Trump's newest plan to drive down drug prices to fight 'global freeloaders' sounds exactly like what a lot of those 'freeloaders' are already doing

Reuters

U.S. President Donald Trump speaks about lowering drug prices with Health and Human Services Secretary Alex Azar from the Rose Garden at the White House in Washington, U.S., May 11, 2018.

• President Donald Trump on Thursday is giving a speech on ways to curb drug pricing.
• The speech will focus on spending in the part of Medicare that pays for seniors who get drugs administered in a doctor's office.
• Trump has decried "global freeloading" as a reason why the US pays high drug prices, but the administration's plans to bring down costs actually piggybacks on what other countries have done to lower prices themselves.
• If the plan moves forward, it's likely to face a lot of opposition from the healthcare industry, including pharma companies and doctors.

President Donald Trump's plan to lower drug prices sounds a lot like what the "global freeloaders" he often criticizes do themselves to curb high prescription prices.

Trump's administration plans to set up an "international pricing index," in which some US drug prices would be linked to what 16 other countries pay, ultimately to get to a lower price in line with what those countries are paying, Politico reports. Trump is set to give a speech later today at the Department of Health and Human Services, and the agency didn't immediately respond to a request for comment ahead of the remarks.

The speech will likely be a continuation of an effort set in motion in May, when the Trump administration laid out a 44-page drug-pricing blueprint, calling out middlemen in the pharmaceutical industry and "freeloading" by other countries that pay less than the US for prescription drugs.

The speech also comes at an interesting time given the proximity to the midterm elections. So far, Republicans have been on the defensive when it comes to healthcare, especially when it comes to the GOP's attacks on preexisting condition protections, so the speech may be an attempt to reframe the healthcare conversation as Americans head to the polls.

The Trump administration will focus on prices paid for drugs that are covered under a portion of the Medicare program known as Part B. Those are typically drugs that are given in an doctor's office and include drugs used in cancer treatment, as well as eye medications like Ey lea and Lucentis, used to treat age-related macular degeneration.

By tying the price Medicare is willing to pay to the price in other countries, Trump is effectively piggybacking on the efforts by governments in those countries to lower drug costs. Those are the same initiatives he's recently slammed as "freeloading."

Other options Trump is considering

The Department of Health and Human Services released a report on Thursday showing that the prices paid in the US for drugs that are part of Part B are 1.8 times higher than in other countries like the UK, France and Canada.

To cut back on that, the Trump administration is also considering two other options, according to Politico:

• Having companies known as pharmacy-benefit managers negotiate for lower drug prices in the way they currently do in Part D plans, which cover the prescription drugs you pick up at a pharmacy.
• Changing up the incentives for doctors, so they're paid based on a flat fee rather than a percentage of the price of a drug, as a way to push them to use lowe- cost drug options.

In 2015, Medicare spent $26 billion on Part B drugs. Most of the drugs in the Part B plan are a kind of drug called a "biologic," or drugs made of living organisms (usually cells). They're typically made by one drugmaker, which means there isn't a lot of competition over price.

Similarities to 'global freeloaders'

While Medicare is barred from explicitly negotiating prices with drug companies, Trump's proposed changes are all designed to use the collective power of the growing Medicare market to force drugmakers to bring down their prices or lose access to a potentially lucrative market. The approach bears some similarities to price negotiations by government healthcare programs in European countries like the UK.

In those countries, the government health systems directly negotiate with pharmaceutical makers over the price of their drugs. If the two sides don't agree on a price, the drug may not make it to the country's market at all, costing the maker a large chunk of change. In addition to direct negotiation, the countries use a variety of other methods, such as reference pricing, that bear similarities to the Trump proposals.

Interestingly while Trump is proposing to shift the Part B program to look more like international systems, the president and many administration members have accused those same countries of leeching off the US.

"You can look at some of the countries; their medicine is a tiny fraction of what the medicine costs in the USA. It's unfair and it's ridiculous, and it's not going to happen any longer," Trump said during a May 15 speech on drug pricing. "It's time to end the global freeloading once and for all."

Trump's argument is that pharma companies use the higher prices from the US to fund new research and development that other countries then receive, effectively benefitting from the highers costs for US patients. But instead of pushing other countries away from the practice, Trump seems to be moving closer to their system.

Already, however, there is skepticism about how much this will impact the drug industry.

"This is the first time a US administration appears to have taken a real step in their direction (how committed they are, we will see)," Bernstein analyst Ronny Gal said in a note Thursday ahead of the speech. "Some of the ideas like introducing indexing prices to other countries would be viewed by the drug industry as outright antithetical to their interests."

See also:

• The Trump administration has a little-known practice in the pharma industry in its crosshairs
• Medicaid enrollment didn't grow in 2018 for the first time in a decade - and it's thanks to the booming US economy