Vitamin tablets are arranged for a photograph in Tokyo, Japan. (Photographer: Kiyoshi Ota/Bloomberg)

$100,000 Drugs Get Targeted for Discounts Under Trump's Plan

(Bloomberg) -- The key proposal in President Donald Trump’s plan to lower the price of some of the most expensive drugs would open up those treatments to price negotiation, Health and Human Services Secretary Alex Azar said.

Trump had once pledged, to the chagrin of many Republicans, that the federal government would be doing the negotiating, using its enormous buying power to drive down prices. But the plan his administration announced last week made no mention of that strategy. Instead, the new goal is to shift the coverage of some drugs so that insurers and pharmacy-benefit managers can negotiate better deals.

Such a move would make a “huge difference,” Azar said Monday in a briefing with reporters in Washington. HHS believes it has the authority to make such a move without waiting for Congress to act, he said.

“The pen has a lot of power at HHS,” Azar said. About the proposal to change the payment system, he added: “I am certainly able to sign an order that does a demonstration or a pilot.”

Medicare spending on prescription drugs totaled $137.4 billion in 2015, a 13 percent increase over the prior year. The proposal would move coverage of some drugs in the traditional Medicare program, called Part B, which covers therapies administered by doctors, to Part D, which covers most other prescriptions.

The drugs in Part B, such as cancer treatments and some rheumatoid arthritis therapies, aren’t subject to price negotiation by insurers or PBMs like Part D drugs are. Moving Part B drugs to Part D would make them subject to haggling, which in theory would drive down prices.

Trial Method

A broad switch in how Part B drugs are managed would require Congress to pass legislation, but Azar said HHS could initiate trials of such a change sooner, though he didn’t specify when. HHS plans to identify particular drugs or classes of drugs in Part B that would generate savings if moved to Part D, according to the blueprint Trump and Azar released Friday.

Azar discussed the issue in general terms, saying there are certain drugs in Part B, such as infusions given by doctors, that have competition in Part D in the form of injections patients can give themselves. Doctors may prefer to prescribe patients the drug covered by Part B because they are reimbursed the average sales price plus 6 percent -- even if it costs patients more than a treatment under Part D.

AbbVie Inc.’s Humira is the best-selling rheumatoid arthritis drug in the U.S., with $12.4 billion in U.S. sales last year. It’s covered by Part D, while Johnson & Johnson’s competing treatment, Remicade, is covered by Part B.

If enacted, parts of the plan “would more adversely affect companies that have a high concentration of drugs covered under Medicare Part B,” Michael Levesque of Moody’s Investors Service said Tuesday. Other prominent products paid for by the program include Merck & Co.’s lung cancer drug Keytruda; Opdivo from Bristol-Myers Squibb Co., also for lung cancer; and Amgen Inc.’s white blood cell booster Neupogen, according to Levesque.

Azar said he wants to eliminate any perverse prescribing incentives and move to a system where Medicare pays doctors directly for administering drugs “not through a spread on acquisition versus reimbursement cost.”

Azar also said the administration could go after drugs that cost much less in other industrialized countries.

Class Approach

Switching all of the drugs covered under the traditional Medicare program, Part B, into the prescription-drug program could increase out-of-pocket costs for many seniors.

“If nothing else changed, it would raise out-of-pocket costs for many patients,” said Peter Bach, a drug-cost expert at Memorial Sloan Kettering Cancer Center. The fine print of the Part B-to-Part D plan “hasn’t been fleshed out enough” to understand how it would actually work and how it actually would end up impacting patients, he said.

Many of the most expensive cancer drugs -- such as Merck & Co.’s immune-therapy drug Keytruda, which costs about $160,000 a year -- are injected medicines administered by doctors or nurses. Doctor-administered drugs like those have historically been covered under the regular Medicare program. And most seniors in traditional Medicare have supplemental policies that provide full coverage for those expensive infused drugs, said Bach.

But in the Medicare prescription-drug benefit, there is currently no out-of-pocket limit and patients often must pay a percentage of an expensive medicine’s cost. That can add up fast when the drug’s list price is more than $100,000 annually.

The Trump administration has said that some of its policy proposals need to be implemented simultaneously to work. One of its proposals, which would require Congress to approve legislation, would add an out-of-pocket maximum to the prescription-drug benefit.

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