Administration Releases Blueprint to Lower Drug Prices, Reduce Out-of-Pocket Costs

by Holland & Knight LLP

Holland & Knight LLP


  • "American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs" outlines actions that the Administration proposes to lower prescription drug prices.
  • The plan includes four broad strategies for reform: improved competition, better negotiation, incentives for lower drug list prices and lowering out-of-pocket costs for patients.
  • The blueprint suggests that the Trump Administration may be willing to consider a wholesale re-ordering of how prescription drugs are paid for by the federal government.

"American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs," released on May 11, 2018, outlines the much-anticipated set of actions that the Administration proposes to take to lower prescription drug prices. It addresses four broad strategies for reform: improved competition, better negotiation, incentives for lower drug list prices and lowering out-of-pocket costs for patients. In practical terms, the plan envisions a two-phased approach, including actions that can be taken immediately by the U.S. Department of Health and Human Services (HHS), and actions on which HHS would need to solicit feedback, presumably through the regulatory notice-and-comment rulemaking process.

The 44-page document prefaces its proposed approach with a history of drug pricing and the regulatory environment, the increase in high-deductible health insurance and an overview of the growing prevalence of high-cost specialty drugs as a percentage of overall drug spend. It also offers several pages of explanation regarding actions that the Administration has already taken in an attempt to address high drug prices and outlines the proposals in the President's Fiscal Year 2019 Budget on this topic.

Immediate Actions

The announcement offers 15 steps that the Administration believes it can take immediately through HHS. These include, among others:

  • having the FDA issue guidance to manufacturers on the use of the Risk Evaluation and Mitigation Strategies (REMS) program to limit access to generic manufacturers to samples of brand products
  • having the Centers for Medicare & Medicaid Services (CMS) develop a demonstration project to test value-based pricing models
  • directing CMS to evaluate options for allowing Medicare Part D plan sponsors to adjust coverage or payment for a drug based on the indication for which it is used
  • allowing Part D plan sponsors to adjust their formularies or benefit designs during the plan year in response to a price increase on sole source generics
  • calling on the U.S. Food and Drug Administration (FDA) to evaluate whether to require manufacturers to include the list prices of their drugs in direct to consumer advertising
  • prohibiting Part D plan sponsors from preventing pharmacists from informing patients when they could pay less out-of-pocket by not using their insurance
  • working with the U.S. Trade Representative to "develop the knowledge base necessary to address the unfair disparity between the drug prices in America and other developed countries"

Need Public Input

Fourteen pages of the blueprint are devoted to topics and proposals on which the Trump Administration would seek input by soliciting comments from industry and the public. Some of the more notable questions posed, which appear to telegraph the Administration's willingness to take a significant departure from the status quo with respect to the pharmaceutical supply chain, include:

  • What benefits would accrue to Medicare and Medicaid beneficiaries by allowing manufacturers to exclude from their calculation of Average Manufacturer Price (AMP) and Best Price rebates or price guarantees included in value-based arrangements?
  • Should Part B drugs sold by manufacturers offering lower prices in other developed countries be subject to negotiation by Part D plans?
  • Should Pharmacy Benefit Managers (PBMs) be obligated to act as a fiduciary of the entity for whom they are managing the drug benefit (i.e., payers and employers), and should PBMs be forbidden from receiving any remuneration from manufacturers?
  • Does the use of manufacturer copay cards help lower consumer cost or actually drive increases in manufacturer list price? What would be the effect of eliminating the exclusion of manufacturer-sponsored drug discount cards from AMP and Best Price?
  • Has the 340B drug discount program caused cross-subsidization in form of higher prices paid for drugs by commercial payers?
  • If a drug can be used safely in an outpatient setting and achieve the same outcomes, how should Medicare encourage the administration of those drugs in the outpatient setting in order to encourage their reimbursement under Part B rather than Part A to take advantage of lower payer, and out-of-pocket, costs that might accrue?

All of the issues raised in this section of the document are posed as mere questions and are open-ended. They will necessarily be the subject of public input through the notice-and-comment rulemaking process or potentially through necessary changes in law. However, the nature of many of these questions suggest that the Trump Administration, through HHS, may be willing to consider a wholesale re-ordering of how prescription drugs are paid for by the federal government. This bears close attention at all levels of the supply chain.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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