Trump targets Medicare, PBMs in plan to lower drug prices

Donald Trump
The Trump administration has its sights on major changes to Medicare in its quest for lower drug prices. (Gage Skidmore)

The Medicare program could soon see major policy changes by the Trump administration in its quest for lower drug prices, and not everyone is happy.

The administration's long-promised blueprint (PDF) to lower drug prices, released Friday, was not short on proposals to the federal program. Among the many provisions listed include value-based arrangements for drug pricing, more transparency on prescription drug prices, and possible changes for pharmacy benefit managers.

The release of the plan was applauded by many across the healthcare industry. But not everyone is happy about it. Here's a look at what it says: 

Free Daily Newsletter

Like this story? Subscribe to FierceHealthcare!

The healthcare sector remains in flux as policy, regulation, technology and trends shape the market. FierceHealthcare subscribers rely on our suite of newsletters as their must-read source for the latest news, analysis and data impacting their world. Sign up today to get healthcare news and updates delivered to your inbox and read on the go.

Value-based pricing for drugs

The administration said it's planning on experimenting with value-based programs for drugs for the first time in the near future. Industry experts have told FierceHealthcare that such programs were expected and long overdue.

The blueprint said such programs could include indication-based pricing and long-term financing. 

"These models should hold manufacturers accountable for outcomes, align with CMS’s priorities of value over volume and site-neutral payments, and provide Medicare providers, payers, and states with additional tools to manage spending for high-cost therapies," the blueprint said. 

RELATED: More Medicare Part D beneficiaries reaching catastrophic phase, likely setting up calls for reform

A "future opportunity" listed by the administration is the removal of government "impediments" to value-based contracting by private payers, which insurers have been calling for. 

The National Pharmaceutical Council said last month that restrictions on the information drugmakers and payers can use in developing a contract, current Medicare and Medicaid reimbursement regulations and legal restrictions under the Anti-Kickback Statute all impede such contracts from becoming more commonly used. 

Medicare Part D

Lindsay Bealor Greenleaf, Director at ADVI, told FierceHealthcare that some of the biggest provisions include changes to pharmacy benefit managers. The administration floated the idea of considering fiduciary status for PBMs and determining whether the rebates they seek out create an incentive to favor higher list prices.

"Increasingly higher rebates in federal health care programs may be causing higher list prices in public programs, and increasing the prices paid by consumers, employers, and commercial insurers," the blueprint said. 

Greenleaf said changes to this status would likely not happen in the near future, but it does highlight Trump and HHS Secretary Alex Azar's focus on getting rid of the middleman. 

Another proposal would be to prohibit Part D plan contracts from preventing pharmacies from telling beneficiaries that their medication could cost less out-of-pocket by not using their insurance. 

RELATED: Medicare reimbursement caught in the crosshairs of congressional opioid talks

Such "gag contracts" have been criticized for making beneficiaries pay higher out-of-pocket costs. 

Another overhaul of the Medicare program would be to give Part D plan sponsors more power when negotiating with manufacturers. The blueprint appeared to support the idea of allowing Part D plans to adjust their formularies if necessary to address a price increase for a sole source generic drug. 

Possible reforms to the Medicaid Drug Rebate Program and the 340B Drug Discount Program were also noted. The number of 340B hospitals has grown from 1,700 in 2011 to almost 2,500 in 2017, the administration reported. Some critics say the program, which is intended to reduce drug costs for low-income hospitals, has strayed from its original purpose. 

The administration is also considering restricting the use of rebates, including revisiting the safe harbor under the anti-kickback statute for drug rebates.

Industry responds

However, the healthcare industry gave mixed reviews on the plan due to concern that some provisions could actually increase prices. 

RELATED: Health insurer groups speak out against Medicare Part D policy proposal

America's Health Insurance Plans praised components of the blueprint, including encouraging doctors to prescribe lower-priced medications, and to offer their patients clear information about costs as they discuss treatments.

However, AHIP said it is concerned that some proposals could actually lead to higher costs and weaken the ability of payers to negotiate lower prices.

"Requiring drug rebates to be passed through to Medicare patients at the pharmacy counter would likely lead to higher drug prices from manufacturers, and would lead to higher premiums for seniors, as well as $40 billion in additional costs for hardworking taxpayers," the group added. 

The American Hospital Association applauded the blueprint in a statement but urged against any efforts to scale back the 340B drug-savings program.