Published: Thu, May 17, 2018
Markets | By Noel Gibbs

Their view: President needs to take broader approach on drug prices

Their view: President needs to take broader approach on drug prices

The price on Celgene's widely used Revlimid - a connection Evercore ISI's Umer Raffat made in a note this afternoon - was jacked by 20% over the previous year, which means that Medicare patients pay an extra $115 month, moving from $575 to $690 per month, for their share of a drug that had cost $11,500 a month in 2015. There will be no real effort to "derail the gravy train for special interests", as Trump put it.

Shares of pharmaceutical companies had rallied but ultimately slipped marginally at the close while biotech company stocks gained 1.2% on the stock market today following the speech. Ronny Gal, a securities analyst at Sanford C. Bernstein & Company, said the president's speech was "very, very positive to pharma".

Trump's speech singled out foreign governments that "extort unreasonably low prices from USA drugmakers" using price controls and said US trade representatives would prioritize the issue in trade deals.

The blueprint also takes aim at patient out-of-pocket costs, for example proposing to do away with rules that limit what pharmacists can share about costs with patients, for example if they could pay less out-of-pocket by not using insurance.

Mr. Trump also wants to repeal Obamacare's cap on penalties drug companies must pay when they raise prices faster than inflation, though it will require legislation from Congress. "Our plan will end the dishonest double-dealing that allows the middleman to pocket rebates and discounts that should be passed onto consumers and patients", he said.

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In the U.S., Medicare is the largest purchaser of prescription drugs, covering 60 million seniors and Americans with disabilities, but it is barred by law from directly negotiating lower prices with drugmakers.

Trump came out against even minor reforms that might interfere with drug companies charging whatever price the market can bear.

A proposal allowing Medicare to directly negotiate drug prices was not included in the blueprint, however, which was a promise Trump had campaigned on in 2016. In the first three months of this year, the industry has already spent almost $10 million for lobbying.

Countering the naysayers who said President Donald Trump was going easy on the biopharma industry, Health and Human Services (HHS) Secretary Alex Azar started the week off by putting drug companies on notice that the administration will no longer stomach business as usual when it comes to drug prices.

The Part D program now spends about $30 billion a year on the protected drugs, which include antiretrovirals, immunosuppressants, antidepressants, antipsychotics, anticonvulsant agents and antineoplastics. The agency is seeking more information on how to provide information in the most useful way to patients and providers and is also looking for feedback on ways to get state pharmacy practice acts involved. "It makes sense that proposals we see coming out of the administration would be somewhat limited".

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As secretary, he said, he can use his pen - "a very powerful pen" - to authorize demonstration projects, waivers and experiments to bring down drug prices.

HHS also plans to use shaming tactics against any drug makers that refuse to make samples available for generic manufacturers to use for their development work, calling them out on any abuses they find.

Nevertheless, he held those measures out as a threat the industry has to deal with now by offering better prices on drugs used by the federal program. Moreover, the price controls and regulations in other countries have not made it unprofitable to sell drugs there. "When foreign governments extort unreasonable low prices from United States drugmakers, Americans have to pay more to subsidise the enormous cost of research and development". "When foreign governments extort unreasonably low prices from USA drug makers, Americans have to pay more to subsidise the enormous cost of research and development", Trump said.

Instead, the administration is proposing a "competitive acquisition program" for Part B drugs."The concept of the competitive acquisition program is not to have physicians take title to the medications they're administering, but rather, have a competitive program where those drugs would be purchased and the capital outlay would occur elsewhere", so the doctor doesn't have to buy the drug "and the physician is paid. a fair, appropriate level of reimbursement for their services in administering the drug", Azar said.

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