Trump proposes global pricing index model for Medicare Part B program

By PharmaCompass

2018-11-01

Impressions: 156 Article

In the US, healthcare is a major issue in the midterm elections, which are due to take place next week. As a precursor to the elections, President Donald Trump has proposed a new payment model that would more closely align the cost of Medicare Part B drugs with the prices paid for the same drugs in other countries.

Medicare pays for drugs through two programs — Part B and Part D. Part D drugs are picked up at the pharmacy or through mail order, while Part B covers treatments administered by a doctor or in a hospital or clinic.

For physician-administered drugs, Medicare pays for the cost of the product, plus 6 percent. Critics have said the system creates incentives for doctors to prescribe more expensive therapies, and for drugmakers to raise prices.

In order to prevent that, the federal health officials unveiled the ‘International Pricing Index’ model, and projected that the proposal could save Medicare more than US$ 17 billion during the next five years. Under the new proposal, the Centers for Medicare & Medicaid Services (CMS) would pay a target price based on international prices for Part B drugs and look to alternatives for the add-on fee.

Trump said he wanted to stop “global freeloading” by other governments through the proposed change to Medicare. The program covers more than 50 million elderly or disabled Americans.

Trump’s announcement came a few hours after his administration released a study ‘Comparison of US and International Prices for Top Medicare Part B Drugs by Total Expenditures’ that said the prices charged by drug manufacturers to wholesalers and distributors (commonly referred to as ex-manufacturers prices) in the US are 1.8 times higher than in other countries for the top drugs by total expenditures separately paid under Medicare Part B. Drug prices in the US were higher for most drugs included in the analysis.

To begin with, the Trump administration will test the new pricing model in half the country, targeting drugs made by a single manufacturer, Health Secretary Alex Azar said. Over time, the aim is to drive down the cost of those medications by 30 percent, Azar added.

CMS aims to gather comments over the next several months ahead of issuing a proposed rule by next spring. According to Health and Human Services officials, if the model is finalized, it would kick off in the spring of 2020.

The drug industry, represented by the main trade group Pharmaceutical Research and Manufacturers of America (PhRMA), are opposing such a move. According to PhRMA, the administration “is imposing foreign price controls from countries with socialized health care systems that deny their citizens access and discourage innovation.”

According to Wall Street investment analyst Ronny Gal of Bernstein, three drug companies — Roche, Amgen and Regeneron — would be particularly hard hit by the move. Johnson & Johnson, Bristol-Myers Squibb and Eli Lilly would also be affected.

“Change is coming,” Azar told an audience at Brookings Institution in Washington. “You can be a part of the solution in bringing market-based, competitive ways of compensating for drugs and lowering patient out-of-pocket costs, or you can put your head in the sand and pretend change is not coming and you’ll get whatever comes at you.”

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“ The article is based on the information available in public and which the author believes to be true. The author is not disseminating any information, which the author believes or knows, is confidential or in conflict with the privacy of any person. The views expressed or information supplied through this article is mere opinion and observation of the author. The author does not intend to defame, insult or, cause loss or damage to anyone, in any manner, through this article.”

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