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Patients First
The Trump Administration Blueprint to Lower Drug Prices
and Reduce Out-of-Pocket Costs
MAY 2018
The U.S. Department of Health & Human Services
Hubert H. Humphrey Building
200 Independence Avenue, S.W.
Washington, D.C. 20201
MAY 2018
“
One of my greatest priorities is to reduce
the price of prescription drugs. In
many other countries, these drugs cost
far less than what we pay in the United
States. That is why I have directed
my Administration to make fixing the
injustice of high drug prices one of our
top priorities. Prices will come down.”
THE UNITED STATES is first in the world These problems have often been
in biopharmaceutical investment discussed, but gone unaddressed.
and innovation. Combining our free Under President Trump, that has now
market system and generous pub- changed. This blueprint is a historic
lic investment made America home plan for bringing down the high price
to the first chemotherapy treat- of drugs and reducing out-of-pocket
ments for cancer, the first effective costs for the American consumer.
treatments for HIV, the first cure The time to act is now: Not only
for Hepatitis C, and now, the first are costs spiraling out of control, but
therapies that turn our own immune the scientific landscape is changing
systems against cancer. as well. Securing the next generation
But too often, this system has not of cures for the next generation of
put American patients first. We have American patients will require radi-
access to the greatest medicines in cal reforms to how our system works.
the world, but access is meaningless Our blueprint will bring immediate
without affordability. relief to American patients while also
When it comes to the cost of pre- delivering long-term reforms.
scription drugs, our healthcare sys- The men and women of the
tem faces four major challenges: high Department of Health and Human
list prices for drugs; seniors and gov- Services (HHS) are looking at every
ernment programs overpaying for facet of HHS’s programs, author-
drugs due to lack of the latest nego- ities, and spending. Working with
tiation tools; high and rising out-of- our partners in the private sector,
pocket costs for consumers; and for- we will turn this vision into action,
eign governments free-riding off of and thereby improve the health and
American investment in innovation. well-being of every American.
Alex M. Azar II
CONTENTS
I. Trump Administration Blueprint in Brief............................................................ 9
I. Trump Administration
Blueprint in Brief
• Improved competition
• Better negotiation
• Incentives for lower
list prices
• Lowering out-of-pocket costs
HHS’s blueprint encompasses two phases: 1) actions the
President may direct HHS to take immediately and 2)
actions HHS is actively considering, on which feedback is
being solicited.
| 10 | American Patients First
Insurance
Contract
Drugs
FIGURE 1
Consumers
Payers Premium Money
Reimbursement for Consumers’ Rx
Drugs
Pharmacies, Drug Channels
Network Agreement Prime Vendor Agreement Institute, January 2016.
350$400 FIGURE 2
$350
$300
Retail Prescription
Drug Spend
$250
BILLIONS
$200 SOURCE
CMS Office of the Actuary
$150
$100
$50
$-
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
$ GROWTH
of $1 billion or more—led to the loss igible for the first time, while the
of over $140 billion in drug manu- ACA’s Medicaid expansion made
facturer revenue.2 New generic com- more hospitals eligible by increas-
petition coincided with a slowdown ing their Disproportionate Share
in new product development, creat- Hospital enrollment.5
ing additional financial pressure. In fact, the number of 340B hos-
pitals grew from nearly 1,700 in 2011
Affordable Care Act Taxes to 2,479 in 2017. The number of
and Rebates non-hospital covered entities, off-
The Affordable Care Act (ACA) site clinics or “child sites,” hospital
shifted costs and changed the outpatient departments, and con-
Medicaid Drug Rebate Program in tract pharmacies also grew substan-
ways that may have driven up pric- tially.6 As a result, discounted drug
es for consumers, especially in the purchases made by covered entities
private market. under the 340B program totaled
The ACA also created a new tax more than $16 billion in 2016—
on branded prescription drug sales nearly a 400% increase in purchases
to Medicare, Medicaid, and other from 2009.7 The additional billions
government health care programs. of dollars in discounted sales and the
Drug companies paid $2.5 billion in cross-subsidization necessary may
2011, based on their market share have created additional pressure on
in government programs, a number manufacturers to increase list price.
that increased to $4.1 billion in 2018.
The ACA also increased the manda- Growth in International
tory Medicaid base rebate on brand Price Controls
name drugs to 23.1%, and extended The global financial crisis in 2008
the Medicaid rebate to drugs pur- spurred austerity measures in
chased by Medicaid Managed Care most European countries, includ-
Organizations, more than doubling ing more aggressive use of existing
the number of Medicaid covered drug price controls. Between 2010
lives using rebate-eligible drugs.3,4 and 2011, 23 countries implement-
This expansion of discounts may ed 89 distinct measures to contain
have placed pressure on list prices by government spending on prescrip-
forcing drug manufacturers to raise tion drugs. Most used their sin-
prices overall. gle-payer healthcare systems to
impose drug price controls along-
340B Growth side increased copayments, val-
The ACA also increased the demands ue-added tax rates on prescription
on the 340B drug discount program: drugs, and other measures.8
For one, it made critical access hos- In 2013, the World Health
pitals and other hospital types el- Organization published a paper de-
Ii. What’s The Problem | 15 |
Retail Net
Retail Gross FIGURE 3
330
List Price vs.
