Health and Science

Trump outlines new plan to lower Medicare drug  prices, end 'rigged' system

Key Points
  • President Donald Trump outlined a plan Thursday that would allow Medicare to start negotiating drug prices to bring costs in line for its Part B coverage with what other nations pay for the same drugs.
  • HHS Secretary Alex Azar released a report earlier Thursday that said the U.S. pays 1.8 times more for the exact same drugs as other nations.
Trump proposes change to Medicare drug prices

President Donald Trump outlined a plan Thursday he said would allow Medicare to lower drug prices for its Part B coverage and end this "rigged system" that allows other countries to pay less than the U.S. for the same drugs.

Under the administration's proposal, the Department of Health and Human Services would permit Medicare to create a new payment model that would bring drug prices in line with what other nations pay.

HHS estimates $17 billion in program savings over five years, it said in a press release. The agency is trying to issue a formal rule early next year with the new payment model taking effect in 2020, HHS said.

"For decades, other countries have rigged the system so that American patients are charged much more ... for the exact same drug," Trump said in his speech at HHS headquarters in Washington.

"Americans pay more so that other countries can pay less," Trump said. "The government pays whatever price the drug companies ask ... not any more."

The SPDR S&P Pharmaceuticals index, which tracks drug stocks, was more than 2 percent higher early afternoon Thursday.

In May, Trump said it was 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.

Health and Human Services Secretary Alex Azar released a report earlier in the day that said the U.S. pays 1.8 times more, and sometimes four times as much, for prescriptions covered by Medicare Part B than other nations.

"The United States will finally be able to confront one of the most unfair practices ... that drives up the cost of medicine," Trump said. "For decades other countries have rigged the system so that American patients are charged much more, and in some cases much, much more for the exact same drug," he said.

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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.

"Because @POTUS wants to end global freeloading, we compared prices for the most costly physician-administered drugs that are covered and paid for by Medicare Part B," Azar tweeted. The "prices for Part B drugs in America exceed the prices paid in countries with similar economic conditions."

— CNBC's Angelica LaVito and Meg Tirrell contributed to this report.

This is a developing story. Please check back for updates.

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