The United States Department of Health and Human Services has released a new plan intended to reduce drug prices for some patients on Medicare, based on an international pricing index model. In his announcement of the plan, President Trump said the US would save money “for our seniors by paying the prices other countries pay. Nothing special, just the prices that other countries pay.”

The HHS press release is available here.

Medicare is a US government-funded medical insurance program for people over 65 years, younger disabled people and dialysis patients, according to the HHS website.

The new plan released on 25 October is based on an HHS study, Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures [pdf]. That study states that the “prices charged by drug manufacturers to wholesalers and distributors (commonly referred to as ex-manufacturers prices) in the United States are 1.8 times higher than in other countries for the top drugs by total expenditures separately paid under Medicare Part B. U.S. prices were higher for most of the drugs included in the analysis, and U.S. prices were more likely to be the highest prices paid among the countries in our study.”

“This happens because the government pays whatever price the drug companies set, without any negotiation whatsoever,” Trump said in his announcement. “Not anymore. Under our new plan the Department of Health and Human Services would allow Medicare to determine the price it pays for certain drugs based on the cheaper prices paid by other nations.”

The countries compared in the HHS study include the United States, France, Portugal, Austria, Germany, Slovakia, Belgium, Greece, Spain, Canada, Ireland, Sweden, Czech Republic, Italy, United Kingdom, Finland, and Japan.

“All of this means that the Medicare program and its beneficiaries spent an additional $8.1 billion—47% more—on these drugs than it would have if payments were scaled by the calculated international price ratios,” HHS Secretary Alex Azar said in a post on Twitter.

“We will no longer accept the inflated prices being charged to our seniors,” Trump said in the announcement. “At long last, the drug companies in foreign countries will be held responsible for how they rigged the system against American consumers.”

Details of the New Medicare Drug Plan

The pharmaceutical industry offers “deep discounts abroad while taking advantage of the payment system in Medicare Part B which drives the cost in the U.S., even though Medicare is the world’s largest drug purchaser. The IPI [international pricing index] model would take on this issue and pay vendors for Part B drugs at a level approaching international prices,” the HHS release states.

The IPI model of the new drug plan would achieve the following goals, according to the HHS release:

• “Reduce costs for Medicare beneficiaries, and thereby increase adherence and access to prescription drugs.
• Introduce competition to the system of paying for physician-administered drugs by bringing in private-sector vendors.
• Reduce providers’ burden and the financial risk associated with managing drug inventories, so physicians can focus on patient care.
• Maintain financial stability for physicians while removing incentives for higher drug prices.
• Address the disparity in drug prices between the U.S. and other countries.
• Reduce costs to the American taxpayers and Medicare beneficiaries who fund these programs.”

Civil Society: Positive but Weak

The Union for Affordable Cancer Treatment (UACT) released a statement today on the new Medicare Plan calling it “a weak response to a big problem,” and “too narrow to be taken very seriously.”

While UACT “welcome[s] plans to lower seniors’ prescription drug costs and provide relief from excessive prices,” the group finds the plan “disappointing,” according to the statement, because it “would only cover some drugs on Medicare Part B…, will only benefit selected geographical areas where about half of Medicare patients live,” and “the changes will be slow (beginning in 2020 and phased over 5 years).”

Public Citizen, a US consumer advocacy group, also released a statement today by Peter Maybarduk, director of Public Citizen’s Access to Medicines Program, which said: “The details of this plan count for everything. Yet, from initial reporting the plan may indeed represent positive steps. The goal of making medicine affordable for all may benefit from administration proposals to compare U.S. prices with those paid abroad, negotiating Medicare Part B medication prices and reducing physician incentives to administer more expensive treatments.”

“The far bolder plan we need to make medicines affordable would confront the power of Big Pharma corporations. The American people want their leaders to challenge pharma head-on. Instead, Trump yells from the back of his horse at allies who could help make medicine affordable for all,” the statement concludes.

Pharmaceutical Industry: Market-Based Reforms, Not Price Controls

Prominent pharmaceutical industry groups Biotechnology Innovation Organization (BIO) and Pharmaceutical Research and Manufacturers of America (PhRMA) responded critically to Trump’s announcement of the new Medicare drug plan.

BIO President and CEO James C. Greenwood issued the following statement:

“Adopting foreign price controls on American innovation puts America’s patients last and diminishes their hope for a better future. Contrary to the president’s repeated promises to end ‘foreign free-loading,’ this proposal embraces it and exacerbates its harmful effects. By adopting foreign price controls on the very small number of innovative medicines that make it to market, this proposal will severely chill investment in new cures and therapies for America’s seniors.”

“BIO has repeatedly urged the administration to work with us on market-based reforms that will promote competition and lower drug costs, without harming our nation’s innovative ecosystem that leads the world in discovering new cures and treatments. It is deeply unfortunate the Trump administration has proposed pursuing a radically different approach.”

PhRMA President and CEO Stephen J. Ubl also issued a statement:

“The administration is imposing foreign price controls from countries with socialized health care systems that deny their citizens access and discourage innovation. These proposals are to the detriment of American patients. The United States has a competitive marketplace that controls costs and provides patients with access to innovative medicines far earlier than in countries with price controls, and it’s why we lead the world in drug discovery and development. Americans have access to cancer medicines on average about two years earlier than in developed countries like in the United Kingdom, Germany and France.”

“The proposed Medicare Part B model would jeopardize access to medicines for seniors and patients with disabilities living with devastating conditions such as cancer, rheumatoid arthritis and other autoimmune diseases… We oppose changes to Medicare that threaten patient access to innovative, lifesaving medicines and are disappointed the administration put the needs of patients aside with these proposals.”