pass through all of these rebates.

Food and Drug Administration Commissioner Scott Gottlieb last week suggested the federal government re-examine whether the rebates should be re-classified under anti-kickback laws, which has weighed on PBM stocks. Shares of CVS Health and Express Scripts fell about 9 percent last week before paring losses.

Rebates have become a battleground in the fight over who's to blame for high drug prices. Drugmakers accuse PBMs of profiting off higher list prices because they can negotiate bigger discounts. PBMs say it's manufacturers' fault for setting the high prices in the first place.

Trump's proposal will also seek to limit price increases that are greater than the rate of inflation for drugs covered under Medicare Part B, which covers treatments that patients need to be administered by a physician. It includes some of the most expensive drugs like cancer treatments.

Medicare reimburses the list price of the drug plus 6 percent, so capping price increases could help lower the program's costs. Total Medicare drug spending reached $162 billion in 2015, according to data from the Centers for Medicare and Medicaid Services.

The officials declined to outline exactly how the administration would address what has been called "foreign freeloading," or how patients in other countries typically pay less for drugs than Americans, while U.S. companies invest in research and drug development.

Even if foreign countries were to pay more for drugs, that wouldn't lower the cost of prescriptions in the U.S., said Craig Garthwaite, director of the Health Enterprise Management Program at Northwestern University's Kellogg School of Management.

"I can understand the intuitive appeal of the argument, but the basic economics don't work out very well," he said.

The administration will publish a blueprint of its plan Friday to coincide with Trump's speech, the officials said. It will also publish a request for information seeking input on a range of policy ideas.

"The vast majority" of the plans that will be outlined Friday can be implemented through administration action rather than requiring Congress to draft legislation, the officials said.