How Team Trump Is Bringing Drug Prices Down

This op-ed originally appeared in the New York Post on February 7, 2019.

When you go out and make a major purchase for yourself or your family, do you ever do it without first knowing what it’s going to cost you? Of course not.

Yet that is what our health-care system asks of millions of Americans every day, when they make health-care decisions without knowing what they will cost or show up to the pharmacy counter to pick up a drug they need without knowing the price.

Take prescription drugs: Patients are often in the dark about what their medications will cost them until they get to the pharmacy counter. But more than that, they also often have no idea about how that price of their drugs was calculated in the first place.

President Trump has exposed the dirty secret of drug pricing: There is a shadowy third player in the transaction ­between patients and their pharmacists: middlemen who have taken a big kickback from the drug manufacturer, which may or may not be reflected in patients’ out-of-pocket costs.

As Americans heard Tuesday in the State of the Union Address, the president is committed to improving fairness and transparency in health care. These back-door deals in health care undermine his ­vision for drug pricing and are completely unacceptable.

We have already gotten started. Last week, the Trump administration proposed what could be the single biggest change to the way Americans’ drugs are priced at the pharmacy counter, ever. Under the president’s plan, the current system of kickbacks to middlemen would be replaced with transparent, up-front discounts, delivered directly to patients.

Each year, more than $150 billion in rebates are passed around the drug-pricing system — and ­patients are entirely in the dark about it. In 2017, there were more than $29 billion in rebates in the Medicare Part D program alone, which pays for medication for ­­elderly Americans.

Under the president’s proposal, kickbacks in Medicare Part D would be eliminated and replaced with ­direct discounts that are passed on to seniors at the pharmacy counter.

There are other benefits to bringing this new transparency to drug markets. As it is, drug companies regularly raise prices on many medications, because the higher prices ­allow them to make larger kickback payments, in the form of rebates, to the drug plans that ­decide which drugs are covered by insurance.

Without these kickbacks, the single biggest incentive to raise prices every year will be eliminated, and prices can come down. Eliminating today’s kickbacks will also open up more choice and competition for patients. Today, kickbacks are used by drug companies to ward off competition, depriving patients of options they may have never known about.

Proposing direct discounts at the pharmacy counter is just part of the Trump agenda for fairer, more transparent prices in health care. Like so many Americans, he is outraged by the practice of surprise billing, where patients ­receive sky-high bills from health-care providers that they didn’t know weren’t covered by insurance. The Department of Health and Human Services, which I lead, is already examining what can be done to address this abusive practice.

More broadly, Americans ought to know the price of a health-care service, and what they’re going to owe out-of-pocket, before they get that service. The president has ­required hospitals, for the first time ever, to post their standard set of charges online.

That was just a first step. We are now looking at all the tools we have to provide Americans with the information they need to be ­effective consumers of health care — information to which we believe they have a right.

When prices are transparent and competition is encouraged, consumers win. We believe that can prove true in health care as it has in every other area of the American economy.

Delivering such a health-care system will mean some disruption to the status quo. But anyone who wants to defend that status quo will have to explain why they want to keep prices high and ­patients in the dark.

The president is going to keep charging ahead with delivering better care at more transparent, lower prices. That’s what it looks like to put American patients first, and that’s what he will deliver.