White House scraps key plan to lower U.S. drug prices
The Trump administration on Thursday scrapped one of its most ambitious proposals for lowering prescription medicine prices, backing down from a policy aimed at health insurers and raising the possibility of new measures focused on drugmakers.
The abandoned proposal would have required health insurers to pass billions of dollars in rebates they receive from drugmakers to Medicare patients.
The decision represents a new setback to U.S. President Donald Trump's efforts to deliver on a pledge to lower drug prices for consumers before the November, 2020 election, when Republicans want to capitalize on voter concern over high healthcare costs.
It allows companies like Cigna Corp and CVS Health Corp, which negotiate rebates with drugmakers on behalf of the government's Medicare program, to continue to benefit from those discounts.
A CVS pharmacy store. /VCG Photo
A CVS pharmacy store. /VCG Photo
Shares of Cigna rose nine percent, CVS gained five percent and UnitedHealth Group was up six percent.
Pharmaceutical company shares fell, with Merck & Co off four percent, Bristol-Myers Squibb down three percent and Pfizer Inc off two percent.
Baird analyst Eric Coldwell said Trump was likely refocusing his reform efforts on the pharmaceutical companies themselves.
"There are still many headwinds for the supply chain, but... pharma and biotech seem to have drawn the ire of the administration more recently," said Coldwell, noting the industry's successful legal challenge of a rule that would have required drugmakers to include list prices in TV ads for their medicines.
"Shelving the rebate reform initiative, which pharma strongly supported, feels like payback," Coldwell added.
The White House first floated the idea of ending the rebates last year as part of a drug pricing "blueprint" aimed at bringing down costs.
A key issue for the 2020 elections
Several Democratic presidential hopefuls have also seized on drug pricing as a key issue for the 2020 elections. Legislators, including House Speaker Nancy Pelosi, are pushing for new laws to allow the government to negotiate drug prices directly with manufacturers.
A senior administration official, speaking on the condition of anonymity, said the rule was too costly and could have hurt chances for bipartisan legislation.
"The decision was made that... it was not prudent to go forward with the rule right now, that it would be too disruptive, that the risk was probably too high, and that it might upset a legislative deal, which is our primary focus," he said.
The rebate rule would have forced companies like Cigna and CVS either to forgo the discounts or pass them onto Medicare patients enrolled in their health insurance plans and drug plans.
They argued that such a change would force them to raise monthly premiums and had been pressing the administration to consider its impact on Medicare, which includes people aged 65 and older and the disabled, and instead focus on drugmakers.
"Only drug manufacturers have the power to set drug prices. We believe that the key to lowering drug costs is to enact policies that encourage greater competition," JC Scott, chief executive of industry lobbyist Pharmaceutical Care Management Association, said in a statement.