310
Net Price
290
270
Billions ($)
SOURCE
250 Medicine Use and Spending in
the U.S.; A Review of 2017 and
230 Outlook to 2022. April 19, 2018
210
190
170
150
2013 2014 2015 2016 2017
Specialty Spend
Traditional Spend FIGURE 4
700
Growth in
600 22% Decrease Specialty Drug
500 Spending
Billions ($)
400 SOURCE
Medicine Use and Spending in
300 the U.S.; A Review of 2017 and
106% Increase
Outlook to 2022. April 19, 2018
200
100
-
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
THE PRESIDENT has consistently em- to spur new entrants and bring
phasized the need to reduce the price prices down. Over 1,000 generic
of prescription drugs. The Trump drugs were approved in 2017,
Administration has already taken which is the most in FDA’s history
a number of significant adminis- in a calendar year by over 200
trative steps, and proposed in the drugs. These generic approvals
President’s FY2019 Budget, to im- saved American consumers and
prove competition and end the gam- taxpayers nearly $9 billion in 2017.
ing of regulatory processes, support
better negotiation of drug discounts • Drug Competition Action
through government insurance pro- Plan. In 2017, President
grams, create incentives for phar- Trump’s FDA established a
maceutical companies to lower list Drug Competition Action Plan
prices, and reduce consumer out- to enable patients to access
of-pocket spending at the pharmacy more affordable medications
and other care settings. by focusing the Agency’s
efforts in three key areas: (1)
A. Increasing Competition improving the efficiency of
the generic drug development,
Since the beginning of the Trump review, and approval process;
Administration, HHS has taken a (2) maximizing scientific and
number of actions to increase com- regulatory clarity with respect
petition and end the gaming of regu- to complex generic drugs; and
latory processes that may keep drug (3) closing loopholes that allow
prices artificially inflated or hin- brand-name drug companies
der generic, branded, or biosimilar to “game” FDA rules in ways
competition. These efforts include: that forestall the generic
competition Congress intended.
• Accelerating Food and Drug The Agency also has taken
Administration (FDA) approval of steps to prioritize its review
generic drugs. Studies show that of generic drug applications;
greater generic competition is issued guidance to improve
associated with lower prices. FDA efficiencies in the development,
is publishing the names of drugs review, and approval processes
that have no competitors in order for generic drugs, including
Iii. Trump Administration Accomplishments On Drug Pricing | 19 |
i. https://www.whitehouse.gov/wp-content/uploads/2018/02/budget-fy2019.pdf
Iii. Trump Administration Accomplishments On Drug Pricing | 21 |
ii. 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation, 82 Fed. Reg.
1210, 1227 (Jan. 5, 2017).
iii. Aaron Vandervelde and Eleanor Blalock, Measuring the Relative Size of the 340B Program: 2012-2017, BERKE-
LEY RESEARCH GROUP (July 2017), available at
https://www.thinkbrg.com/media/publication/928_Vandervelde_Measuring340Bsize-July-2017_WEB_FINAL.pdf.
V. Further Actions Under Review And Opportunities For Feedback | 37 |
Endnotes
1. Malkin, J. D., D. P. Goldman, and G. F. Joyce. “The Changing Face Of Pharmacy Benefit
Design.” Health Affairs 23, no. 1 (January/February 2004): 194-99.
4. “Medicaid Managed Care Enrollment Reports, 2009 & 2010.” Medicaid.gov. Accessed April
23, 2018. https://www.medicaid.gov/medicaid/managed-care/enrollment/index.html.
6. U.S. Congress. House. Energy & Commerce Committee. Review of the 340B Drug Pricing
Program. 115th Cong. H. Rept.
7. Fein, Adam J. “The 340B Program Hits $16.2 Billion in 2016; Now 5% of U.S. Drug Market.”
Drug Channels. May 18, 2017. Accessed April 23, 2018. http://www.drugchannels.net/2017/05/
exclusive-340b-program-hits-162-billion.html.
8. Rémuzat, C., D. Urbinati, J. Roïz, A. Kornfeld, and M. Toumi. “Overview Of External Reference
Pricing Systems In Europe.” Journal of Market Access & Health Policy 17, no. 3 (September 15, 2015).
9. “External Price Referencing.” WHO Collaborating Centre for Pharmaceutical Pricing and
Reimbursement Policies. http://whocc.goeg.at/Glossary/PreferredTerms/External price
referencing.
10. https://www.kff.org/report-section/ehbs-2017-section-9-prescription-drug-benefits/;
https://www.cdc.gov/nchs/data/nhis/earlyrelease/ERHDHP Access 0617.pdf.
11. Shrank, William H., Niteesh K. Choudhry, Michael A. Fischer, Jerry Avorn, Mark Powell,
Sebastian Schneeweiss, Joshua N. Liberman, Timothy Dollear, Troyen A. Brennan, and M.
Alan Brookhart. “The Epidemiology of Prescriptions Abandoned at the Pharmacy.” Annals of
Internal Medicine 153, no. 10 (November 16, 2010): 633.