Trump Forces Pharma to Face More Medicare Drug-Price Negotiation
(Bloomberg) -- Drugmakers will be made to negotiate on prices for more medications paid for by Medicare, part of the Trump administration’s effort to rein in prescription costs.
Starting next year, private insurance companies that offer health plans through the Medicare Advantage program will no longer be deterred from negotiating with drugmakers for rebates or discounts on expensive medications typically administered in a doctor’s office or hospital outpatient clinic, Health and Human Services Secretary Alex Azar said Tuesday in an interview with Bloomberg.
The Centers for Medicare & Medicaid Services will allow insurers and pharmacy-benefit managers to negotiate prices for treatments covered under Part B of Medicare, the federal health-care program for senior citizens and the disabled. Expanding price negotiation into Part B, which covers outpatient visits, is a key part of President Donald Trump’s blueprint to lower drug costs, which was released in May.
The treatments subject to the change include infusions for rheumatoid arthritis, eye injections to treat certain conditions that cause vision loss as well as some cancer therapies. More than 20 million Americans are enrolled in Medicare Advantage. The government and beneficiaries in those plans spent $25.7 billion on Part B drugs in 2015.
“For the first time ever, we’re going to unleash these plans, which are so good at negotiating, to try to get discounts on Part B drugs,” Azar said. “This is a very important change in terms of drug pricing as well as just in managing and modernizing how Medicare functions.”
Medicare Advantage insurers will be required to pass on to patients more than half of the savings generated through the negotiations. Typically, the savings would result in lower premiums for patients. But because 2019 premiums are already set, patients could receive a gift card instead. Insurers in the commercial market negotiate discounts of 15 percent to 20 percent or more on the same drugs Part B has had to pay full price for until now.
The guidance being announced Tuesday gives health-insurance companies the ability to require patients to take certain steps -- such as trying a less-expensive drug -- before allowing use of a medication. Insurers can then use that leverage to negotiate with drugmakers for better rebates and discounts in exchange for not implementing such a program, which could steer patients to rival treatments.
Patients required to try other treatments would be able to ask for an exception. They also will have the option for the first time of switching plans through March 31. The change applies only to new prescriptions.
Azar said the real benefit will begin to be seen in 2020 once insurers have more time to implement the new protocol. Their experience could serve as “a road map as we work with Congress for future change.” Medicare would need congressional approval to implement negotiation on Part B drugs more broadly.
Medicare’s prescription-drug benefit, which is also operated by private insurance companies, covers far more drugs. Implemented in 2006 and known as Part D, it already allows insurers and pharmacy-benefit managers to negotiate rebates and discounts. Medicare’s move Tuesday attempts to close the gap, particularly when some treatments for a disease are covered under Part D while other drugs for the same ailment are covered under Part B.
“The typical example here would be rheumatoid arthritis,” Azar said.
Rheumatoid arthritis injections Humira and Enbrel from AbbVie Inc. and Amgen Inc. respectively, are covered under Part D, while Remicade from Johnson & Johnson, an infused therapy for the same disease, is covered under Part B.
“Now, the Medicare Advantage plan could decide if it wanted to manage that holistically as a class and help direct their patients to the most cost-effective treatments and the most appropriate sequencing of medicines,” Azar said.
Other prominent products paid for by Part B include Merck & Co.’s lung cancer drug Keytruda; Opdivo from Bristol-Myers Squibb Co., also for lung cancer; and Amgen Inc.’s Neupogen, meant to boost white blood cells after cancer treatment.
“It may be that plans don’t decide to manage oncology stuff,” Azar said. “You really can only manage what you have choices for. So you need multiple therapies that can deliver clinically appropriate solutions to be able to manage and demand rebates and discounts from pharma.”
The administration has made several significant moves over the past month to implement Trump’s drug-pricing blueprint, including submitting for White House Office of Management and Budget review a proposal to curb exemptions from kickback laws when drugmakers negotiate rebates with insurers and pharmacy-benefit managers.
Curbing rebates is seemingly at odds with the administration’s push on Tuesday to expand them through price negotiation. Azar emphasized that plans can currently negotiate discounts to bring down list prices and don’t solely rely on rebates.
What form cost-cutting measures take, discounts or rebates, “is a separate question than empowering the insurers or pharmacy-benefit managers to go after pharma,” 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. Instead the blueprint, and the plan announced Tuesday, expands the reach of insurers and pharmacy-benefit managers -- but not the government.
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