President Donald Trump has announced reforms aimed at tackling high drug prices in the US, including a controversial measure to try to set prices for American seniors at the lowest level in the developed world.
The administration said it would impose a so-called most favoured nation model, in which the government-run Medicare programme would pay no more for 50 popular medicines than drugmakers receive in the lowest-priced developed country.
Mr Trump has repeatedly floated the idea but Friday’s announcement, in the final weeks of his administration, was the first time it had been turned into a concrete measure.
Legally speaking, the model is a test, intended to last for seven years, with the “most favoured nation” price phased in gradually from January.
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However, it is still likely to be challenged by drugmakers in court. “I presume they will sue,” Mr Trump said. “But it is a suit they will never be able to win.”
Stephen Ubl, president of the industry lobby group PhRMA, accused Mr Trump of a “reckless attack” on companies working to end the Covid-19 pandemic, and said the group was considering all options to stop the “unlawful onslaught on medical process”.
Mr Trump has blamed “foreign freeloaders” for high drug prices, claiming that America’s outsize payments to drug companies subsidise research and development that benefits the whole world. He has previously tried to make it easier for states to import cheaper drugs from Canada.
In the US, unlike in other countries, government-backed insurance programmes such as Medicare do not negotiate prices with pharmaceutical companies, unlike in other countries. President-elect Joe Biden has proposed enabling Medicare to negotiate prices but Mr Trump has not.
The initiatives announced on Friday will have to survive not just any legal onslaught from drug companies or others in the supply chains, but also any policy changes under the Biden administration. The share prices of pharmaceutical companies and so-called pharmacy benefit managers did not move significantly on Mr Trump’s announcement.
Also on Friday, Alex Azar, secretary of health and human services, moved forward another rule on drug pricing, following the president’s July executive ordering him to eliminate “kickbacks to middlemen”.
The rule — now in its final stage and due to come into effect in January 2022 — applies to the rebates paid by pharmaceutical companies to the pharmacy benefit managers. PBMs manage formulary lists of preferred drugs and the rebates are incentives to ensure a drug company’s products are covered by insurers.
By changing safe harbour provisions, the rule aims to encourage the pharma companies to channel these rebates — which can be as much as 20 or 30 per cent — to patients at the pharmacy counter, rather than to PBMs.
Large pharmaceutical companies have been lobbying for rebate reform, as they believe the PBMs take too large a slice of the pie.
Mr Ubl said the industry group was still reviewing the final rule but was “hopeful it will guarantee that seniors will finally see the savings at the pharmacy counter”.