Tagged Medicare

Trump’s Budget Proposal Swings At Drug Prices With A Glancing Blow

President Donald Trump’s new budget proposal flirts with combating high prescription drug prices, but industry watchers say the tweaks to Medicare and Medicaid do little more than dance around the edges of lowering the actual prices of drugs.

The White House’s proposal, which comes after Congress passed a two-year spending deal last week, though, sets the tone for the administration’s focus on prescription drugs.

“Drug costs are a populist issue for the president,” and he’s made it clear to his staff that progress needs to be made this year, said Dan Mendelson, president of Avalere Health, a health care consulting firm.

The proposal targets billions of drug spending cuts in the federal Medicare program, which provides health care for about 60 million people age 65 and older or younger patients with disabilities, and alters drug spending in Medicaid’s safety-net program for nearly 70 million Americans.

And the sheer size of the federal government’s Medicare and Medicaid programs means any drug pricing tweaks that do get made are meaningful — just not necessarily groundbreaking.

“The main question is, how far are they actually going to go in dealing with the underlying problem?” said Paul Van de Water, who spent nearly two decades in the Congressional Budget Office and is now a senior fellow at the Center on Budget and Policy Priorities. Most of the proposals for Medicare, for example, move money around rather than force decreased prices, Van de Water said.

Alex Azar, the newly appointed secretary of Health and Human Services, said the proposed budget supports the work his agency is already doing to reduce the high cost of prescriptions, “especially for America’s seniors.”

Just last month, the former Eli Lilly executive told Congress during his confirmation hearings that “all drug prices are too high in this country.”

Highlights from the proposals include:

— Passing on the discounts and rebates negotiated by pharmacy benefit managers, the financial middlemen between insurers and drugmakers, to seniors who buy drugs through Medicare Part D. The seniors would pay less out-of-pocket when buying their drugs but the proposal could potentially raise premiums because insurers wouldn’t be getting the discounts.

— Ensuring that low-income seniors in Medicare don’t pay for generics and capping out-of-pocket costs for beneficiaries who pass through the so-called doughnut hole, or coverage gap, and hit the catastrophic stage. Beneficiaries typically pay a 5 percent coinsurance in the catastrophic phase, but under the plan it would be decreased to zero.

— Moving some of the drugs paid for under Medicare Part B, which covers drugs administered in the doctor’s office such as chemotherapy and rheumatoid arthritis infusions, into the Part D part of the program to foster price negotiations. While the government pays sticker price for drugs under the Part B program, the Part D program allows insurers and pharmacy benefit managers to negotiate formularies.

— Creating a five-state pilot project to allow state Medicaid programs to negotiate prices with manufacturers and create their own drug formularies.

Trump entered office with blustering promises to bring drug prices “way down.” But critics have charged that the White House has failed to engage Congress on cost-cutting ideas, and that a leaked draft of an executive order last summer read like a wish list for the industry.

With the new budget, the administration is trying to recast that narrative at a time when Republicans in Congress may be willing to compromise.

“Americans want Washington to lower prescription drug prices, and our paper provides policy options that would make drugs more accessible to Americans, today and in the future,” wrote D.J. Nordquist, chief of staff for the president’s Council of Economic Advisers, in an email late Friday after the council released a 28-page report on reforming drug prices.

The CEA paper and the president’s budget come on the heels of Congress passing a spending pact Friday that includes a big benefit to Medicare enrollees at the expense of the pharmaceutical industry. The budget proposes closing the doughnut hole in 2019, a year earlier than expected.

Republicans “just showed a propensity to sort of take on the industry,” said Jayson Slotnik, a policy consultant and partner at Health Policy Strategies. And there is political upside for doing more since Republicans are concerned about this year’s November midterm elections approaching, Slotnik said: “They can run and [say] it’s something they have accomplished.”

Yet James Love, director of the nonprofit Knowledge Ecology International, said Trump’s proposals are not “insightful or original” and, referring to the council’s report, said it “could have been written by PhRMA,” the powerful D.C. lobbying firm for pharmaceutical manufacturers.

PhRMA released a statement late Monday applauding the provision to pass on rebates to Medicare beneficiaries but also raising concerns about other elements of the budget proposal, saying they would “limit access to innovative medicines.”

Experts from the academic and think-tank world said the district has seen several of these policies before. For example, the rebate and discount pass-through proposal has been a topic of discussion within the Centers for Medicare & Medicaid Services for more than a year and is already in the rulemaking process.

Another proposal that lowers reimbursement for Medicare Part B drugs that are new to the program is reminiscent of an Obama-era pilot that never got off the ground.

