Candidate Donald Trump promised Americans a war on the pharmaceutical industry. President Donald Trump isn’t going to give them one.
On Friday afternoon, the Department of Health and Human Services released a policy blueprint for helping Americans pay for prescription drugs that, with every passing year, get harder and harder to afford.
“Today, my administration is launching the most sweeping action in history to lower the price of prescription drugs for the American people,” Trump said of the plan during a speech in the White House Rose Garden.
Whether and how much the approach will ultimately reduce drug prices is unclear, and will probably remain so for some time. But while some of the ideas Trump endorsed have bipartisan support and the potential to help people, few experts expect the administration’s plan to have the kind of dramatic impact Trump once promised.
The health care industry certainly doesn’t seem scared. Stocks climbed following the speech, while analysts dismissed it loudly, using phrases like “non-event” and “waste of time.”
A missive from the health care trading desk at Jeffries said simply, “Jay-Z’s Blueprint far more impactful than HHS version.”
Trump’s speech and a 39-page blueprint have been weeks in the making, although their roots lie in the 2016 presidential campaign, when Trump promoted himself as a different kind of Republican ― one who would stand up for average Americans and protect them from powerful corporate interests.
The drug industry was high on the list of predators. He railed against them regularly, even after taking office, famously saying drugmakers were “getting away with murder” by charging such high prices for life-saving medications.
More controversially, Trump also endorsed an idea Democrats had long championed and Republicans had long opposed: having the federal government negotiate prices directly with drugmakers, just like the governments of other developed countries do. Name-brand drugs in those countries are far less expensive than they are in the U.S.
A year and a half into his presidency, and following some well-publicized meetings with precisely the sort of pharmaceutical industry leaders he once denounced, Trump has backed away from that rhetoric. He’s no longer calling to have the federal government negotiate with drugmakers over prices and, more generally, he no longer identifies the drug industry as the primary culprit behind high prices.
Blaming Big Government More Than Big Pharma
Instead, Trump has adopted a more nuanced and in many ways more traditionally Republican argument for why prescriptions are so expensive. This view, which the White House Council of Economic Advisers laid out in a February report, blames high prices more on the excesses of big government than on the excesses of Big Pharma.
According to this argument, government insurance programs make drugs unnecessarily expensive. An example is the requirement that Medicare Part D plans ― the private insurance policies that provide seniors with prescription coverage ― include at least two drugs from each class. If the insurers who provide those plans could have just one drug from each class, administration officials say, insurers would have more negotiating leverage and could cover drugs more cheaply.
Another issue is the way Medicare pays for drugs that specialty physicians, such as oncologists, deliver on an outpatient basis. Trump administration officials say this payment scheme gives the doctors incentive to provide the most highly priced therapies when cheaper drugs might be just as good, if not better, on a clinical basis. Trump is expected to call for restructuring those payments, in order to reduce that incentive.
The administration has some other changes in mind, too. It wants to straighten out a complicated scheme of rebates and payments among insurance companies, drugmakers and a group of middlemen known as pharmacy benefit managers. PBMs have received a great deal of scrutiny in recent years, because their payment arrangements are secret.
In theory, they are supposed to help insurers bargain for lower prices, which can then benefit consumers. In practice, critics say, PBMs strike deals that drive up their own profits without providing much relief for the people who get drugs.
The precise details of how the administration plans to address these and other issues remain unclear, even in the blueprint. Absent more information, it’s impossible to know how aggressive the administration intends to be ― or what could be done through regulatory action, which the administration can handle on its own, versus legislation, which would require Congress to act.
But the break with campaign rhetoric is clear and, in this respect, Trump’s approach to prescription drugs has a lot in common with the approach he has taken toward the insurance reforms of the Affordable Care Act.
Outsourcing Policy To The GOP Establishment Again
As a candidate, Trump promised to replace “Obamacare” with a more generous, more comprehensive universal coverage scheme. At several points, he suggested he might just push for a European-style, single-payer system in which the government would simply insure everybody. “Everybody’s going to be taken care of much better than they’re taken care of now,” he said shortly after taking office.
