The White House’s withdrawal of the rebate rule, which would have hurt industry middlemen known as pharmacy benefit managers, could put it at odds with the pharmaceutical industry, a
major contributor to Republicans, ahead of the 2020 elections.
The death of the rebate rule all but guarantees that the administration will push ahead with its controversial proposal to tie drug payments to an index of cheaper international prices — the “worst possible outcome” for drugmakers, said an individual briefed on the deliberations. Two other individuals with knowledge of Trump’s strategy said that an
executive order teased by the president last week could incorporate similar ideas.
The White House also has been relying on a proposal from the Senate Finance Committee, which is negotiating a bipartisan drug pricing package including changes to government insurance programs that could be finalized as soon as next week.
“It’s very clear there are two vehicles. Senate Finance, or [the international pricing index],” said Ted Okon, executive director of the Community Oncology Alliance.
While a cadre of congressional Republicans have backed that model, others have likened it to government price controls.
HHS Secretary Alex Azar scrambled late last year to head off a public revolt by Senate Republicans against the idea, only to watch Senate Finance Chairman Chuck Grassley firmly reject it last month. Within the GOP conference, concern about the proposal is “widespread,” said Sen. John Cornyn.
House Freedom Caucus Chairman Mark Meadows — a close Trump ally — also criticized the policy. “I’m not inclined to be supportive,” he told Politico on Thursday. The North Carolina Republican had spent the past several weeks trying to drum up Hill support for the rebate rule.
Inside the Trump administration, the collapse of some drug pricing initiatives has
highlighted internal division between Azar and White House policy officials like Domestic Policy Council chief Joe Grogan and acting chief of staff Mick Mulvaney — fiscal hawks who have expanded their influence within the White House.
Azar had spent months championing the rebate rule, warning that it was the administration’s best shot at lowering drug list prices. But analyses indicated the rebate rule would raise seniors’ premiums and cost billions without touching pharmaceutical profits. Grogan and Mulvaney seized on that point in meetings with Trump, said three individuals with knowledge of those conversations,
warning that seniors could see a price hike ahead of the 2020 elections.
HHS Secretary Alex Azar warned in April that any policy that fails to address drug rebates “will simply not get list prices down.” | Alex Wong/Getty Images
Trump had trouble understanding the rebate rule, which relies on a complex series of changes to the supply chain, according to two people with knowledge of White House conversations.
“He likes importing drugs [and] ideas like most-favored-nation because they’re simple ideas, they’re trade ideas,” said one person who’s been in meetings with the president on drug policy.
Speaking to reporters on Thursday, Azar framed Trump’s decision to kill the rebate rule as a “simple” decision that he supported.
“The president is deeply committed to protecting America’s seniors,” Azar said. “He does not want any risk that any action could cause seniors’ premiums to increase.”
Azar also told reporters that there are more drug pricing plans in the works “that you don’t even know about,” although he declined to offer details. “One aspect of job security is not preempting your boss,” he said.
Trump made the call to abandon the rebate proposal after an Oval Office meeting on Wednesday that included Azar and Grogan, three sources familiar with the discussion said. Concerns about 2020 premium hikes and doubts about the rule’s true impact on drug costs weighted the discussion.
White House skeptics had expressed doubts the policy could live up to the administration’s promises, two sources familiar with the discussion said. The critics also pointed to the pharmaceutical lobby’s support for the rule as cause for alarm.
“There was a real concern about, would this be seen as, and was this, a giveaway to the pharmaceutical companies?” said one person with knowledge of the discussions. “This is pharma’s business, and if they’re saying ‘Get this done,’ then they probably have the most accurate prediction of what’s going to happen in the marketplace.”
Trump, already incensed over reports of massive drug price hikes and pharma’s successful legal bid to kill the administration’s drug price advertising mandate, sided with the rule’s opponents and ordered it withdrawn.
“They were trying to take victory laps over it,” a person with knowledge of the debate said of the drug industry. “That combined with the lawsuit that didn’t go their direction on the ads pissed him off further.”
But the decision prompted dismay on Thursday from at least one Republican senator, who blasted it as a gift for the pharmacy benefit managers that had lobbied heavily against the proposed rule. The decision is “a clear victory for big health care and a loss for patients,” said Sen. Mike Braun of Indiana. He promised to push his own legislation ending rebates in the commercial market.
Drug costs have continued to
steadily rise, jumping 10.5 percent overall in the past six months and 3.1 percent among top-selling brands.
HHS has cited other figures, saying there were 57 percent fewer brand drug price increases in the last seven months of 2018 — after Trump’s laid out his blueprint — compared with the same period in 2017. A dozen companies froze price cuts during that time, chilled by a Trump tweet attacking Pfizer’s planned hikes.
HHS claimed in a statement that Trump had done more than any other president to lower drug prices. Spokesperson Caitlin Oakley said Trump and Azar were “taking bold action to end foreign free riding, examine how to safely import lower-cost prescription drugs, empower patients with meaningful transparency, and the list goes on.”
Pharmaceutical companies are bracing for Trump to ramp up attacks on the industry to combat the idea that his efforts so far have failed. “Certainly he is known to take his frustration to the American public,” said one drug industry lobbyist.
Another told Politico that the call to pull the rule shocked drug makers, prompting a scramble to figure out what happened and how to react after spending enormous sums promoting it. “Everyone is trying to get to the bottom of it,” the industry source said. “I don’t know what the lobbying strategy is going to be.”
Azar and Grogan’s meeting this week with Senate Finance Republicans gave a window into their strategy, said one health care lobbyist: they indicated that Trump would continue to use his bully pulpit, move the indexing and importation efforts forward and shepherd a drug package through Congress that penalizes Medicare Part D price hikes.
“The withdrawal [of the rebate rule] puts even more pressure on Congress to step up to the plate,” Grassley said in a news release. “It’s time for Congress to legislate and deliver on our promise to lower health care costs for Americans.”
“The Trump administration is poised to take credit for whatever Congress manages to pass on drug pricing,” the lobbyist said.