In taking on high drug prices, Donald Trump faces a complex nemesis
Before taking office, President Donald Trump railed against the pharmaceutical industry and accused it of “getting away with murder.” The populist rhetoric appears to be giving way to a more nuanced strategy focused on making the pharmaceutical market more open and competitive, with the aim of lowering costs for consumers. It’s an approach that could avoid a direct confrontation with the powerful pharmaceutical lobby, but it could also underwhelm Americans seeking relief from escalating prescription costs. On Friday, Trump is scheduled to give his first speech on an overarching plan to lower drug prices. Administration officials previewing the speech Thursday touted it as the most comprehensive plan to tackle prescription drug costs that any president has ever proposed, but offered few specifics. Officials said the plan would increase competition, create incentives for drugmakers to lower initial prices and slash federal rules that make it harder for private insurers to negotiate lower prices. The result would be lower pharmacy costs for patients — a key Trump campaign promise. The plan will not include giving the federal Medicare program power to directly negotiate prices with drugmakers, they noted. Trump campaigned on the idea, which is vigorously opposed by the pharmaceutical industry. Public outrage over drug costs has been growing for years, because Americans are being squeezed in a number of ways: New medicines for cancer and other life-threatening diseases often launch with prices exceeding $100,000 per year. Drugs for common ailments like diabetes and asthma routinely see price hikes around 10 percent annually. Meanwhile some companies have been buying up once-cheap older drugs and hiking prices by 1,000 percent or more. Since entering the White House, Trump has backed away from reforms directly targeting drugmakers and staffed his administration with appointees who have deep ties to the industry, including his health secretary, Alex Azar, a former top executive at Eli Lilly. Still, administration officials ratcheted up the rhetoric ahead of Trump’s speech. Azar promised bold action. FDA Commissioner Scott Gottlieb — another Trump appointee with industry connections — hinted at a plan to “dismantle” the convoluted system of discounts and rebates between drugmakers and health care middlemen. On Thursday, administration officials also vowed to address foreign governments that rely on U.S. medicines but pay drastically lower prices due to government controls. The U.S. accounts for 70 percent of the world’s brand-name drug profits, according to a White House report released earlier this year. Here are some of the drivers of U.S. prescription drug prices, proposals for reducing the costs and what’s at stake: LACK OF REGULATION Drugmakers generally can charge as much as the market will bear because the U.S. government doesn’t regulate medicine prices, unlike most other countries. Medicare is the largest purchaser of prescription drugs in the nation, covering 60 million seniors and Americans with disabilities, but it is barred by law from directly negotiating lower prices with drugmakers. Democrats have long favored giving Medicare that power, but Republicans traditionally oppose the idea. The powerful pharmaceutical lobby has repeatedly fended off proposals that could lower prices, such as Medicare negotiations or importing drugs from countries that regulate pricing. With no direct government price regulation, the primary check on prices comes from buyers in bulk — such as insurance companies and pharmacy benefit managers, which handle prescription coverage for insurers, employers and other big clients. But because there are so many players in the fragmented system, the discounts achieved in the U.S. are generally far more modest than those in other countries. The result is that the U.S. spends more on medicines than any other nation. In 2015, the U.S. spent $1,162 per person on pharmaceuticals, according to the Organization for Economic Cooperation and Development. That compares with $756 for Canada and $497 for the United Kingdom, both of which have government measures to control drug prices. LACK OF TRANSPARENCY The U.S. system for pricing drugs is notoriously complex, so much that the “real” price for most medicines isn’t clear. Critics contend that this lack of transparency limits competition and drives prices higher. Pharmaceutical companies often launch their drugs with high initial prices. But they argue list prices are merely a starting point for negotiations because they give substantial rebates and discounts to pharmacy benefit managers. Those price concessions are almost never disclosed and it’s unclear what portion actually flows back to consumers. FDA Commissioner Scott Gottlieb and others say the lack of transparency in the current system creates perverse incentives in which drugmakers and other health care companies benefit from rising prices — at the