Will Trump use executive action to cut drug prices?

(Bloomberg) –President Donald Trump is considering executive action to cut drug prices ahead of the 2020 election, officials familiar with the matter say, as he enters his re-election seeking to rebut Democratic criticism that his policies have hurt U.S. health care.

If he proceeds, Trump would force drug companies to accept lower payments from Medicare for treatments administered in doctors’ offices, such as Bristol-Myers Squibb Co.’s immune-boosting Opdivo for cancer and Regeneron Pharmaceuticals Inc.’s Eylea for eye conditions. The rule would apply to certain drugs bought by the “Part B” section of Medicare, the program for the elderly and disabled.

Related: Sens. Sanders, Booker propose new agency to police drug prices

Health care is a vulnerability for the president entering his re-election, and his budget proposal released Monday projects billions in unspecified drug-cost savings. He is under near-constant attack from Democrats for seeking to overturn the Affordable Care Act without offering an alternative proposal of his own to guarantee access to health insurance. He has also been criticized for claims that his policies have lowered drug prices.

“I’m calling for bipartisan legislation that achieves the goal of dramatically lowering prescription drug prices. Get a bill on my desk, and I will sign it into law immediately,” Trump said in his State of the Union speech last week.

The next day, Vice President Mike Pence said on Fox News that Trump supports a bill co-sponsored in the Senate by Republican Chuck Grassley and Democrat Ron Wyden that aims to reduce Part B drug spending among other changes to Medicare.

Contentious bills

In response to the line, many Democrats in the House chamber stood and shouted “H.R. 3” at the president, the bill number for legislation the House passed last year that would force drug makers to negotiate prices with Medicare. The White House opposes the House bill and isn’t going to change its position, one official said. Meanwhile, Senate Majority Leader Mitch McConnell hasn’t yet endorsed the Grassley-Wyden bill.

Some Republican lawmakers have criticized a provision of the legislation that would penalize drug makers for raising prices for certain medications faster than inflation, calling it a “price cap.”

Trump’s two-track approach — hoping for legislation, but preparing his own plan that would undermine congressional negotiations — illustrates the president’s anxiety about his health-care record. “There are a number of different things that we can do. I know the president is looking at other measures as well,” White House counselor Kellyanne Conway said last week.

Trump’s budget proposal, issued Monday, projects savings due to “comprehensive drug pricing reform” totaling $36.5 billion between 2021 and 2025. It doesn’t say how. The administration “eased up on specifics” of drug price cuts in the budget in order to give Congress more latitude, Office of Management and Budget Acting Director Russ Vought told Fox News on Monday.

Under the rule he’s considering formally proposing, Trump would order reimbursement for certain Part B drugs to be tied to what’s known as the International Price Index. That would mean a price cut for many medicines, since the prices drug makers charge outside the U.S. are often set by government-run health-care systems and are generally lower. Medicare doesn’t use its position as a big buyer of drugs to bargain for lower prices.

Officials working on the plan have not yet settled on many of its details. The Trump administration first proposed the approach in 2018. Three officials familiar with the matter said it remains under consideration and has not been ruled out, despite Trump’s endorsement for the Grassley-Wyden bill.

Rollout worries

The White House is wary of repeating its messy rollout of new vaping restrictions, a person familiar with the deliberations said. The White House announced a vaping crackdown last fall before waffling publicly for months and ultimately walking it back.

The drugs that would be affected by any Trump action are among the costliest taken by Americans. They include innovative therapies for cancer, immune disease and other disorders. The industry says that Part B pharmaceutical spending makes up just 3 percent of overall Medicare costs.

The pharmaceutical industry warns the move could damage its profits and take away incentives to invent new treatments.

“We have to confront really bad ideas like importation, Medicare setting the price or, you know, letting the French health minister set our prices,” Stephen Ubl, president of the pharmaceutical industry’s lobbying arm, the Pharmaceutical Research and Manufacturers of America, said in an interview last month. “We need to push back on principle. There is no middle ground on those areas.”

Carol Lynch, head of the North America unit of Sandoz, a generic and biosimilar drugmaker owned by Novartis AG, said Monday at a conference in New York that it would be “rather difficult to implement” an index to international prices. “I imagine that prices will go up elsewhere in the world” to fund innovation, Lynch said.

Policy downsides

Unilateral action would cause at least two difficulties for the president. Signing legislation to reduce Medicare spending on the drugs would generate official budget savings that Congress could have applied to other health-care legislation — bills to expand insurance coverage or reduce other drug spending, for example. Executive action taken before a bill’s passage would remove a key bargaining chip, and likely reduce the scope of a health-care bill expected in the coming months.

The president might also hurt himself on the campaign trail. Tying prices paid by Medicare to an international index that includes countries with nationalized or government-run health-care systems would undercut one of Trump’s favorite criticisms of Democratic proposals: they represent “socialism.”

“The president rails against socialist medicine, but he’s willing to import socialist pricing models into the United States,” James Greenwood, who leads the Biotechnology Innovation Organization, an industry group, said at the New York conference.

Health care contributed to Trump’s party losing control of the House of Representatives two years ago, after Republicans in the chamber voted for an Obamacare replacement that could have led to insurers charging higher prices to sick people. Democrats assailed Trump and his party for trying to strip away Obamacare protections for people with pre-existing conditions.

Democratic presidential candidate Michael Bloomberg has zeroed in on Trump’s health-care policies in an aggressive television advertising campaign, drawing the president’s ire. Bloomberg is the co-founder and chief executive of Bloomberg LP, the parent company of Bloomberg News.

“While radical Democrats propose radical plans that would destroy the health insurance of millions of Americans, President Trump continues to work to improve health care more broadly, including creating a system that protects the vulnerable and those with pre-existing conditions and delivers the affordability Americans needs, the choice and control they want, and the quality they deserve,” White House spokesman Judd Deere said in a statement.

Read more: 

• Trump officials changing drug pricing plan as bipartisan Senate bill gets blocked
• Conservatives not a fan of Trump’s drug pricing reforms
• Unsupported price increases netted drug manufacturers $5.1 billion

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