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Administration Releases Drug Pricing and Cost Containment Plan

By Blair Burnett, ACCC Policy Analyst

May 11, 2018
Hundred dollar bills in capsule-1

Today – Friday, May 11, 2018  –  President Trump announced the administration’s plan to tackle rising drug costs in the United States through a four-pronged policy approach outlined in “American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.” Proposed strategies seek to lower prescriptions drug costs through increased competition, improved negotiations, creation of incentives through regulatory measures to lower drug list prices and to decrease out-of-pocket spending.

The long-awaited plan is a blend of existing policies laid out in the administration’s 2019 budget blueprint as well as some smaller, more recently proposed ideas. These proposed policy changes include offering free generic drugs to low-income senior citizens, capping specific out-of-pocket costs for Medicare Part D beneficiaries, and requiring Medicare Part D plans to give a certain percentage of drug rebates to patients. Proposed reforms to Medicare Part D also seek to create an out-of-pocket maximum for a patient’s catastrophic coverage. The blueprint signals the administration’s intent to tackle the role of the Pharmacy Benefit Manager (PBM) by proposing to eliminate current “gag clauses” that do not allow pharmacists to discuss true out-of-pocket drug costs with patients. 

Under the administration’s blueprint, Medicare Part B will also see significant changes. The plan seeks to:

  • Limit payment for any drug price increase above the current inflation rate, seeking to eliminate incentives for physicians to prescribe higher price drugs.
  • Leverage the Competitive Acquisition Program (CAP) to provide physicians with an active choice between obtaining drugs through a bidding process or through direct purchasing, adhering to current Average Sales Price (ASP) methodology.
  • Retain discounts under the 340B Drug Discount Program for any hospital paid under Part B that provides charity care at more than 1% of their total patient costs.

Health and Human Services Secretary Alex Azar touted the administration’s plan for lowering drug costs as one of the most comprehensive overhauls of drug pricing, yet it does not stick to a campaign promise made by then-candidate Trump - to allow Medicare to negotiate directly with drug manufacturers. And, despite significant reforms made to Medicare, this blueprint does little to curb rising drug prices for the millions of Americans with employer coverage or private insurance.

Top administration officials have stated that most of the policy action needed to implement the blueprint can be achieved through regulatory actions rather than waiting for Congressional action. Many of the immediate steps called for in the blueprint rely on guidance from the Food & Drug Administration (FDA) and the Centers for Medicare & Medicaid Services (CMS) in the coming weeks.

In addition to the policies slated to take immediate effect, the administration has announced that they will be seeking input on the plan through a Request for Information (RFI). The administration is asking for submissions regarding additional value-based arrangements to be announced from the Center for Medicare & Medicaid Innovation (CMMI), potential implementation of indication-based pricing, analysis of moving certain Medicare Part B drug to Medicare Part D, reform of the 340B Drug Discount Program, site neutrality for physician-administered drugs, as well as site neutrality between inpatient and outpatient settings.   

ACCC will continue to evaluate the impact of these proposals on our member programs and advocate for policies that are in the best interest of all community-based providers and their patients. Look for more from us in the coming days.

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