3 things Trump can do now to lower drug prices

The problem with prescription drug prices

Consumers, pharmaceutical manufacturers, insurers, middlemen, Wall Street analysts and others are waiting for and wondering about President Donald Trump's twice-postponed speech focusing on lowering prescription drug prices. It's now scheduled for Friday.

While much as been said about what the president may or may not propose -- on-script or off -- here's a look a three ways the government could help lower the cost of prescriptions, even in the face of opposition from various interested parties. 

Direct government negotiation for Medicare-covered drugs

Insurers and pharmacy benefit managers routinely negotiate with drugmakers for big discounts on list prices. But the government, by law, cannot enter into such negotiations, even though Medicare Part D is a huge payer for all types of medicines.

That law didn't stop then-candidate Trump from pushing for government negotiations when he was on the campaign trail, when he said doing so could save some $300 billion a year.  

Now it's a different story. Health and Human Services Secretary Alex Azar, a former drug company executive, and Scott Gottlieb, commissioner of the Food and Drug Administration, are against direct government negotiation. They argue that robust negotiations are already taking place between the private insurers that provide Medicare Part D coverage and pharmaceutical companies. 

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It would be better, their thinking goes, to create an environment of more competition with more drugmakers providing alternative drugs so true price competition can exist, explained Ian Spatz, former pharmaceutical industry lobbyist and senior adviser at Manatt Health.   

"There's no guarantee that direct government negotiation would lead to lower prices," said Spatz. "The government may not get the prices right. If it prices too low, there's no incentive to create new drugs we still need. And as we've seen in other areas of the government, prices could be set too high."

Nonetheless, Mr. Trump is expected to embrace incremental changes in government drug price intervention. For instance, the administration may be willing to negotiate Medicare prices for costly physician-administered drugs such as many expensive cancer drugs that doctors now purchase direct from wholesalers. And you may see some government intervention on extreme cases of price increases for common drugs such as various forms of insulin, said Spatz.

Import cheaper drugs from Canada

This is yet another point Mr. Trump made on the campaign trail, saying consumers should be allowed to buy less expensive drugs from Canada and other countries. But that has changed dramatically. Administration officials and health care experts have balked at this idea, citing safety concerns. They say it isn't always known where drugs imported from Canada came from originally and if they're authentic.

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Nonetheless, the idea resonates with several states, including Utah, Oklahoma, Vermont and West Virginia, all of which have begun legislative efforts to allow the importation of less expensive Canadian drugs, which is currently illegal. Individual states would be responsible for making sure the drugs are safe and that patients are saving money.

In recent weeks the Trump administration has called out several trading partners that regulate drug prices, including many European countries, saying they're not paying their fair share for U.S. drug company innovation and are therefore increasing the cost of drugs in the U.S. This stance is adding to global trade tensions.

On the other side of the coin, some experts are pushing the idea of more open drug trade. One proposal: The FDA should allow foreign makers qualified to sell generic drugs in Canada, England, France and other countries to sell generics in the U.S. too.

Offer discounts directly to consumers

Earlier this year, Aetna (AET) and United Health (UNH) announced they would pass discounts they receive from drugmakers directly to some consumers. Pharmaceutical companies often offer rebates to insurers and pharmacy benefit managers to ensure their drugs are included in coverage. Traditionally, insurers have not passed these savings to consumers, instead claiming they use them to stabilize premiums. Along these same lines, President Trump announced he would like to see drug company rebates passed directly to seniors enrolled in Medicare Part D coverage.

The details of the Aetna and Humana announcements aren't yet clear, including how many consumers would be affected and how much they would save. But allowing consumers to gain more from industry discounts may be an important step in overall savings.