The White House budget director dropped a hint about how Trump could bring drug prices down

Mick Mulvaney, director of the Office of Management and Budget, right, speaks as Gray Davis, former governor of California, listens during the Leaders In Global Healthcare and Technology (LIGHT) conference at Stanford University. (David Paul Morris/Bloomberg)

White House budget director Mick Mulvaney dropped a surprising clue Thursday about how President Trump might bring drug prices down, describing the kind of government intervention that traditionally has been supported by Democrats.

Mulvaney explained at a Stanford University conference that drugmakers receive a “tremendous giveaway” from Medicare’s prescription drug benefit because they do not have to pay a mandatory rebate off the average price as they do in Medicaid. Instead, in Medicare’s prescription drug benefit, private companies bargain with drug companies to win rebates for their members.

“We’ve actually floated that idea with the president, to be a little bit heavier-handed on the rebates they have to pay in order to drive the prices down,” Mulvaney said.

Trump has repeatedly said that drug prices are too high, but has often suggested that increased bidding would be the best way to bring down prices. It has been unclear how that would work or whether Congress would support it. Mulvaney appeared to suggest something even closer to government price-setting Thursday, drawing a direct comparison to Medicaid, which has mandatory rebates off the average manufacturer’s price and is also insulated against drug prices that rise faster than inflation.

“I was shocked to hear this from the mouth of Mick Mulvaney. The idea that we’re going to pay Medicaid rates for the Medicare population is just something I’ve never heard from most of the Republican officials. It’s something President Obama has been proposing for years, and that had been roundly criticized,” said Rachel Sachs, associate professor at the Washington University School of Law.

A 2011 report from the Health and Human Services Department’s Office of the Inspector General examined the top 100 brand-name drugs and found that while Medicaid received a 45 percent rebate of its spending on drugs in 2009, Medicare only received a 19 percent rebate. That means two government programs pay very different prices for many of the same drugs, with Medicare paying much more.

Sachs explained that there has long been an argument to extend Medicaid drug prices to more of the population, usually by giving people who are dual-eligible for both Medicare and Medicaid access to Medicaid’s drug prices. That has been included in proposed budgets by the Obama administration.

Republican plans typically focus on increasing competition by speeding up the approval of new drugs or generics. Therefore, the idea of decreasing prices by increasing rebates could represent “a significant shift in Republican thinking on drug pricing” if it is a serious proposal, Sachs said.

The trade group for the pharmaceutical industry criticized any attempt to implement a mandatory rebate system in Medicare’s prescription drug program, called Part D.

“Any type of government price-setting in Medicare Part D would limit access to needed medicines and increase costs for beneficiaries,” said Holly Campbell, a spokeswoman for the PhRMA, the drug industry’s trade group. “It also would destabilize a successful, market-based program in which beneficiaries are highly satisfied and would curtail investment in research and development needed to discover new treatments. The risks of these proposals clearly outweigh the benefits.”

Health and Human Services Secretary Tom Price has been holding listening sessions with health-care players about the affordability of medicines. On Thursday, he met with representatives of pharmacists, physicians, hospitals, insurers and others.

“Secretary Price reaffirmed President Trump and the Administration’s commitment to address escalating prescription drug costs and to improve both access and the quality of care delivered to patients in the United States,” the White House said in a statement describing the meeting.

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