expense of patients. Trump officials have suggested requiring Medicare pharmacy benefit managers to share rebate payments with patients. Another proposal would do away with rebates altogether to encourage more upfront discounts in Medicare. But the benefit managers and insurers say that they use rebates to lower health care premiums overall and that doing away with them would drive up costs. PATENTS AND ANTI-COMPETITIVE TACTICS Patents last longer in the U.S. than most countries, typically giving companies a dozen years of competition-free marketing after a drug launches. Most drugmakers increase their prices annually during this monopoly period, and until recently double-digit price hikes were the norm. Drugmakers also have developed a number of techniques to block competitors from launching lower-cost generic drugs. Companies often tweak drug formulations to extend their patents. In other cases, companies directly pay would-be competitors to stay off the market in so-called “pay-to-delay” deals. Gottlieb has promised a crackdown on some of these techniques used to “game the system.” He’s highlighted a practice in which drugmakers use tightly controlled distribution systems to prevent rival manufacturers from purchasing their drug. This effectively blocks the development of generic versions because generic drugmakers must test their products against the original medicine before they can win FDA approval. PUBLIC PERCEPTION A majority of Americans say bringing down prescription drug prices should be a “top priority” for Trump and Congress, according to recent polling by the Kaiser Family Foundation. And experts who study drug pricing say
Promise, promises: What Donald Trump has pledged on health care
President Donald Trump is not known for plunging into the details of complex policy issues, and health care is no exception. Since his campaign days, Trump has addressed health care in broad, aspirational strokes. Nonetheless he made some clear promises along the way. Those promises come under two big headings. First, what Trump would do about the Affordable Care Act, his predecessor’s health care law, often called “Obamacare.” Second, the kind of health care system that Trump envisions for Americans. On repealing Obama’s law, Trump seems to have a realistic chance to deliver. But he’s nowhere close to fulfilling his generous promises of affordable health care for all. A look at some of the president’s major health care promises, and how the Republican legislation advancing in Congress lines up with them: REPEAL ‘OBAMACARE’ Repealing President Barack Obama‘s signature domestic achievement has been a clear and consistent promise from Trump. Under the Obama law, some 20 million people gained coverage through a combination of subsidized private insurance and a state option to expand Medicaid for low-income people. Costs have been a problem, as are shaky insurance markets for people buying their own policies. But the nation’s uninsured rate is at a historic low, about 9 percent. Both the House and Senate GOP bills would largely fulfill Trump’s promise to repeal Obama’s law. Both bills end Obama’s unpopular requirement for individuals to carry health insurance or risk fines. The legislation also phases down the Medicaid expansion and repeals hundreds of billions of dollars in taxes on upper-income people and health care industries, used under Obama to finance coverage. And it opens the way for states to seek waivers of federal health insurance requirements. Some Republican critics on the right say the congressional bills leave other major parts of “Obamacare” in place, such as subsidies for people buying private insurance, and too many rules. While the subsidy structure would remain, much less taxpayer money is invested in it. “INSURANCE FOR EVERYBODY” In a Washington Post interview before his inauguration, Trump distilled his vision for health care into a few visionary goals. “We’re going to have insurance for everybody,” he said. “There was a philosophy in some circles that if you can’t pay for it, you don’t get it. That’s not going to happen with us.” Trump said he was close to finishing a plan of his own that would have “lower numbers, much lower deductibles.” But the White House never delivered a health care plan from the president. And the congressional plans are likely to increase the number of uninsured people, because even if all Americans have access to coverage, some may no longer be able to afford it. Deductibles are likely to rise for many people with individual coverage because the congressional plans would end subsidies under Obama’s law that reduced out-of-pocket costs for those with modest incomes. The Congressional Budget Office has projected that, on average, premiums for individual policies would be lower over the long run than under current law. But there would be winners and losers. Younger adults and those in good health are likely to find better deals. Older people and those requiring comprehensive coverage could well end