WASHINGTON -- In his effort to bring down prescription drug prices, President Donald Trump is testing the limits of a law that prohibits the government from interfering in negotiations between drug manufacturers and the insurance companies that provide drug coverage to more than 42 million people on Medicare.
The prohibition was adopted 15 years ago when a Republican-controlled Congress added drug benefits to Medicare, and since then Republicans have repeatedly invoked it to quash Democratic demands for the government to rein in drug costs.
But now, with prices of new drugs often topping $10,000 a year, Trump has unveiled a blueprint to lower drug prices, and some of his ideas envision a larger role for the government.
He wants to require insurers to reduce retail drug prices to reflect the discounts they receive from drug manufacturers. These discounts often take the form of rebates paid to insurers and middlemen known as pharmacy benefit managers.
Trump takes further aim at those rebates by suggesting that Medicare should "restrict or reduce," or perhaps even prohibit, their use. Administration officials have said that the rebates, which are a common feature of contracts in the pharmaceutical industry, could be viewed as illegal kickbacks because they reward an insurer for increasing the sales of a drugmaker's products.
The White House blueprint suggests that it might be better to require a fixed price for a drug, rather than rebates, in contracts between drugmakers and the insurers that offer Medicare's prescription drug plans.
Critics say that is exactly the type of interference Congress wanted to prevent.
Under the president's proposal, Medicare would "dictate the details of pricing arrangements between the parties" -- details that, under the Medicare law, are supposed to be worked out in negotiations between drug manufacturers and prescription drug plans, said Wendy Krasner, a vice president of the Pharmaceutical Care Management Association, which represents drug benefit managers like Express Scripts, CVS Health and OptumRx, a unit of UnitedHealth Group.
Medicare officials "may not interfere in those negotiations," she said, and "this free market approach is generally credited for the overwhelming success" of the drug benefit program, known as Part D of Medicare.
The 2003 law that created the Medicare drug benefit says that the secretary of health and human services "may not interfere with the negotiations between drug manufacturers and pharmacies and [prescription drug plan] sponsors" and may not establish "a price structure" for the reimbursement of prescription drugs.
This provision of the law, the "noninterference clause," is central to the free market approach Republicans took when they added drug benefits to Medicare. The benefits are delivered entirely by competing private plans that try to keep costs low by negotiating with pharmaceutical companies to obtain discounts in the form of rebates, which can exceed 25 percent of the list price of a drug.
Premiums for drug coverage, which average about $35 a month for a standard Part D plan, and the overall cost of the drug program ($94 billion last year) are below the original estimates, and surveys show that beneficiaries are generally satisfied with the program.
Trump has shown no particular commitment to the principle of noninterference. As a presidential candidate, he broke with his party and said the federal government should use its buying power to negotiate lower drug prices for Medicare beneficiaries -- an idea long favored by Democrats. As president, he has backed away from that proposal, saying he wants to give private plans more tools to negotiate, under new federal rules and requirements.
Drug companies lobbied Congress to include the noninterference clause in the 2003 law. And they have often cited it in resisting Democratic proposals that call for the government to negotiate lower prices for Medicare beneficiaries. But now drugmakers want the government to require Medicare drug plans to share a minimum percentage of negotiated rebates with patients.
This, they say, would immediately reduce out-of-pocket costs for Medicare beneficiaries at the pharmacy counter. Such a change would also reduce the political pressure on drug manufacturers, which are often blamed for high drug prices.
Medicare officials have "clear statutory authority" to require insurers to pass on some of the savings they receive to Medicare beneficiaries, says the Pharmaceutical Research and Manufacturers of America, a trade group for drug companies.
Under federal law, the group says, Medicare drug plans must provide patients with "access to negotiated prices," and the government can specify how much of any rebates must be included in those prices.
A Section on 06/17/2018