Trump's International Pricing Proposal Being Revised To Adopt ‘Most Favored Nation’ Policy – Azar
Executive Summary
HHS Secretary Alex Azar says that reshaping Administration’s upcoming proposed rule would drive Medicare Part B drug prices even lower than previously projected. As Part B drug costs are being blamed for higher premiums, the policy revisions are at OMB, but plan would reemerge as "a notice of proposed rulemaking if that comes out,” Azar said.
The US Health and Human Services Department is revising its pending international reference pricing proposal with a “most favored nation” approach in an effort to drive Medicare Part B drug prices even lower than previously projected, Secretary Alex Azar said on 13 November.
In an advance notice of proposed rulemaking released in October 2018, HHS outlined a plan to test a new payment model for Medicare Part B drugs in which reimbursement would be calculated based on an index of the lower prices paid by European countries, Japan and Canada. Under the plan, Medicare would be projected to go from paying 180% of what other countries pay to 126%. (Also see "Medicare's Foreign Price Bench-marking Will Only Hurt Bad Negotiators, HHS's Azar Argues" - Pink Sheet, 25 Oct, 2018.)
“What we suggested was reducing that 180% premium by 30%,” Azar said at a policy event sponsored by Axios and AARP. But “the President did not find that satisfactory. In his view, which he has articulated publicly, Americans ought to get the best deal among developed countries – that is the terminology of most favored nation status. So that is the type of proposal we are working on.”
President Trump mentioned his interest in a most favored nation approach to lowering US prices during impromptu remarks to reporters last summer. (Also see "White House Exec Order Will Bring US Parity With Lowest Drug Prices Abroad, Trump Says" - Pink Sheet, 5 Jul, 2019.)
Policy Still Stuck At OMB
At that time, he said the policy would be implemented via executive order. However, Azar explained the most favored nation approach is being assimilated into the upcoming IPI proposed rule. That would explain why release of the proposed rule has been delayed after it reached OMB for review in June. “We have over at [the Office of Management and Budget] right now a proposal on most favored nation/foreign reference pricing. … And it would be a notice of proposed rulemaking if that comes out,” Azar said.
Also pending at OMB is a proposal to allow importation of cheaper drugs from Canada. (Also see "US Drug Importation: Hard To See Path Forward, Former HHS Adviser Says" - Pink Sheet, 5 Nov, 2019.))
The process of finalizing the IPI proposal is tricky, White House Domestic Policy Council Director Joe Grogan commented during a recent briefing with reporters.
“These are difficult issues and we are very focused on making sure that any policy we roll out is solid, making sure the data is right, making sure we’ve thought through potential unintended consequences,” Grogan said.
“Drug pricing is a difficult issue. We continue to make sure all policies are solid from a legal perspective, solid from a policy perspective and that we’re not going to do something we’re going to regret over time.”
Azar stopped short of predicting when the proposal would be released, commenting: “I can’t prejudge the President’s decision making. But [it] should come out and you’d have the normal 60-day comment period and go to final rule.”
Part B Drug Costs Blamed For Higher Premiums
The disparity between US and foreign prices is an important issue for President Trump, and the Centers for Medicare and Medicaid Services has frequently flagged rapidly increasing drug costs as a growing problem in Medicare Part B.
Most recently, CMS blamed higher drug costs for a rise in Part B premiums and deductibles for 2020. “The increase in the Part B premiums and deductible is largely due to rising spending on physician-administered drugs. These higher costs have a ripple effect and result in higher Part B premiums and deductible,” the agency announced on 8 November.
CMS suggested that Part B drug reimbursement needs to change to help lower costs. “Currently, for Part B, the law requires CMS to pay the average sales price for a drug and also pays physicians a percentage of a drug's sale price. This incentivizes drug companies to set prices higher and for physicians to prescribe more expensive drugs – because that leads to a higher Medicare payment,” the agency explained.
But “through the President’s drug pricing blueprint, the Trump Administration is working to lower drug prices in Medicare Part B drugs.”