up paying more. TAKING AWAY THE LINES During the presidential campaign, Trump called for a system in which insurance plans would compete nationally, offering Americans choice and lower premiums. “What I’d like to see is a private system without the artificial lines around every state,” he said at one of the presidential debates. Many experts say Trump’s vision of interstate competition is unrealistic because health insurance, like real estate, reflects local prices. In any case, it remains unfulfilled in the GOP legislation. Some congressional leaders have promised that cross-state insurance will be addressed in follow-on legislation. Such a bill, however, would likely have to meet a 60-vote test in the Senate. PRESCRIPTION DRUG PRICES During the presidential campaign, and since becoming president, Trump called for action to bring down the cost of prescription drugs. The GOP bills in Congress basically sidestep that. At one point in the campaign, Trump called for giving Medicare the authority to directly negotiate prices with drug makers, an approach favored to some extent by Obama and Democratic presidential candidate Hillary Clinton. Trump also proposed letting Americans import prescription drugs from other countries, where prices are usually lower because of government regulation. But Medicare negotiations are a nonstarter for most congressional Republicans, and Trump’s call for allowing drug importation has faded. MEDICAID In a 2015 interview with The Daily Signal, Trump said: “I’m not going to cut Social Security like every other Republican and I’m not going to cut Medicare or Medicaid.” But last year, his campaign started backtracking on the Medicaid promise, endorsing the idea of limited federal financing for the federal-state program that covers some 70 million low-income people, from newborns to elderly nursing home residents, from special-needs kids to part-time workers lacking job-based health insurance. The Republican bills in Congress would phase out Obama’s financing for Medicaid expansion and limit future federal payments for the entire program as well. The Congressional Budget Office said the House bill would reduce federal Medicaid spending by $834 billion over 10 years, and the program would cover about 14 million fewer people by 2026, a 17 percent reduction. Several Republican governors have joined their Democratic counterparts calling that a massive cost-shift to the states. OPIOID CRISIS The Trump White House says it’s serious about confronting the nation’s opioid epidemic, which shows no sign of letup. “The president is all in,” health secretary Tom Price said on a recent visit to New Hampshire. “He has such passion for this issue because he knows the misery and the suffering that has occurred across this land.” But state officials say rolling back Obama’s Medicaid expansion would deal a heavy blow to their efforts to treat addiction and get its victims back to jobs and family. Among the group of low-income adults made eligible for Medicaid under Obama are many
Alabama passes SUNucate, allowing sunscreen in school to protect kids from skin cancer
Thanks to a new law signed by Gov. Kay Ivey earlier this month, Alabama children will be allowed to bring and apply sunscreen at school or camp without a doctor’s note. Previously, following U.S. Food and Drug Administration (FDA) guidelines, school systems categorized sunscreen as an over-the-counter medication like Tylenol or ibuprofen and required a doctor’s note to have it at school. Alabama has loosened these restrictions to make it easier for kids to protect themselves from skin cancer. The law, deemed SUNucate, eliminates barriers prohibiting students from possessing and using over-the-counter sunscreen by exempting these products from requirements implemented by broad reaching ”medication bans,” such as the need for a physician’s note or prescription. Alabama is the fourth state to pass this law in 2017. The American Society for Dermatologic Surgery Association (ASDSA) applauds the bill’s sponsors, Springville-Republican State Sen. Jim McClendon and Talladega-Republican State Rep. Ron Johnson – sponsors of Senate Bill 63 and House Bill 147 – for their leadership on the issue, and thanks both the legislature and Governor Ivey for their support of the efforts to help protect children from skin cancer. “Creating a culture of sun-safe behavior in our youth is a real part of how we can reduce the risk of skin cancer,” said ASDSA President Thomas E. Rohrer, MD. “As dermatologic surgeons, we must help the public understand the real risks of excessive sun exposure and how to mitigate them.” The ASDSA said in a statement allowing “the regular and routine use of sunscreen at schools without a prescription” is key to reducing skin cancer in the U.S. The Centers for Disease Control (CDC) and Prevention and the U.S. Preventive Services Task Force both agree — children should have access to sunscreen and other sun-protective measures in order to reduce the risk of skin cancer.