Tara O’Neill Hayes, who focuses on health policy at the conservative American Action Forum, said several Medicare proposals were also similar to those found in a June 2016 report by the Medicare Payment Advisory Commission. If all the Medicare proposals took effect — including one that calls for more flexibility in drug formularies — O’Neill Hayes said overall premiums could go up slightly for all Part D beneficiaries, but that would be offset by lowering out-of-pocket payments for the beneficiaries with the highest drug costs.

“You’re going to have winners and losers,” she said. “The real winners here are going to be the incredibly high-cost patients.”

Trump’s budget requires hospitals to provide a minimum level of charity care to get an additional payment adjustment under the 340B program, which requires pharmaceutical manufacturers to provide drugs at steep discounts to hospitals and clinics with a high ratio of low-income patients.

The administration lowered reimbursement amounts for hospitals earlier this year, and Mendelson at Avalere said he expects more changes.

In reviewing Trump’s budget and the council report, Allan Coukell, senior director of health programs at the Pew Charitable Trusts, said several of the proposals “have the potential to reduce out-of-pocket costs, several have the potential to increase competition within the programs and/or move people toward lower cost drugs. None of it changes the overall trajectory” of rising sticker prices.

KHN On NPR: The Uniquely American Problem Of High Prescription Drug Costs

Kaiser Health News Editor-in-Chief Elisabeth Rosenthal discussed drug costs with Scott Simon, the host of NPR’s Weekend Edition on Saturday, Feb. 10. This is a transcript of that conversation.

SCOTT SIMON, NPR: The new budget passed by Congress last week includes changes for Medicare patients. It will require drug companies to give deeper discounts to Medicare on expensive prescriptions. That should reduce the cost of drugs for patients. The skyrocketing cost of prescription drugs is something followed closely by Elisabeth Rosenthal, a veteran healthcare reporter and editor-in-chief of Kaiser Health News, who joins us from her offices. Thanks so much for being with us.

ELISABETH ROSENTHAL: Thanks for having me.

SIMON: Will this and other features you see in the budget help reduce the cost of prescription drugs?

ROSENTHAL: Well, to a small number of people, it will. I mean, this really targets the Medicare-age population and Medicare plans. And for people who have very high drug costs within Medicare, it will definitely help them. But it, of course, doesn’t solve the much larger problem of the very high prescription drug prices that everyone pays in this country. And P.S., what we’re talking about for Medicare patients, even, are discounts on these very high initial prices. So, you know, a discount of a really high price still isn’t a very good deal.

SIMON: Why do we have a problem with this in the United States?

ROSENTHAL: Well, we’re the only country that doesn’t in some way directly negotiate prescription drug prices with manufacturers – the only developed country, that is. I mean, most other countries in some form either evaluate the cost-benefit ratio of a new drug and decide what they’re willing to pay or, you know, very aggressively negotiate with drug manufacturers, particularly for older drugs, as they age.

SIMON: Insulin in one form or another has been saving lives for – what? – 80 years.


SIMON: Why has the price gone up in recent years?

ROSENTHAL: Prices will rise to whatever the market will bear, right? We see that uniquely in the U.S. One vial of insulin in the U.S. costs seven times what it does in Germany. So there’s a huge disparity there. Some of the reasons have to do with reformulations of insulin that are, in fact, better than some of the older ones. Although, when I’m talking about that 1 in 7 price comparison, that’s the same exact insulin.

In the U.S., what’s happened – and this is something that I know the Trump administration is looking at and many experts in the field have decried – the slow arrival of biosimilars or generic insulins onto the market, which are on the market in other countries. The problem in this country is the lowering of prices of insulin. And insulin patents have been held up in the courts for years now in suits and countersuits between the three big insulin drug makers, including by Eli Lilly, which is the former employer of our new HHS Secretary.

SIMON: That’s Alex Azar – has been appointed Secretary of Health and Human Services.


SIMON: Is he the kind of choice that gives you optimism that prescription drug prices will come down?

ROSENTHAL: Well, there’s a certain argument to be made that Alex Azar of all people on Earth understands how the games are played and how these suits and countersuits about making generics or making biosimilars have held up the arrival on the U.S. market and have raised prices for everyone. On the other hand, there’s ongoing concern about the revolving door between government and pharmaceutical companies such that you wonder, is their loyalty to the American people, or is their loyalty to the pharmaceutical world from which they came?

SIMON: I don’t think I can think of any politician who says, and if you elect me, I promise prescription drugs will cost more.

ROSENTHAL: (Laughter).

SIMON: I mean, on the contrary, every politician says, elect me, and I’ll do something to bring down the cost of prescription drugs. Why doesn’t that get done?

ROSENTHAL: Yeah. Everyone agrees that our prescription drug costs are too high – both right and left – you know, Democrat, Republican. It’s one of the few points of information, points of fact that everyone agrees on. The problem is everyone disagrees on how best to tackle that. And there are a lot of forces that are resisting any change at all.

