President Trump said at the end of May that drug companies were about to make “voluntary, massive drops in prices” in two weeks.
Nearly four weeks out, the White House has not explained why nothing has happened on that front, but it continues to hint that news could be imminent. “We’re not going to get ahead of any forthcoming announcements,” deputy White House press secretary Hogan Gidley said in an email last week.
Drug companies — and insurers, pharmacy benefit managers (PBMs) that negotiate drug prices, drug distributors, patients and physicians — are working with the administration, a spokeswoman for the department of Health and Human Services said, "to respond to President Trump's call to action and help patients pay less for their prescription drugs." But after more than a year of promises to lower drug prices, the silence following Trump's recent remarks suggests that the bully pulpit may not offer the swiftest solution to the problem of high drug prices. And it is increasingly clear that policy solutions — which will likely spark bitter fights between industries — will take longer than Trump has suggested.
Would 'voluntary, massive' price drops be a real solution?
The first company to make a “voluntary, massive” price drop, even on a single drug, is likely to be celebrated by the administration.
Some health experts say they would not be surprised to see some announcements. After all, drug companies have for years argued that voluntary action — such as the pledges by some companies to keep drug price increases below 10 percent — is the best way to solve the price problem. But even a big cut in the price of an important, well-used drug could be more of a stunt than a solution.
Voluntary price cuts are “not actual policy that would lead to robust, sustainable change in the marketplace,” said Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center. “I wouldn’t be surprised to see some action by the industry that would be characterized as 'Here are these big price drops,' just as a political or optical concession to the administration. What will probably happen is some price will drop by 20 percent, and they'll raise their price on other products by 50 percent.”
What are drug companies doing?
Some drug companies are raising their prices.
In early June, 10 major drug companies responded to inquiries from Democratic Sens. Elizabeth Warren (Mass.) and Tina Smith (Minn.) without any specific plans to reduce prices. Pharmaceutical giant Bayer hiked the prices of two cancer drugs by more than $1,000 a month two weeks after Trump unveiled his drug price plan. Novartis said it plans to raise the prices of some drugs this year. On June 12, it increased the price of the cancer drug Mekinist by five percent, the second increase for that drug this year.
More pharmaceutical companies have been issuing reports to try to shift the discussion of pricing. These tend to show that an increasing share of the money from drug price hikes is flowing to industries that sit between the company that makes the pill and the patient who swallows it — operators such as insurers, PBMs, wholesalers and distributors. Several drugmakers have reported that, averaged across their whole portfolio of products, the net prices of their drugs are rising only modestly or are even slightly decreasing.
A half-dozen drugmakers contacted by The Washington Post declined to comment on whether any price reductions were pending.
If drug companies really want to lower their prices, why don't they?
Pharmaceutical companies set the list prices of drugs, which are a starting point. But drugmakers argue that if they cut their prices, patients might not benefit because the move could backfire and lead other parts of the pharmaceutical pipeline to discriminate against their products. They argue that PBMs that make their money off negotiating rebates may prefer a competing drug with a higher list price and a bigger rebate. Wholesalers and distributors also take a cut of the list price.
Azar laid out this convoluted system in the hearing this month. Azar said drug companies fear that if they lower prices, their products will no longer be as attractive to the companies that negotiate discounts and take a cut. That could lead to a situation where cheaper drugs paradoxically get left off the list of drugs covered by a plan in favor of more expensive drugs.
PBMs, which have increasingly found themselves in the Trump administration's crosshairs for their role in drug pricing, dismissed the idea that they are a barrier to price reductions. Jennifer Luddy, a spokeswoman for Express Scripts Holding, said in an email that drugmakers can lower their prices at any time and that her company would welcome it.
Tom Moriarty, head of policy and external affairs for CVS Health, echoed that. “We are not standing in the way of any efforts to lower prices, and welcome the opportunity to work with manufacturers and other stakeholders to do so,” he said in a statement.
But Adam Fein, president of Pembroke Consulting and an expert on the drug supply chain, said that it was “difficult, perhaps impossible,” for drugmakers to lower their prices.
“Cutting the list price means wholesalers make less money, pharmacies make less money, PBMs make less money and payers get fewer rebate dollars,” Fein said. “It’s part of the completely insane, backward nature of our drug channel system, and it has precisely the wrong incentives.”
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