Drug industry dodges worst fears in Trump’s US price plan

Bloomberg

President Donald Trump’s plan to lower US drug prices avoids some of the harshest steps that the pharmaceutical industry and the network of companies that distribute its products feared.
Calling his proposal the most sweeping attempt in US history to lower drug prices, Trump wants to increase competition for medicines, cut list prices and reduce patients’ out-of-pocket costs. Yet it also preserves — and in some cases expands — the role of the pharmacy middlemen the administration has blamed for many problems with drug costs.
“We’ll have much lower prices at the pharmacy counter and it’ll start taking effect immediately,” Trump said in a speech in the White House Rose Garden. “We’re also increasing competition and reducing regulatory burdens so drugs can be gotten to the market quicker and cheaper.”
Few of the steps proposed by the administration would take immediate effect. The 44-page document is laid out as topics for discussion and contains more than 100 questions about what the administration should do. Industry stocks gained after the speech. “It’s going to be months for the kind of actions that we need to take here,”s aid Health and Human Services Secretary Alex Azar, Trump’s top health official. “It took decades to erect this very complex, interwoven system. I don’t want to over-promise that somehow there’s radical changes. There’s a deep commitment.”
Azar added: “This is the possible restructuring of a major part of the economy. One doesn’t do that lightly.”
Nowhere in the proposal does the administration call for two policies the industry most feared: having the government directly negotiate prices and allowing the importation of
prescription drugs from overseas. Trump had previously backed both of those ideas, promising to use the government’s buying power to get better deals.
In the months ahead of the speech, drug companies and pharmacy benefit managers, or PBMs, have traded accusations over who’s to blame for high US drug costs. In the immediate aftermath, company stocks in both industries were up — a sign that investors think that the worst-case scenario has been avoided, for now.
“The speech was very Trump; it was bombastic, and he made his points,” said Spencer Perlman, an industry analyst with Veda Partners. “But we will have to find out what ideas are real and how they can implement them. If you’re investing for next six months, today’s a good day for you.” The Nasdaq Biotechnology Index rose 2.7 percent, the biggest gain in four weeks. The 193-company index is a barometer of investor sentiment about the drug industry and pricing issues.

Congress’s Role
Some of the proposals would require action by Congress, often an unlikely prospect in an election year. Senior Republicans on Capitol Hill gave measured support for the plan.
Senator Lamar Alexander, chairman of the Senate health committee, said in a statement he especially welcomed proposals to examine the rebate system that makes it “hard for consumers to know what they are paying and what alternatives are.”
“I look forward to reviewing the proposals and working with the president and his team to help patients and protect taxpayers,” Senate Majority Leader Mitch McConnell said in a statement. Senator Ron Wyden, an Oregon Democrat, said Trump didn’t go far enough. “Today’s announcement is a far cry from what Trump called for when he said the drug companies were ‘getting away with murder,’” Wyden said in a statement. “They’re breathing a sigh of relief in pharmaceutical board rooms across the country.”

Drug Spending
In 2017, total US spending on drugs rose about 0.6 percent, according to a report by Iqvia Holdings Inc., which tracks prescriptions. That modest increase doesn’t tell the whole story, though. List prices rose at a far faster pace, meaning that Americans who pay out of pocket for brand-name drugs — such as people who are uninsured or who have high deductibles, for example — can face a steep bill.
Azar and other administration officials have singled out PBMs for blame in recent weeks, including companies such as Express Scripts Holding Co., CVS Health Corp. and UnitedHealth Group Inc.’s OptumRx unit. The plan released in particular targets rebates negotiated between the PBMs and drugmakers, which often don’t pass directly back to customers. “We’re very much eliminating the middle men,” Trump said, without specifying that he would target PBMs. “Whoever those middlemen were — a lot of people never figured it out; they’re right — won’t be so rich anymore.”