Early in President Donald Trump’s term he said pharmaceutical companies’ prices were so high, they were “getting away with murder.” He promised Americans he would help them save big on prescription drugs. And drug companies, well, they were going to pay for it.
But drug prices rose anyway. In 2018, for every one drug price that fell, 96 other drug prices went up, the Associated Press reported. Patients’ out-of-pocket drug costs also increased — by more than 50% from 2016 to 2018 for people with cancer, arthritis and other serious conditions, according to the Health Care Cost Institute.
So in the past four months, in a last-ditch attempt to keep his promise, Trump’s administration has proposed a wave of new federal policies. The problem is that the strategies the White House has concocted, if carried through, would only enrich the pharmaceutical industry, and raise costs for U.S. taxpayers.
Since the summer, the White House has introduced at least six measures:
In June, it proposed a loophole that would let drug companies give bigger discounts to their preferred customers than they give to Medicaid. But revoking Medicaid’s price protections, which have been in place since 1992, means raising costs in this vital insurance program that covers tens of millions of the country’s poorest citizens and more children than any other insurer. The end result would be to increase the income of the drug industry and raise costs for taxpayers.
Also in June, when it came time to negotiate the price of the first effective COVID treatment, Remdesivir, the Health and Human Services Department with great fanfare committed U.S. hospitals to pay about $3,200 per patient — 33% more than the price the company announced it would charge in other developed countries.
In July, the president signed an executive order meant to block insurance companies from collecting rebates from drug companies after beneficiaries fill their prescriptions. This was the drug industry’s idea, based on an argument that they raise their prices only so they can afford the rebates. In truth, rebates work like discounts, so getting rid of them leads to higher insurance premiums — for everyone, whether they buy Medicare Part D drug insurance or get drug coverage from their employer or on an insurance-exchange plan. The administration’s own budgeters have estimated that this change will add $137 billion to drug-company earnings over the next 10 years.
Also in July, Trump announced that he will let people import lower-priced drugs from Canada. That sounds good until you realize he doesn’t have an actual plan; his administration has said as much. The Food and Drug Administration’s report on the proposal left blank the part where it was supposed to say whether it would save money, because the drugs to be imported haven’t been determined, and it isn’t known how much less they would cost. This is probably why the president’s own budget office has called the plan “not economically significant.”
In September, the president announced that Medicare would pay no more for drugs than other high income countries do. That sounds like a hard-nosed policy on how much companies can charge. In reality, it is just an edict saying that no matter how much doctors, hospitals and pharmacies have to pay to buy expensive drugs for Medicare patients, the government will reimburse them based on how much the drugs cost in other countries. In other words, the drug companies can still charge those doctors and hospitals whatever they want, and other Americans in the health care system will have to pick up the slack.
Also in September, Trump promised to send Medicare beneficiaries $200 cards to help pay for their medicines. There’s no question that high out-of-pocket drug costs are a major burden for seniors. But giving them money to help defray this cost will only encourage drug makers to raise their prices even more. The administration’s first plan was to have the drug companies pay for the scheme, but the companies said no. So now the plan is to raid Medicare’s rainy-day trust funds for the $7 billion that will be needed, funds that Americans support through payroll, Social Security and income taxes.
It’s worth noting that, having proposed these half-dozen drug-pricing measures, which range from ineffective to costly, the Trump administration is asking the Supreme Court to repeal the Affordable Care Act. Yet among the ACA’s dozens of important provisions (including protection for people with preexisting conditions) is one, rarely mentioned, that lessens the cost of medications for seniors in Medicare’s “donut hole” coverage gap. For patients who need high-cost medicines, this benefit can exceed $3,000 per year, and the drug industry is paying that cost. Repealing the law would be worth more than $100 billion to the drug industry over the next decade.
Peter B. Bach, a physician, directs the Drug Pricing Lab at Memorial Sloan Kettering Cancer Center in New York.
