The Trump Administration recently unveiled a new plan aimed at curbing drug prices for expensive medicines administered to patients under Medicare Part B and took aim at entities the President claims are responsible for Americans paying more for prescription drugs than citizens in other countries. The 44-page blueprint released by the Department of Health and Human Services is asking for feedback on the plan before it plans to propose it more formally in early 2019 and eventually take effect the following year.
While the proposal would not extend to most prescription drugs that Americans fill at their local pharmacy under Medicare Part D, the plan would instead focus on some of the most high-cost medications administered by physicians, such as those used to treat cancers, autoimmune diseases, and late-stage renal failure. According to government reporting, the Centers for Medicare and Medicaid Studies (CMS) spent $26 billion on Part B drugs in 2015, or about 3 percent of Medicare’s total $647.6 billion budget that year.
These types of drugs, often called “biologics” because they are made from living organisms, are typically manufactured by only one pharmaceutical company which can leave little if any competition to drive prices down. To accomplish the goal of reducing costs the administration has suggested tying the price of some drugs under Medicare Part B to those paid in other countries like France and Germany.
In addition to price tying, the administration is also proposing to increase the role of companies known as pharmacy-benefit managers in managing drugs and pricing in the Part B program and altering the incentives for physicians so they are paid based on a flat fee rather than a percentage of the price of a prescription drug. If successfully implemented, the measures could save the government an estimated $17.2 billion over the next five-years.
The strategy has come under intense scrutiny from the Pharmaceutical Research and Manufacturers of America (or PhRMA), the lobbying arm of the pharmaceutical industry, amid claims the administration is attempting to meddle in the free market. However, due to laws put in place that prevent the government from directly negotiating with drug companies over the price of prescription medicines, it may be entirely necessary to help stem the tide of rising health care costs that have been taking a very serious toll on the health and welfare of millions of Americans.