- The Trump administration on Friday put in motion two last-ditch efforts to deliver on the president's repeated promises to lower prescription drug costs in the U.S., announcing a new plan to implement a "most-favored nations" policy that pharmaceutical companies have decried as foreign price controls, and finalizing a rule that would eliminate certain drug rebates.
- The most-favored nations plan is the latest attempt by the administration to link Medicare reimbursement for doctor-administered medicines to prices paid abroad. Now structured as a CMS model, the plan would cap payments for some 50 drugs covered under Part B.
- The rebate rule, by contrast, would apply to payments made by pharma companies to pharmacy benefit managers and insurance plans in Part D, which covers pharmacy drugs. The Trump administration scrapped an earlier iteration last year, only to revive it now in a post-election policy push.
The nation's hospital lobby took aim at the policy that the administration let languish but is now pushing through in the waning months before Trump is set to leave office.
Hospitals say they will bear the brunt of the cost cuts — not drugmakers, as the policy affects drugs administered by clinicians in offices or hospitals not over-the-counter medicines.
"Instead of holding drug companies accountable for drug prices, it slashes reimbursement to hospitals for drugs," Tom Nickels, executive vice president of the American Hospital Association, said in a statement.
AHA contends it will cut hospital reimbursement by an average of 65% when fully phased in — losses hospitals will have to absorb, Nickels said.
"It is alarming that the Administration has issued this operationally burdensome rule after over two years, in the middle of a pandemic with cases at record levels, and with less than six weeks’ notice before the model begins," Nickels said.
The White House has spent the better part of Trump's time in office trying to advance a raft of drug price plans that have either lost momentum, or come undone as a result of legal action.
The administration's latest effort is last-minute, announced two months before President-elect Joseph Biden is set to be sworn in, and likely to face a legal challenge from drugmakers.
With the most-favored nations plan, the White House arrived on an approach first tried during the administration of President George W. Bush, leaning on CMS' power to test new payment methods through reimbursement models.
The plan was released as an "interim final rule," a pathway that allows a government agency to bypass the normal process of first proposing a rule and making changes based on public commentary.
The plan applies nationwide, unlike some Medicare models that pertain only to certain types of providers or regions. Some hospitals, like specialty cancer centers and those in medically underserved areas, will be excluded. So will hospitals and healthcare providers participating in per-beneficiary payment models that aim to include anticipated drug costs in a global payment plan.
Under the model, Medicare payment for prescription drugs would be based on an analysis of what's paid in countries in the Organization of Economic Cooperation and Development, members of which typically use national negotiation to establish a single reimbursement rate.
In pushing for this policy, the administration has labeled these countries "free riders," claiming they are able to negotiate lower rates for drugs because the U.S. pays higher prices.
Only drugs reimbursed under Medicare Part B — typically complex biologic drugs that must be injected or infused at a healthcare facility — would be included in the model, which would then cover the 50 drugs that constitute a large share of spending. The payment rule will be phased in over four years, using a blend of international pricing and the old system relying on sales prices.
The model is set to run through 2027.
Among the drugs included in the first year of the payment scheme would be Regeneron's Eylea, Merck & Co.'s Keytruda, Bristol Myers Squibb's Opdivo, Roche's Rituxan and Amgen's Xgeva.
Drugs included in the first year will remain subject to the international price index rate even if they fall out of the top 50 in following years. Drugs that enter the top 50 in subsequent years would then be subject to the international rates.
The plan may never be enacted, however. Rick Weissenstein, an analyst at Cowen Washington Research Group, noted that because the administration is circumventing the typical regulation process, its initiative is "unlikely to stand up in court."
The rebate rule, which was finalized earlier this week, seeks to eliminate retroactive rebates paid by pharmaceutical manufacturers to payers running Medicare Part D insurance plans to entice them to offer up-front discounts. Under the new rule, those discounts would only be permitted if they are passed on to Medicare beneficiaries at the point of sale. The regulation aims to accomplish this by changing the agency's interpretation of laws banning kickbacks in federal benefit programs.
This rule would take effect Jan. 1, 2022.
Both plans had languished in the rulemaking process, with the rebate rule being withdrawn in July 2019 and the precursor to the most-favored nations plan, called the International Pricing Index, seemingly deprioritized by the administration.
But their revival, even if challenged or delayed in implementation, could still be significant in the broader national debate over drug policy.
"With this rule, the head of the Republican Party is endorsing the proposition that Americans should not pay higher prices than do the citizens of other countries — and he is willing to endorse adopting European price controls to reduce prices here," wrote Rachel Sachs, an assistant law professor at Washington University in St. Louis, on Twitter.