Four Things to Look for in Trump's Drug Pricing Speech Friday

(Bloomberg) -- President Donald Trump will deliver a long-awaited speech Friday on his administration’s plan to bring down U.S. drug prices and reduce the amount people pay out of pocket for their medications.

Here are four topics his plan is expected to touch on:

Approve More Generic Drugs

Food and Drug Administration Commissioner Scott Gottlieb kicked things off last year by expediting reviews of applications to bring new generic drugs to market. The agency has given priority to certain generic-drug applications that would fill gaps where there is little-to-no low-cost competition. The FDA approved a record-setting 1,027 new generic drugs last year.

Trump’s fiscal 2019 budget request to Congress proposed speeding up generic drug approvals further. Currently, the first company to try and bring a generic to market gets six months to sell its drug before competitors drive down the price. If it has trouble making the cheaper drugs or getting approved, the process can drag out -- making consumers wait for the less expensive version. Trump’s proposal would allow the FDA to leapfrog the troubled application and move on to one ready to gain approval.

Require Other Countries to Pay More

Most other developed nations pay far less for brand-name drugs than the U.S. does, which has led to claims that Americans are subsidizing medical costs for the rest of the world. Many of those countries exert tighter price controls on pharmaceutical products, and Trump wants those countries to pay more, in the interest of fair trade.

A February report from the president’s Council of Economic Advisers called for measures that would push other countries to “appropriately reward innovation, rather than disproportionately putting that burden on American patients and taxpayers.” Trump is a proponent of using trade-deal negotiations to push other countries to act more favorably toward American interests.

Restructure Rebates

Insurers and pharmacy-benefit managers negotiate discounts in the form of rebates drugmakers pay them on the base price of medications. In addition to requiring those rebates to be passed on to seniors in Medicare, Gottlieb has floated the idea that the U.S. may need to re-examine the laws that exempt such programs from anti-kickback statutes. Senator Lamar Alexander, chairman of the Senate Health Committee, recently questioned the need for rebates, which critics say obscure the real cost of drugs.

Some insurers, including UnitedHealth Group Inc., have committed to passing more of the rebates on to patients. But because they use the rebates to lower premiums, the move could lead to a slight increase in patient insurance costs. The Pharmaceutical Research and Manufacturers of America, the lobby group for the brand-name drug industry, has backed increased rebate sharing with patients -- but not eliminating rebates.

Lower Seniors’ Drug Costs Under Medicare

The budget proposal also included requiring insurers and pharmacy-benefit managers to share rebates with Medicare beneficiaries at the point of sale, offering certain low-income seniors free generic drugs and creating an out-of-pocket spending cap on prescription drugs for Medicare beneficiaries. In addition, the administration has proposed changing how certain expensive drugs are paid for by Medicare to allow pharmacy-benefit managers to negotiate lower prices and weaken an incentive for doctors in some circumstances to prescribe higher-priced drugs.

To contact the reporter on this story: Anna Edney in Washington at aedney@bloomberg.net.

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Mark Schoifet

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