Drug prices don’t budge even after pressure from Congress
Congress’s routine of publicly shaming drug company executives over high prices works no better than a placebo: It may make some people feel better, but it doesn’t treat the problem. In the last two years, House and Senate committees issued more than a dozen subpoenas to price-hiking drugmakers, collecting hundreds of thousands of documents and berating executives for more than 16 hours of public hearings. But a review by The Associated Press of the list prices of nearly 30 brand-name medications and generic versions targeted by congressional investigators shows most haven’t budged since coming under federal scrutiny, according to figures from Truven Health Analytics. “These companies have made clear that they are not going to change course on their own – they will keep bilking the American people for all they can unless Congress acts,” said Rep. Elijah Cummings, D-Maryland, the ranking member on the House Committee on Oversight and Government Reform. Unlike most countries, the U.S. doesn’t regulate drug prices. That means drugmakers, like other businesses, are largely free to set prices as high as the market will bear. Congress has avoided passing laws that would change how drugs are priced, in keeping with the wishes of the powerful pharmaceutical lobby. That leaves lawmakers with few options beyond hauling executives before their committees. Cummings helped kick off Capitol Hill’s latest round of pharmaceutical bashing in the fall of 2014 with a flurry of letters to makers of prescription drugs that had seen dramatic price spikes. Since then, the AP counted 29 drugs that were specifically mentioned either in letters from lawmakers or during congressional hearings. The list prices of 22 of those drugs did not change at all. Five fell, and two went up. Those that fell were generic drugs that received little public attention. Drugmakers say list prices overstate drug costs, since insurers who pay for them negotiate discounts and rebates. But companies don’t disclose those reductions, leaving the actual prices paid unclear. Meanwhile, executives have found ways to defuse some of the public outrage without cutting prices. Under questioning from Cummings and other lawmakers in September, Mylan CEO Heather Bresch pointed to company coupons that can lower the price for EpiPens by up to $300 for some insured patients. While such coupons lower patients’ out-of-pocket expenses, insurers foot the bill for the drug, which still carries of list price of $608 for a two-pack, up more than 500 percent since 2007. Last year, former Turing Pharmaceuticals CEO Martin Shkreli reneged on a pledge to lower the price of the life-saving anti-infection drug Daraprim after raising it 5,000 percent. Instead, his company offered hospitals a sliding discount and the option to buy a 30-pill bottle for $22,500 instead of the original 100-pill bottle, which cost $75,000. The $750 list price per pill didn’t budge. “The industry has cultivated an outrageously complicated and obscure pricing system,” said Robert Weissman, president of consumer advocate Public Citizen. “They can give the illusion of various discounts and rebates that sound on their face like price reductions but without really impacting their bottom line.” Even when corporate leaders seem to promise price cuts while under oath, the decreases don’t materialize. Last April, billionaire investor Bill Ackman testified before a Senate committee about Valeant Pharmaceutical’s much-maligned strategy of buying niche drugs and raising their prices by as much as 3,000 percent. With the Canadian drugmaker’s then-CEO Michael Pearson stepping down, Ackman promised to use his influence on the company’s board to try and revamp its pricing strategy. “A lot is going to change,” said Ackman, whose Pershing Square Capital fund is Valeant’s largest investor. On two heart drugs that Valeant had acquired and hiked, Nitropress and Isuprel, Ackman suggested price cuts were imminent. “You can expect from us within weeks, and hopefully sooner, a response to where we’re going to price these drugs and it will be meaningfully lower than where they are priced now,” Ackman said. Instead, Valeant kept the list prices the same and expanded existing rebates for hospitals to up to 40 percent. “That sounds good, but when you raise prices more than 500 percent a 40 percent discount is still egregious,” said Scott Knoer, chief pharmacy officer at the Cleveland Clinic. Valeant said in a statement the rebates were recommended by its internal drug pricing committee, created in the wake of public outrage over its prices. A spokesman for Ackman declined to comment. Experts who study the pharmaceutical pricing say rebates and discounts allow drugmakers to retain greater control – and revenue – than blanket price cuts. “You can have different prices for different customers depending on who has more market share,” said analyst Richard Evans of Sector and Sovereign Research. “So you can tailor your pricing somewhat stealthily.” Evans says congressional scrutiny of companies like Valeant has discouraged the most extreme price hikes, generally those above 100 percent. But most of the price inflation squeezing patients and hospitals comes from industry-wide price increases that often total more than 10 percent a year, rather than the drastic hikes targeted by Congress. Rep. Cummings and his investigative partner, Senator Bernie Sanders of Vermont, unveiled a new strategy earlier this month that could have more teeth than shaming, at least if companies are doing something illegal. Rather than launching another congressional probe, the lawmakers called on the Department of Justice to investigate possible price collusion among manufacturers of insulin, which they say has seen industrywide price increases of more than 300 percent between 2002 and 2013. There are also some new and long-standing proposals that could stem increases, but they are unlikely to pass Congress, in part because of the pharmaceutical industry’s pervasive influence on Capitol Hill. Drugmakers and related health businesses spent more than $235 million on lobbying last year, more than any other industry, according to the nonprofit Center for Responsive Politics. Investors seem to think the victories of Donald Trump and congressional Republicans have dimmed the prospects for drug price reform even further. Pharmaceutical company shares, which had
