Trump administration opens up more drugs covered by Medicare to price negotiations

  • The Centers for Medicare & Medicaid Services will allow Medicare Advantage plans to negotiate prices of medicines covered under Medicare Part B.
  • President Donald Trump has repeatedly criticized pharmaceutical companies and other firms along the drug supply chain, most recently publicly shaming Pfizer and other drugmakers for raising prices.
Seema Verma testifies before the Senate Finance Committee on her nomination to be the administrator of the Centers for Medicare and Medicaid Services, in the Dirksen Senate Office Building in Washington, on February 16, 2017.
Mandel Ngan | AFP | Getty Images
Seema Verma testifies before the Senate Finance Committee on her nomination to be the administrator of the Centers for Medicare and Medicaid Services, in the Dirksen Senate Office Building in Washington, on February 16, 2017.

Pharmaceutical companies will soon have to negotiate prices for more drugs.

The Centers for Medicare & Medicaid Services will allow Medicare Advantage plans to negotiate prices of medicines covered under Medicare Part B, which covers drugs typically administered by a physician. These tend to be more expensive treatments like rheumatoid arthritis drugs and some cancer drugs.

Medicare Advantage plans, which are offered by private companies, will also be able to use step therapy, or starting patients on less expensive options before moving them up to more expensive drugs. CMS Administrator Seema Verma told reporters Tuesday this practice is already "widely used" across the private sector.

Verma said she expects lower drug prices to come from insurers and pharmacy benefit managers negotiating better discounts and passing those savings on to patients. They'll be required to pass on more than half of these savings.

"For too long, Medicare Advantage plans have not had the tools to negotiate a better deal for patients," Verma said in a statement. "Today we begin lifting those barriers so plans can use private-sector tools to drive down the cost of expensive drugs while also offering new care coordination and drug adherence programs, to ensure that patients are getting high quality care at lower cost."

Plans can implement the changes starting Jan. 1, 2019. In a statement, Health and Human Services Secretary Alex Azar said drug prices "can start coming down for many of the 20 million seniors" enrolled in Medicare Advantage plans "as soon as next year."

Spending on drugs covered under Part B totaled $27.5 billion in 2015, according to a report from The Medicare Payment Advisory Commission. A handful of treatments covered under Medicare Part B cost more than $1 billion in one year alone, according to government data from 2016. Those include include Regeneron's Eylea at $2.2 billion, Roche's Rituxan at $1.7 billion and Amgen's Neulasta at $1.4 billion.

The administration did not give an exact estimate for how much it expects the changes to save. An administration official told reporters Medicare Advantage plans' spending on Part B drugs equals $12 billion, and that commercial insurers typically save between 15 to 20 percent when using step therapy.

Tuesday's announcement is the latest attempt from the Trump administration to lower prescription drug prices. President Donald Trump unveiled a blueprint earlier this year aimed at lowering drug prices for consumers filled with lofty initiatives but light on specifics.

Trump has repeatedly criticized pharmaceutical companies and other firms along the drug supply chain, most recently saying Pfizer and others "should be ashamed" of themselves for raising drug prices "for no reason."

As a candidate, Trump frequently hammered drugmakers for what he called "getting away with murder." HHS Secretary Azar has focused his attention on pharmacy benefits managers, firms that control which drugs are covered and negotiate discounts, known as rebates, on branded drugs with manufacturers.

Despite the rhetoric, Tuesday's announcement gives PBMs more power. Pharmaceutical Care Management Association, the industry's lobbying group, praised the changes.

"Today's announcement by the Administration to include greater use of PBM tools in Medicare Part B through Medicare Advantage Prescription Drug Plans is an important step toward reducing costs for the program and beneficiaries," PCMA said in a statement.