President Announces Plan to Cut Drug Prices

President Announces Plan to Cut Drug Prices

On Friday, May 11, President Trump spelled out his plan to bring lower prescription prices to consumers.

In doing so, his rhetoric included pointed remarks – “Everyone involved in the broken system – the drug makers, insurance companies, distributors, pharmacy benefit managers and many others – contribute to this problem.”

The plan is called a “blueprint” and has four main components:

  • Increasing competition in drug markets
  • Giving private plans more tools to negotiate discounts for Medicare patients
  • Providing new incentives for drug manufacturers to reduce list prices
  • Cutting consumers’ out-of-pocket costs

One way that the administration would like to address the last component is passing on rebates or discounts to Part D patients. The language on this method seems to point to having drug manufacturer rebates going currently to plans to instead be passed on to the consumers.

However, there is an implication that pharmacy price concessions (DIR fees) would also be used to cut drug prices at the point of sale.

Separately, Health and Human Services Secretary, Alex Azar, last week spoke on the possibility of having the HHS Inspector General investigate DIR fees, saying that they increase unpredictability of payment and put independent pharmacies at a competitive disadvantage.

The President’s plan calls for a prohibition of gag clauses in Part D plans so patients can be informed when they can pay less out-of-pocket by using an alternative product and possibly not using the pharmacy plan. There also was language to get feedback on making PBMs function more as a fiduciary by acting in the best interest of the payers they have as clients.

Despite this plan pushing on a lot of issues impacting pharmacies and patients, the response on Wall Street was one of shrugging off the announced plans.

Large PBMs, Express Scripts and CVS Health, saw their stock prices increase 2.5% to 3.2%. Drug manufacturer stocks also went up. This points to limited concern by large drug companies and PBMs on the eventual effect on their ability to satisfy their stockholders/investors.

It will take time for the administration and affected agencies like HHS to sort out how announced policy may or may not be translated into practice.

HHS/CMS has said in their final rule for 2019 that they are still looking at the after point-of-sale price concession (rebates and DIR fees) issue.

We will continue to communicate with NCPA and IPC regarding DIR fees, gag orders, or other key issues as the administration and HHS move forward.