Trump plan to lower drug prices moves forward on several fronts

FOLLOWING PUBLIC COMMENT, the Trump Administration has moved to implement pieces of its plan to bring down drug prices. / BLOOMBERG FILE PHOTO/JB REED

NEW YORK – The Trump administration moved swiftly in the past 24 hours to implement pieces of its plan to bring down drug prices, taking some major actions just a few days after a public comment period on the plan ended.

The Health and Human Services Department on Wednesday night submitted a proposal to the White House that would curb kickback exemptions that allow drugmakers to offer insurers and pharmacy-benefit managers rebates widely blamed for keeping drug prices high. Earlier that day, the Food and Drug Administration released a plan to boost the market for so-called biosimilars, which are generic copies of expensive drugs that contain living organisms.

On Thursday, FDA Commissioner Scott Gottlieb also said the agency would consider allowing importation of drugs from other countries under certain conditions, including when a generic-drug company that is the sole provider of a medication significantly raises the price of that drug. Astronomical price increases on sole-source generic drugs are what thrust “Pharma Bro” Martin Shkreli into the spotlight a couple years ago.

Sudden price increases and other supply disruptions “can leave patients without access to drugs they need,” Gottlieb said in announcing a working group to examine the proposal.

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The move is noteworthy because the FDA has for years – under Republican and Democratic administrations – resisted lawmaker calls to allow drug imports to lower prices for American patients.

Trump tweets

Trump thanked Novartis AG and Pfizer Inc. on Thursday via Twitter for halting drug price increases they had planned to make this month.

“Thank you to Novartis for not increasing your prices on prescription drugs. Likewise to Pfizer. We are making a big push to actually reduce the prices, maybe substantially, on prescription drugs,” Trump wrote.

Pfizer delayed its increase this year after Trump called them out on Twitter July 9 and said the company “should be ashamed that they have raised drug prices for no reason.” Novartis followed suit this week.

The proposed regulation on rebates sent to the White House Office of Management and Budget would make changes to federal safe-harbor protections that have allowed the discounts. The federal anti-kickback statute allows “safe harbor” to protect normal business practices, an exemption that currently includes PBMs.

The budget agency must review all regulations before they’re released publicly.

Details of the proposal weren’t available, but its title provides a clue to the changes being considered: “Removal Of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection.” It could represent a sweeping shift in how drug prices are set in the U.S. and potentially eliminate some of the opacity that surrounds the system.

Shares of pharmacy-benefit manager CVS Health Corp. fell 3 percent to $65.84 at 10:15 a.m. in New York. Express Scripts Holding Co., another PBM, was down 2.1 percent to $76.29.

Moving fast

The rebates idea was included in Trump’s plan, or blueprint, to bring down drug prices proposed in May, as were the FDA’s plans to boost biosimilar competition. Part of the biosimilar plan involves FDA working with the Federal Trade Commission to stop “gaming tactics” like piling up patents to extend the commercial dominance of brand-name medicines.

The rebates proposal came “faster than we had expected,” said Evercore ISI analysts Ross Muken and Michael Newshel in a note Thursday, given that the public comment period on the blueprint ended only Monday.

“The scope and details are unknown at this point, but the heightened risk and uncertainty should renew pressure on shares of PBMs, distributors and pharmacies, whose economics are driven off of gross price,” the analysts wrote.

They predicted 2020 would be the earliest any changes to the rebate system would take effect.

“While we cannot comment on pending regulations, the president’s ‘American Patients First’ blueprint to lower drug prices and reduce out-of pocket costs clearly states that we are looking at removing safe harbor protections for drug company rebates,” Caitlin Oakley, spokeswoman for HHS, said in an email Wednesday. “It should not come as a surprise that this would require rule-making.”

Gottlieb first floated the idea of re-examining the safe-harbor protections in May just ahead of the release of the blueprint. HHS Secretary Alex Azar has since repeated the idea, most recently during a speech in Washington July 9.

“Eliminating rebates within the Medicare program, pushing the system toward fixed-price discounts, is well within our administrative powers,” Azar said.

The pharmaceutical industry has pushed for insurers and pharmacy-benefit managers to pass more of the rebates they negotiate on to patients. In hearings on high drug costs, members of Congress have questioned whether the rebates should be done away with entirely. None of the companies involved in the drug supply chain have backed eliminating them.

Anna Edney is a reporter for Bloomberg News.