President Donald Trump criticized middlemen in a speech introducing his plan to lower prescription drug prices, but the proposals his administration unveiled largely spared health-care companies massive reforms.
Trump's plan, called "American Patients First," seeks to increase competition, improve negotiation and create incentives to lower list prices of prescription drugs and out-of-pocket costs for consumers. Some of the steps it outlines are rebate-sharing in Medicare drug plans, promoting generics and copycat version of biologic drugs and requiring drug manufacturers to publish list prices for drugs in television advertisements.
However, it stops short of allowing Medicare to directly work with manufacturers on prices, something Trump had called for on the campaign trail but Health and Human Services Secretary Alex Azar, a former Eli Lilly executive, has opposed.
"Everyone involved in the broken system — the drugmakers, insurance companies, distributors, pharmacy benefit managers and many others — contribute to the problem," Trump said. "Government has also been part of the problem because previous leaders turned a blind eye to this incredible abuse."
Despite saying everyone's to blame, Trump focused his harshest comments on middlemen, specifically pharmacy-benefit managers, which negotiate discounts with manufacturers.
"We're very much eliminating the middlemen," Trump said. "The middlemen became very, very rich. Whoever those middlemen were, and a lot of people never even figured it out, they're rich. They won't be so rich anymore."
These 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.
Azar said the administration is calling into question the entire system of rebates as the method of negotiating discounts in the pharmacy channel.
"Because right now, every incentive is for the drug company to have a very high list price and to negotiate list price down, often in a very nontransparent way," he said in a press briefing following the Rose Garden speech.
The administration said it could one day restrict the use of rebates, or discounts pharmacy-benefit managers negotiate from drug manufacturers. This could include revisiting anti-kickback statutes that currently allow the practice.
Trump said the administration will take on the "tangled web of special interests," pointing to the drug lobby, which spent a record $10 million in the first quarter of the year.
Azar said he's directing Gottlieb to look into requiring drug manufacturers to publish list prices in drug advertisements.
"Think about all the time everybody spends watching drug company ads, and how much information companies are required to put in them," Azar said. "If we want to have a real market for drugs, why not have them disclose their prices in the ads, too?"
Trump said it's time to end the "global freeloading once and for all," referring to how some countries set price controls and therefore pay less for drugs than Americans, while U.S. companies invest in research and drug development. He said he has directed U.S. Trade Representative Robert Lighthizer to make fixing this a top priority with every trading partner.
"We have great power over the trading partners," he said. "You're seeing that already. America will not be cheated any longer and especially will not be cheated by foreign countries."
Some of the proposals could be implemented through administrative actions, while others would need Congressional approval.
Express Scripts and CVS Health, both PBMs, praised Trump's efforts to tackle prescription drug costs. The Pharmaceutical Care Management Association, which represents the PBM industry, said getting rid of rebates would leave patients and payers "at the mercy of drug manufacturer pricing strategies."
"PBMs have long encouraged manufacturers to offer payers alternative ways to reduce net costs. Simply put, the easiest way to lower costs would be for drug companies to lower their prices," the group said in a statement.
Pharmaceutical Research and Manufacturers of America CEO Stephen Ubl said in a statement some proposals could help make medicines more affordable, but others could "disrupt coverage and limit patients' access to innovative treatments." BIO CEO Jim Greenwood said he also has concerns about the plan.
America's Health Insurance Plans commended parts of the plan but said it's concerned that some could actually lead to higher premiums. Alliance of Community Health Plans CEO Ceci Connolly thanked the administration for pressing the issue of "sky-high" drug prices.
Investors appeared relieved. Health-care stocks initially slid then quickly rose, with CVS and Express Scripts shares both hitting session highs.
Fear over what the Trump administration would do to control costs has weighed on stocks. As a candidate, Trump advocated for Medicare negotiating prices with manufacturers. Shortly before taking office, he accused the pharmaceutical companies of "getting away with murder."
Democrats attacked on Friday for ditching his promised push for direct negotiation for Medicare drug prices in the plan he announced. The idea is the government would be able to assert its vast buying power to push for lower prices for Medicare recipients.
Read the Trump administration's full blueprint here: