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Plan to cut drug prices drops populist designs

President Donald Trump speaks with Health and Human Services Secretary Alex Azar by his side, in the Rose Garden of the White House on Friday.Jabin Botsford/The Washington Post

WASHINGTON — President Trump vowed Friday to “bring soaring drug prices back down to earth” by promoting competition among pharmaceutical companies, and he suggested the government could require drugmakers to disclose prices in their ubiquitous television advertising.

But he dropped the popular and populist proposals of his presidential campaign, opting not to have the federal government directly negotiate lower drug prices for Medicare. And he chose not to allow American consumers to import low-cost medicines from abroad.

He would instead give private entities more tools to negotiate better deals on behalf of consumers, insurers, and employers.

Speaking in the Rose Garden of the White House, Trump said that a “tangled web of special interests” had conspired to keep drug prices high at the expense of American consumers.


“Everyone involved in the broken system — the drugmakers, insurance companies, distributors, pharmacy benefit managers, and many others — contribute to the problem,” Trump said. “Government has also been part of the problem because previous leaders turned a blind eye to this incredible abuse. But under this administration we are putting American patients first.”

His proposals hardly put a scare into the system he criticized.

Ronny Gal, a securities analyst at Sanford C. Bernstein & Co., said the president’s speech was “very, very positive to pharma,” and he added, “We have not seen anything about that speech which should concern investors” in the pharmaceutical industry.

Shares of several major drug and biotech companies rose immediately after the speech, as did the stocks of pharmacy benefit managers, the “middlemen” Trump said had gotten “very, very rich.” The Nasdaq Biotechnology Index rose 2.7 percent on Friday. CVS Health, which manages pharmacy benefits for many insurers and employers, finished up 3.2 percent.

Republicans in Congress welcomed the president’s attention to high drug prices and promised to review his proposals, which Trump said would “derail the gravy train for special interests.”


Democrats embraced the opportunity to push health care back to the center of the political debate.

“President Trump offered little more than window dressing to combat the rising cost of drugs — a problem that is pinching the pocketbook of far too many Americans,” Senator Chuck Schumer of New York, the Democratic leader, said after the speech. “We Democrats have offered a better deal on prescription drugs through true transparency, Medicare Part D negotiation, and a cop on the beat to police and stop exorbitant price hikes.”

After supporting some of those same proposals on the campaign trail, Trump pivoted to a different approach. He said his administration would provide new powers for Medicare’s private prescription drug plans, known as Part D, to negotiate lower prices but he would not use the purchasing power of the federal government to conduct direct negotiations. He said he would make it easier for pharmacists to inform patients of cheaper alternatives and would speed the approval of over-the-counter drugs “so that patients can get more medicines without prescription.”

Trump also denounced foreign countries that he said “extort unreasonably low prices from US drugmakers” so that their citizens often pay much less than American consumers for the same drugs.

“America will not be cheated any longer, and especially will not be cheated by foreign countries,” Trump said. He directed his trade representative to “make fixing this injustice a top priority” in negotiations with every trading partner.


“It’s time to end the global freeloading once and for all,” Trump said.

It is not clear why higher profits in other countries would be passed on to American consumers in the form of lower prices, and officials in those countries pushed back hard.

“With our price regulations, drug companies are still making profits — just lower profits than in the United States,” said Dr. Mitchell Levine, chairman of Canada’s Patented Medicine Prices Review Board, which reviews prices to ensure they are not excessive.

The administration floated several ideas that could radically change the marketing of prescription drugs.

Alex M. Azar II, the secretary of health and human services, said the Food and Drug Administration would explore requiring drug companies to disclose list prices in their television advertisements.

The government, he said, will consider whether to “outlaw rebates” — the discounts and price concessions that are a key link in the drug supply chain. Pharmacy benefit managers are hired by insurers and large employers to negotiate lower drug prices, but they also receive rebate payments from drugmakers, creating a potential conflict of interest, the administration said.

Trump said he would end “the dishonest double-dealing that allows the middleman to pocket rebates and discounts that should be passed on to consumers and patients.”

Mark Merritt, the president and chief executive of the Pharmaceutical Care Management Association, which represents drug benefit managers, said the real problem was the high prices set by drugmakers.

“Getting rid of rebates and other price concessions would leave patients and payers, including Medicaid and Medicare, at the mercy of drug manufacturers’ pricing strategies,” Merritt said.


Thomas M. Moriarty, an executive vice president of CVS Health, said his company already offers clients the option to share rebates and discounts with consumers when they fill prescriptions.

Experts said some of the president’s ideas could help lower drug prices.

“It’s framed as a pro-competitive agenda, and touches on a range of government programs that the administration can change through regulation — so that the president can take unilateral action,” said Daniel N. Mendelson, the president of Avalere Health, a research and consulting company. “The trick here for the administration is to do something visible before the midterm elections, so they can take credit for an action that reduces drug prices for consumers.”

Trump’s “blueprint to lower drug prices” has four main themes: increasing competition in drug markets; giving private plans more tools to negotiate discounts for Medicare beneficiaries; providing new incentives for drug manufacturers to reduce list prices; and cutting consumers’ out-of-pocket costs.

The administration would lower out-of-pocket costs for Medicare patients by requiring prescription drug plans to pass on some of the discounts and rebates they receive from drug manufacturers. Patients could see those savings at the pharmacy counter. At the same time, Medicare officials say, there could be a modest increase in premiums for Medicare drug coverage.