Trump Proposes Allowing Medicare to Base Drug Prices on What Other Countries Pay

During a speech at the HHS, President Donald Trump unveiled the latest steps his administration is taking to help Medicare drive down the costs of prescription drugs. Trump announced that CMS will be able to determine the price it pays for certain drugs based on the prices that other countries pay.

The new policy follows on the heels of Trump signing into law the Patient Right to Know Drug Prices Act, which eliminates pharmacy gag clauses that prevent pharmacists from telling patients if their medication would be cheaper if they paid out of pocket.

“We’re taking aim at the global freeloading that forces American consumers to subsidize lower prices in foreign countries through higher prices in our country,” Trump said.

He added that other countries have “rigged the system” so Americans pay more to fund research and development for the benefit of the rest of the world. “But no longer,” he said.

Earlier in the day, HHS released a report comparing prices the United States paid for the top Medicare Part B drugs with the prices in other countries, including the United Kingdom, Canada, France, and Germany.

The report found that prices in the United States were 1.8 times that of the average international price. Only 1 product had lower prices in the United States compared with the other countries in the report. For another 6 drugs, the price in the United States was similar (within 20% of the international price), and for the remaining 27 drugs analyzed, prices in the United States exceeded the average international price by more than 20%. For 19 of the products, the United States had the highest price compared with any other country.

Germany and Canada also had higher prices with each having the highest prices for 6 of the drugs. Meanwhile France and the United Kingdom had the lowest prices measured for 4 drugs each.

According to the report, Medicare and its beneficiaries spent $8.1 billion more on these products than it would have if it paid based on international prices. Trump gave 1 example of an eye medication that prevents blindness for which Medicare paid more than $1 billion a year. However, if Medicare paid the prices of international comparators, it could bring those costs down to $187 million, Trump said.

“This happens because the government pays whatever the drug companies set without any negotiation, whatsoever,” he said. “Not anymore.”

The American College of Rheumatology (ACR) quickly released a statement in reaction to the speech. While ACR agreed that action is needed to bring down the cost of drugs, it expressed concern that efforts could unintentionally hurt patients by limiting access to treatment. ACR highlighted CMS’ recent decision to allow Medicare plans to implement step therapy, or a fail-first policy.

“As we have noted with previous proposals, efforts to address high costs can sometimes create significant access issues for patients while penalizing doctors for providing quality care,” according to the statement. ACR added, “It is imperative that policy makers stay focused on the players who control drug prices and not penalize Medicare patients who depend on timely access to needed therapies.”

A fact sheet on CMS’ website outlined the proposed International Pricing Index, which would start in spring 2020 and be evaluated over the course of 5 years. CMS plans for the model to initially focus on single-source drugs and biologics. The potential model would test a payment for included drugs for when the average sales price is higher than an international price. In this instance, CMS would pay based on the target price based on the international price index.

CMS estimates that using an international price index instead of average sales price will reduce drug spending by approximately 30%. Comments are open on the proposal until December 31, 2018.

“At long last drug companies and foreign countries will be held accountable for how they rigged the system against American consumers,” Trump said.