Once in office, Trump abandoned such promises. The repeal bills he tried to pass would have downsized existing government programs and stripped away regulations designed to make sure everybody can get decent coverage, regardless of pre-existing condition. Had one of those bills become law, millions of people would have lost coverage.
A common theme in the Obamacare repeal episode and, now, the effort on drug prices is Trump’s willingness to outsource policymaking to the GOP establishment, which remains loyal and sympathetic to the big corporations Trump attacked as a candidate.
Still, there are some critical differences as well.
With the repeal fight, Trump was largely outsourcing to congressional leaders like House Speaker Paul Ryan (R-Wis.). They promoted extremely conservative ideas, including structural changes to Medicaid that would have dramatically reduced its funding. At times, they seemed more focused on getting a bill ― any bill ― through Congress than attempting to construct a workable alternative for helping people to get insurance.
“But in an administration full of ideological zeal and sometimes questionable competence, Gottlieb and now Azar have reputations for smarts, savvy and a serious commitment to governing.”
On prescription drugs, it appears Trump has largely turned policymaking over to a few key figures in his administration, chiefly Alex Azar, the secretary of Health and Human Services, and Scott Gottlieb, the commissioner of the Food and Drug Administration. Both are bona fide conservatives and have ties to the drug industry. Azar is a former Eli Lilly executive.
But in an administration full of ideological zeal and sometimes questionable competence, Gottlieb and now Azar have reputations for smarts, savvy and a serious commitment to governing. Gottlieb in particular has earned praise, even from Democrats, for the way he has managed the agency.
And so perhaps it is not surprising that at least some of the ideas they have put on the president’s agenda enjoy a great deal of support from across the political spectrum. These days, it’s difficult to find anybody who understands health policy who’s willing to defend current PBM practices. And those changes to reimbursement for cancer and other specialty drugs? The Obama administration tried to do something similar.
The administration also says it will seek to change the design of the Part D benefits, in ways that could make specialty drugs more affordable for the people who desperately need them but struggle to pay for them.
Each of these ideas comes with its own costs and potential dangers. Take the idea of changing the requirements on which drugs Part D plans cover, reducing the number from two to one in each class of treatment. The theory is that with two drugs, many people will take the more expensive one when they don’t need it. But if there’s just one, it could be harder for people who need a different drug to get one. (Think of somebody who needs a particular psychiatric drug in order to avoid certain side effects.)
The Trumpiest Part Of The Plan
There is one element of the administration’s drug strategy that has a distinctly Trumpian tinge to it: criticism of other countries.
The administration argues that drug companies charge Americans more because, in other countries with price controls, they have to charge less. In this view, those other countries are basically getting a free ride, because American consumers are subsidizing the research and development that leads to breakthroughs. Trump says he will address that problem by somehow getting other countries to pay more of their fair share.
Presumably, this would entail making drug prices, already a subject of trade negotiations, an even bigger priority, though it’s not clear how much leverage the U.S. has. Also, most economists doubt the prices that drug companies can get abroad have much, if anything, to do with the prices they charge here.
“What’s not on the table are any of the big, potentially game-changing ideas like having the government negotiate directly with drugmakers.”
What’s not on the table are any of the big, potentially game-changing ideas like having the government negotiate directly with drugmakers, or allowing imports of cheap drugs from other countries, or radically redesigning the patent system (which some economists believe is both the source of high prices in this country and the easiest way to bring them down).
There are reasons for this. Conservatives like Azar and Gottlieb say such measures would cause more harm than good ― stifling innovation, limiting choices and ultimately depriving people of medicine they need.
Lots of reasonable people agree with that view, or at least worry about the possible effects of the government meddling with prices. The economics of pharmaceuticals, like health care policy generally, is complicated and full of trade-offs.
But the contrast with what Trump promised as a candidate could not be more stark.