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Donald Trump

Donald Trump slams drug companies for ‘extortionate’ medication prices, but experts say his proposals don’t go far enough

Trump has promised to bring down medication prices, but experts say that his administration only offers technical tweaks, not substantial changes to the system

PUBLISHED : Saturday, 12 May, 2018, 6:35am
UPDATED : Saturday, 12 May, 2018, 6:35am

US President Donald Trump on Friday blasted drug makers and health care “middlemen” for making prescription drugs unaffordable for Americans, but health care stocks rose as experts said the administration avoided taking aggressive and direct measures to cut drug prices.

Trump said his administration would take aim at the “middlemen” in the drug industry who became “very, very rich,” an apparent reference to health insurers and pharmacy benefit managers. He also said the pharmaceutical industry is making an “absolute fortune” at the expense of American taxpayers.

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“Everyone involved in the broken system – the drug makers, insurance companies, distributors, pharmacy benefit managers, and many others – contribute to the problem,” Trump said.

Shares of the major US companies in each of those sectors rose after the speech, with the S&P 500 health care sector, a broad gauge of large health care stocks, up 1.4 per cent.

Trump also placed blame on foreign governments, which negotiate lower drug prices than in the US, saying they “extort” unreasonably low prices from US drug manufacturers.

He was speaking as the Department of Health and Human Services released what it called a blueprint titled “American Patients First” with details of its plan to bring down drug costs.

It said the administration’s immediate actions would include allowing commercial plans that administer Medicare Part D prescription drug benefits for seniors more power to negotiate prices with drug makers.

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The US Food and Drug Administration would evaluate requiring drug makers to include the list prices they set on medicines in their advertising. Drug manufacturers argue that list prices do not reflect actual cost with discounts and rebates.

Some of the administration’s longer-term priorities include restricting use of rebates, creating incentives for drug makers to lower list prices in Medicare, and investigating tools to address foreign government practices that it said could be harming innovation and driving up US prices.

Health care experts said Trump’s plan sounded like rhetoric rather than substantive change for an industry where prices rise substantially more than inflation each year.

“There’s not a big proposal here that is going to make a huge difference. There are a bunch of smaller technical changes,” said Sam Richardson, Associate Professor of Economics at Boston College.

Regarding forcing other countries to pay more for drugs, Richardson said: “We don’t really have the policy levers to get that to happen.”

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Health and Human Services Secretary Alex Azar said during a White House briefing that many of the actions the government was considering would not require the US Congress, but could take place through executive action within months. He said it would take years to restructure the US drug system.

Health care stocks were volatile during Trump’s speech, with shares of companies involved in the pharmaceutical supply chain, such as Express Scripts Holding Co and CVS Health Corp, hitting session lows.

But those stocks quickly reversed course, with Express Scripts shares up 2.4 per cent and CVS up 3 per cent.