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White House abandons plan to eliminate hidden rebates in order to lower drug prices

The health secretary, Alex Azar (left), and Trump White House advisers have disagreed over drug-pricing legislation.
The health secretary, Alex Azar (left), and Trump White House advisers have disagreed over drug-pricing legislation.(Alex Brandon/Associated Press)

WASHINGTON — The Trump administration has withdrawn a key proposal to lower drug prices, which its top health official had touted seven months ago as the most effective way to curb medicine costs for consumers.

The so-called drug rebate rule would have ended a widespread practice in which drug makers give rebates to insurance middlemen in government programs such as Medicare. The idea was to channel that money to consumers instead.

The proposed rule was the second major Trump drug-pricing effort to collapse this week, further complicating the administration’s efforts to lower prescription drug costs, which President Trump is eager to promote as he courts voters for his reelection campaign.

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The withdrawal of the plan is expected to put more pressure on administration officials to embrace more populist proposals, from importing lower-cost drugs from other countries to basing the prices of some Medicare drugs on the lower costs paid by other countries — ideas favored by the president but reviled by the drug industry and many Republicans.

Health and Human Services Secretary Alex Azar and top White House policy advisers had disagreed over the merits of the drug rebate rule. Azar proposed the rule in January as a central plank of the administration’s effort to lower drug prices, and he had proposed implementing the change next year. But policy advisers at the White House bristled at the rule’s nearly $180 billion estimated price tag over a decade and at forecasts it would raise Medicare premiums.

The policy has been embraced by drug makers but resisted by the health insurance industry and pharmacy benefit managers, the middlemen who administer drug benefits.

The decision to jettison the proposed rule was made at an Oval Office meeting this week, at which several advisers, including White House Domestic Policy Council director Joe Grogan, White House acting chief of staff Mick Mulvaney, and Azar discussed it with the president, according to two sources.

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Several argued it would raise Medicare premiums before the 2020 election, the sources said. Azar was the only one advocating for it. Trump made the decision to withdraw the plan.

In a briefing Thursday with reporters, Azar echoed the White House’s line of reasoning: ‘‘At the end of the day, while we support the concept of getting rid of rebates . . . we’re not going to put seniors at risk of their premiums going up,’’ he said.

Azar contended the practice of hidden rebates is a bad idea and predicted ‘‘we are going to continue to see the days of rebates are over. We have totally changed the debate on rebates.’’

The decision drew praise from pharmacy benefits managers — the insurance middlemen who would have been most hurt by the proposal — who had lobbied members of the Domestic Policy Council and Azar to drop it.

‘‘Only drug manufacturers have the power to set drug prices,’’ Pharmaceutical Care Management Association CEO J.C. Scott said in a statement. ‘‘We believe that the key to lowering drug costs is to enact policies that encourage greater competition.’’

Drug makers, however, called the decision ‘‘a blow to seniors.’’

‘‘Of all the policies proposed in Washington right now, this was the only proposal that would provide immediate savings at the pharmacy counter,’’ said Holly Campbell, a spokeswoman for Pharmaceutical Research and Manufacturers of America.

White House spokesman Judd Deere said the administration hoped to collaborate with Congress on other approaches to lowering drug costs.

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‘‘The Trump administration is encouraged by continuing bipartisan conversations about legislation to reduce outrageous drug costs imposed on the American people, and President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline,’’ he said in a statement.

Azar and Grogan met with Senate Republicans earlier this week to discuss a bipartisan drug-pricing proposal, expected to be unveiled in the coming weeks.

In the other Trump drug policy derailed this week, a federal judge on Monday blocked a rule that would have required drug makers to include the list prices of their medicines in television ads. The judge argued the Health and Human Services Department had overstepped its authority in implementing the rule and needed approval from Congress to do so. The HHS has indicated it is consulting the Justice Department on the next steps.

Meanwhile, Azar told reporters Thursday that he is working with the White House on other ideas to lower drug prices, including finding ways to import lower-cost drugs from other countries.

Trump has embraced a proposal by Florida Governor Ron DeSantis, a Republican, to import lower-priced drugs from Canada. Azar had originally expressed concerns such an approach could allow potentially unsafe counterfeit drugs into the country, but he told reporters Thursday that he thought there were ways to allow imports while ensuring safety.

‘‘My thinking has always been if we are going to have importation, we have to ensure the safety of the drug supply in the US and deliver savings for consumers,’’ he said. ‘‘Increased major players in wholesale distribution. . . . I think could open the door.’’

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Azar said he was not disappointed in the president’s decision on rebates. He also said he would be ‘‘delighted to stay in this role as long as the president is in office and the president wishes me to be here. I love this job.’’