President Trump proposed changes to a segment of Medicare drug pricing that the White House believes would save Americans $17.2 billion over five years and cut down on “global freeloading.”
The president plans to change the pricing model for Medicare Part B drugs administered in doctors’ offices to keep costs aligned with the lower prices similar countries pay for the same medicines. Total payment for such drugs could drop by 30 percent over time, the White House says.
“We will no longer accept the inflated prices charged to our seniors,” Trump said.
The new “international pricing index” for Medicare Part B would set a target price for physician-administered drugs at 126 percent of the average price other countries pay. It would include a larger add-on fee for doctors and hospitals that would be independent of the drug’s price.
That’s a change from the current system that sets pricing based on the average sales price only in the US, plus a price-based add-on fee. The new model would end the incentive for doctors to prescribe the most expensive drugs to obtain the higher fees.
The Medicare Part B model would be phased in over a five-year period and initially apply to 50 percent of the country, with the opportunity to scale up afterward.
Trump on Thursday railed against a “rigged” drug system that allows other countries to benefit at America’s expense, calling it “wrong and unfair.”
“We’re taking aim at the global freeloading that forces American consumers to subsidize lower prices in foreign countries through higher prices in our country,” Trump said.
Earlier Thursday, Health and Human Services Secretary Alex Azar tweeted out an HHS report that highlights the disparities that the Trump administration seeks to end.
The report compared prices for 27 different Medicare Part B drugs that are administered by physicians – not those dispensed by the pharmacies. The report found that prices charged to the US are 1.8 times higher on average than 16 other countries with similar economic conditions. The US was paying the highest price for 19 of the 27 drugs.
The pricing disparities meant that Medicare Part B and its beneficiaries spent an additional $8.1 billion (or 47 percent more) on the 27 common drugs than it would if the payments were determined by an international pricing index, Azar said.
The new pricing aims to tackle the smaller market of non-retail drugs. Pharmacy-dispensed drugs account for about 72 percent of total prescription drug spending in the United States.