The President’s promise on drug pricing is the same as it is on healthcare overall: You deserve to be in control of your health and your healthcare. You should get to choose your doctor, and when you and your doctor agree you need a drug, you must be able to afford it.
Hello, everyone, and thank you for joining us on this historic day.
We’re finalizing actions to tackle two of the biggest problems that drive up drug prices for Americans: the fact that Medicare doesn’t negotiate for some of the most costly drugs and the fact that discounts on many common drugs don’t reach patients at the pharmacy.
I want to begin by laying out how this work fits into the American Patients First drug pricing blueprint that we developed at HHS and the President released in May 2018.
The blueprint identified four challenges: high list prices for drugs, seniors and government programs overpaying for drugs due to lack of the latest negotiation tools, high and rising out-of-pocket costs for consumers, and foreign government freeriding off of American investment in innovation.
We laid out four strategies for addressing these challenges: more competition, better negotiation, incentives for lower list prices, and lower out-of-pocket costs.
Executing on the strategies in the blueprint has already delivered real success: Before the release of the blueprint, the inflation index for prescription drugs had risen steadily, year after year; since the blueprint, it has been flat. From June 2018 to June 2019, we saw the largest single decrease in that index in nearly 50 years. We’ve seen three consecutive years of historic total generic approvals, with over 3,000 generic approvals under President Trump. We’ve also seen two years of record approvals of new drugs, which can often provide competition to existing drugs and drive down prices as well. We’ve given Medicare Advantage plans new tools to negotiate and push the adoption of lower-cost biosimilars.
So, in other words, about two and a half years after the blueprint, we’ve improved negotiation tools, taken steps to lower out-of-pocket costs, and dramatically boosted competition. But two particular challenges remain: We still have to fix the shadowy system of kickbacks that drive list prices ever higher and don’t reduce patients’ costs at the pharmacy counter. We still need to inject competition and negotiation into Medicare Part B.
We’re fixing both of those problems today. We’re taking action to ensure drug discounts are reducing patients’ out-of-pocket costs at the pharmacy counter and promoting competition, and we’re taking action to address the lack of negotiation for some of the most costly drugs in Medicare.
First, we’re taking on a broken, shadowy system of kickbacks to middlemen and replacing them with discounts delivered to patients at the pharmacy counter.
Specifically, we’re excluding prescription-drug rebates paid by manufacturers to PBMs and Part D plans from safe harbor protection under the Anti-Kickback Statute, and creating new safe harbor protections for discounts reflected at the point of sale and for fixed-fee services arrangements between manufacturers and PBMs.
In total, there were nearly $40 billion of these kickbacks in Part D in 2019, representing an average discount of nearly 30 percent—with even deeper discounts for many drugs like insulin. Under the broken status quo, these kickbacks often don’t reduce the cost-sharing that patients owe out of pocket when they so often face sticker shock at the pharmacy.
We’re putting an end to a broken system and ensuring that all discounts reach the patient at the pharmacy counter.
There are further benefits to this rule, too: Ending kickbacks means removing the incentive that drives drug companies to push list prices higher and higher every year, rather than competing on net price.
Ending kickbacks also means removing perverse incentives that lead drug plans to favor some more expensive brand drugs, driving up patients’ out-of-pocket costs further. Ending kickbacks will mean—just as we laid out in the blueprint—more competition, better negotiation, incentives for lower list prices, and lower out-of-pocket costs.
Second, we’re announcing the Most-Favored Nation model for Medicare Part B, which will dramatically cut down on foreign freeriding, address lack of negotiation in Part B, and reduce patients’ high out-of-pocket costs.
The blueprint highlighted that these problems are especially acute in Medicare Part B, which covers physician-administered drugs—because in Part B, we don’t negotiate at all. Medicare simply pays a price that is essentially set at the manufacturer’s will.
Because of this broken system, we currently pay about twice as much through Medicare for these drugs than our peer countries do. On top of that, Part B has a perverse incentive that encourages the prescribing of more expensive options, essentially stifling competition.
Our most-favored-nation model will address all of these challenges—it goes to the heart of what’s broken about how we pay for these expensive drugs. The current pricing system essentially puts us in last place; the President’s MFN model puts American patients first.
The savings generated from this approach are simply massive: We estimate that Americans will save more than $28 billion in out-of-pocket costs over the seven years of the model, and $85 billion for the Medicare program in total. Patients win; taxpayers win; America wins.
Finally—believe it or not, we’re not done yet—we are also announcing the end today of the Food and Drug Administration’s Unapproved Drugs Initiative, which provided market exclusivity for drug companies that went through an approval process for drugs that had been grandfathered under the Food, Drug, and Cosmetic Act and were never formally approved under FDA’s modern approval system.
This program has been used by drug companies to increase prices dramatically and linked to drug shortages for important drugs patients need. In a related action, we’re also asking for input on how FDA should handle these types of drugs going forward, with the goal of ensuring a competitive market for safe and effective drugs that Americans can trust.
I want to conclude by zooming out a bit. The President has promised the American people better care, more choices, and lower costs. These drug pricing actions deliver on all of those fronts.
The President’s promise on drug pricing is the same as it is on healthcare overall: You deserve to be in control of your health and your healthcare. You should get to choose your doctor, and when you and your doctor agree you need a drug, you must be able to afford it.
Lower drug costs are essential to building the healthcare system the President has promised: an affordable, personalized, patient-centric system that puts you, the patient, in control and treats you like a person, not a number. He’s delivered that all throughout healthcare, and we’re making it a reality in some important parts of drug pricing today.
With that, I’ll now hand things over to Administrator Verma, to discuss CMS’s work on drug pricing and more details on the MFN model.
