President Donald Trump speaks about prescription drug prices with Health and Human Services Secretary Alex Azar in the Rose Garden on May 11. Thursday's event is another move to address his campaign promise on lowering those prices. | Carolyn Kaster/AP Photo Health Care Trump proposes sweeping changes to Medicare drug prices

President Donald Trump on Thursday unveiled a plan to overhaul how Medicare pays for certain drugs, attacking “foreign freeloaders” that he says have driven up costs in the U.S. The bold move addresses a Trump campaign pledge to lower drug prices, just days before the tightly contested midterm elections in which health care is playing a pivotal role.

Trump outlined the details in a speech at HHS Thursday afternoon, his first address at the health department. The proposal, first reported by POLITICO, still needs to be refined and put through a federal rule-making process.


The proposal would bypass Congress by using a pilot program to test three ways to lower the costs of drugs — including negotiating for some drugs directly administered by doctors to keep them in line with the far lower prices paid in many other countries, where governments often take an active role in setting prices. The proposal applies only to drugs administered in doctors’ offices and outpatient hospital departments — medicines like cancer treatments and injectable treatments for rheumatoid arthritis or eye conditions. It won’t affect most prescriptions purchased by patients at pharmacies.

"For decades other countries have rigged the system so that American patients are charged much more — and in some cases much, much more — for the exact same drug," Trump said in a brief speech at HHS. "In other words Americans pay more so other countries can play less."

HHS Secretary Alex Azar on Thursday morning touted a new department report on high U.S. drug prices that found Medicare often pays nearly twice as much as countries like France and Japan to use the same drugs. The Trump administration says that Medicare could save more than $17 billion over five years, with the cost of some drugs dropping by as much as 30 percent.

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The administration is bracing for blowback, said one official, noting that hospitals and doctors — and of course the drug companies — all have reason to be unhappy about a plan that will cost much of the health sector money. The drug industry and its allies have lots of lobbying clout; a less ambitious effort by the Obama administration to address Medicare Part B prices fizzled in late 2016.

“Nobody’s going to like this,” said the official. “It antagonizes too many people.”

PhRMA, the main trade group representing drugmakers, before Trump's speech expressed "serious concerns" about proposals that could limit patient access to drugs or discourage innovation. The Biotechnology Innovation Organization slammed Trump for embracing price controls used in other countries, predicting the proposal will "severely chill investment in new cures and therapies for America’s seniors."

Three drug companies — Roche, Amgen and Regeneron — would be particularly hard hit by the move, Wall Street investment analyst Ronny Gal of Bernstein wrote in a note to clients. He analyzed the share of Medicare Part B revenue for the top 20 drugs purchased by the program in 2016. Johnson and Johnson, Bristol-Myers Squibb and Eli Lilly would also be affected, according to the analysis.

Both “Roche and Regeneron are showing the strain,” in the stock market’s reaction Thursday, Gal said.

Despite the threat, Gal said the proposal “should be taken in stride,” due to the drug industry‘s “substantial clout” and the Trump administration’s history of throwing out a “sharp first position and negotiating some of it away.“ But he cautioned the private sector is taking a page from the White House and starting to look at similar cost control ideas.

Trump’s proposal could appeal to patients, who stand to benefit from lower prices, however, as well as Democrats, who have chastised the administration for not using its regulatory power to rein in drug prices, which polls show are a concern of both Republicans and Democrats. Trump predicted Democrats would back the plan.

"We think they will actually come along with us when they see what we’re doing," Trump said.

Health care has emerged as a hot issue in the midterms, with Democrats making gains by pledging to save Obamacare's protections for people with pre-existing conditions. Those protections would have been undermined in GOP repeal bills and are now threatened by a White House-backed lawsuit brought by conservative states. Trump’s pivot to drug prices could help Republican candidates needing a winning message on health.

Hours before Trump's speech, the pro-Obamacare group Protect Our Care called it a "desperate attempt to mask" the GOP's record on pre-existing conditions. Senate Minority Leader Chuck Schumer quickly dismissed the plan.

"It's hard to take the Trump administration and Republicans seriously about reducing health care costs for seniors two weeks before the election when they have repeatedly advocated for and implemented policies that strip away protections for people with pre-existing conditions and lead to increased health care costs for millions of Americans," Schumer said in a statement.

The Trump administration pricing proposal has several pieces, all of which dramatically shake up the industry that right now has vast control over setting Medicare drug prices. Medicare, which covers more than 50 million elderly and disabled Americans, is one of the world’s biggest purchasers of health-care services.

Under the planned “international pricing index,” U.S. drug prices would be benchmarked against prices in countries with similarly developed economies. U.S. prices would slowly be lowered to international levels over five years. The plan draws on HHS analysis comparing the U.S. against 16 other nations — Austria, Belgium, Canada, Czech Republic, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain, Sweden and the United Kingdom — where target drug prices are collectively 44 percent lower.

The Trump administration also wants to experiment with letting private sector vendors negotiate with drugmakers. That strategy is modeled on how health insurers negotiate drug prices in Medicare’s Part D program, which covers outpatient drugs for older Americans. Medicare would test this approach in certain geographic areas, where participation would be mandatory for physicians and hospitals.

Not all drugs would be included in this test. CMS would focus on drugs made by just one company (which tend to be expensive) and biologic medicines, which make up a large share of Medicare Part B spending. The federal government and Medicare beneficiaries spent about $29 billion on Part B drugs in 2016.

Under the third branch of the strategy, officials would try changing incentives for doctors to prescribe drugs. Currently, doctors often have incentives to prescribe more expensive drugs, because they get a fee based on the price. Changing that to a flat fee — instead of a percentage — could help nudge doctors to use less expensive medications.

Beyond Trump’s speech, administration officials are planning a communications blitz, which began with the HHS report on Thursday morning that lays out the high prices with Medicare’s Part B program. Azar is scheduled to give his own speech at the Brookings Institution on Friday. CMS also will begin inviting comments and announce that it may propose the rule in the spring 2019 with an eye toward starting the program in spring 2020.

When President Barack Obama sought to test new ways to pay for physician-administered drugs, the blowback came from fellow Democrats, as well as from Republicans, doctors, hospitals and patient groups. His proposal never got off the ground.

But Trump is touting this plan as part of his “America-first” agenda, blaming other nations for paying too little for drugs and relying on Americans to absorb the higher prices that fund new pharmaceutical innovation. The president has repeatedly demanded that other nations pay more for medicines, a move that he’s claimed would enable the U.S. to get better deals.

Trump’s proposal does not appear to immediately affect what other nations pay for drugs. Instead, his ideas borrow from other countries’ playbook — a gambit to align high U.S. drug prices with the rest of the world, which spends far less on the same medicines.