The bipartisan solution which Senator Klobuchar and Senator John McCain have proposed is allowing prescription drug imports from other countries, so we allow for a global competition in the sense of, you know, if everyone else is getting a better deal than us, why can’t we buy our prescription drugs from there the same way we buy our, you know, refrigerators and cars?

SIMON: Elisabeth Rosenthal, editor-in-chief of Kaiser Health News and author of “An American Sickness: How Health Care Became Big Business And How You Can Take It Back.” Thanks so much for being with us.

ROSENTHAL: Thanks for having me.

Strong Medicare Advantage Growth Helps Humana Beat Q4 Revenue Projections

Strong Medicare Advantage Growth Helps Humana Beat Q4 Revenue Projections

Bipartisan Senate Budget Deal Boosts Health Programs

In a rare show of bipartisanship for the mostly polarized 115th Congress, Republican and Democratic Senate leaders announced a two-year budget deal that would increase federal spending for defense as well as key domestic priorities, including many health programs.

Not in the deal, for which the path to the president’s desk remains unclear, is any bipartisan legislation aimed at shoring up the Affordable Care Act’s individual health insurance marketplaces. Senate Majority Leader Mitch McConnell (R-Ky.) promised Sen. Susan Collins (R-Maine) a vote on health legislation in exchange for her vote for the GOP tax bill in December. So far, that vote has not materialized.

The deal does appear to include almost every other health priority Democrats have been pushing the past several months, including two years of renewed funding for community health centers and a series of other health programs Congress failed to provide for before they technically expired last year.

“I believe we have reached a budget deal that neither side loves but both sides can be proud of,” said Senate Minority Leader Chuck Schumer (D-N.Y.) on the Senate floor. “That’s compromise. That’s governing.”

Said McConnell, “This bill represents a significant bipartisan step forward.”

Senate leaders are still negotiating last details of the accord, including the size of a cut to the ACA’s Prevention and Public Health Fund, which would help offset the costs of this legislation.

According to documents circulating on Capitol Hill, the deal includes $6 billion in funding for treatment of mental health issues and opioid addiction, $2 billion in extra funding for the National Institutes of Health, and an additional four-year extension of the Children’s Health Insurance Program (CHIP), which builds on the six years approved by Congress last month.

In the Medicare program, the deal would accelerate the closing of the “doughnut hole” in Medicare drug coverage that requires seniors to pay thousands of dollars out-of-pocket before catastrophic coverage kicks in. It would also repeal the controversial Medicare Independent Payment Advisory Board (IPAB), which is charged with holding down Medicare spending for the federal government if it exceeds a certain level. Members have never been appointed to the board, however, and its use has not so far been triggered by Medicare spending. Both the closure of the doughnut hole and creation of the IPAB were part of the ACA.

The agreement would also fund a host of more limited health programs — some of which are known as “extenders” because they often ride along with other, larger health or spending bills.

Those programs include more than $7 billion in funding for the nation’s federally funded community health centers. The clinics serve 27 million low-income people and saw their funding lapse last fall — a delay advocates said had already complicated budgeting and staffing decisions for many clinics.

And in a victory for the physical therapy industry and patient advocates, the accord would permanently repeal a limit on Medicare’s coverage of physical therapy, speech-language pathology and outpatient treatment. Previously, the program capped coverage after $2,010 worth of occupational therapy and another $2,010 for speech-language therapy and physical therapy combined. But Congress had long taken action to delay those caps or provide exemptions — meaning they had never actually taken effect.

According to an analysis by the nonpartisan Congressional Budget Office, permanently repealing the caps would cost about $6.47 billion over the next decade.

Lawmakers would also forestall cuts mandated by the ACA to reduce the payments made to so-called Disproportionate Share Hospitals, which serve high rates of low-income patients. Those cuts have been delayed continuously since the law’s 2010 passage.

Limited programs are also affected. The deal would fund for five years the Maternal, Infant and Early Childhood Home Visiting Program, a program that helps guide low-income, at-risk mothers in parenting. It served about 160,000 families in fiscal year 2016.

“We are relieved that there is a deal for a 5-year reauthorization of MIECHV,” said Lori Freeman, CEO of advocacy group the Association of Maternal & Child Health Programs, in an emailed statement. “States, home visitors and families have been in limbo for the past several months, and this news will bring the stability they need to continue this successful program.”

And the budget deal funds programs that encourage doctors to practice in medically underserved areas, providing just under $500 million over the next two years for the National Health Service Corps and another $363 million over two years to the Teaching Health Center Graduate Medical Education program, which places medical residents in Community Health Centers.

Kaiser Health News correspondent Emmarie Huetteman contributed to this article.

KHN’s coverage of these topics is supported by Heising-Simons Foundation and The David and Lucile Packard Foundation

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Cost and Quality Health Care Costs Medicaid Medicare Public Health The Health Law