President Trump outlined a new proposal Thursday to lower Medicare prices for certain drugs by tying them to the prices paid overseas, decrying European “freeloaders” who get lower prices for prescription drugs.
“We are taking aim at the global freeloading that forces American consumers to subsidize lower price in foreign countries through higher prices in our country,” Trump said at a speech at the Department of Health and Human Services in Washington Thursday. “The same company, same box, same pill made in the exact same location and you will go to some countries, and it will be 20 percent the cost of what we pay and in some cases much less than that.”
To go along with Trump's remarks, the administration released a request for comment on a proposal to allow Medicare to determine the price it pays for certain drugs based on the cheapest price that another nation pays.
HHS believes the new payment model would lead to a projected total $17.2 billion in savings over five years.
The goal is to help lower costs and bring U.S. prices in line with prices paid by European countries. The administration also wants public comment on letting private plans negotiate for drugs administered in doctors' offices and reimbursed by Medicare.
“We will no longer accept the inflated charge that is being made to our seniors,” Trump said.
The administration hopes to put out a regulation on the overseas pricing model by spring 2019.
The Trump administration laid out the case for revising Medicare drug payments in a report on Thursday that showed the prices that European countries like Germany and France pay for prescription drugs compared to the U.S.
In some cases, the U.S. pays 400 percent more than other countries, according to the report, which looked at 27 different drugs that accounted for $17 billion in spending, the bulk of it through Medicare Part B, which covers prescription drugs that are administered in a doctor’s office, with treatments like chemotherapy and vaccines. Part D covers prescription drugs that a senior buys at a pharmacy.
The reason for the discrepancy is likely that most European countries have a single-payer government-run systems in which the government directly negotiates for lower prices.
HHS plans to shift payments from current payment levels to levels based on international prices over a five-year period. The goal is to cover a majority of drugs in Part B, HHS said in a release.
“The model would correct existing incentives to prescribe higher-priced drugs and, for the first time, address disparities in prices between the United States and other countries,” HHS said.
The proposal also calls for allowing private vendors to provide drugs to healthcare providers in Part B.
HHS envisions creating a system in which private vendors “procure drugs, distribute them to physicians and hospitals, and take on the responsibility of billing Medicare.”
Private plans can negotiate for lower drug prices on Medicare Part D on seniors’ behalf. However, for Part B, the program is forced to pay whatever the average sales price is, no matter how high.
The administration has targeted Part B for reform starting with the release of a blueprint in May to tackle high prices. The administration has floated moving some drugs covered under Part B into Part D so that private plans can negotiate for discounts.
The proposal would represent a seismic change in how Part B works.
Currently, Medicare reimburses doctors' offices for administering Part B drugs. Medicare pays out the average sales price plus an additional 6 percent of that price to the doctor to compensate for storage and handling of the product.
There has previously been criticism that the current structure creates an incentive for doctors to prescribe Part B drugs that have a higher price since they would get a higher amount off that 6 percent.
Under the proposal, a doctor or hospital would no longer get an additional percentage based on the price. They would instead get a fixed payment amount for storage and handling of Part B drugs.