'Eliminating the Middlemen': Trump Takes Aim at PBMs in Drug Pricing Speech

The president outlined his plan to lower prescription drug costs and aid low-income Americans by reshaping Medicare and boosting competition.

President Donald Trump delivered his long-awaited speech Friday on prescription drug prices, promising to focus the administration's attention on four key strategies to make trips to the pharmacy less expensive for consumers.

Trump's plan seeks to eliminate what he described as the "dishonest double dealing" of healthcare middlemen, such as pharmacy benefit managers (PBMs), to receive rebates and discounts, instead aiming to have those savings redirected to consumers and patients.  

"We're very much eliminating the middlemen," Trump said. "The middlemen became very rich. They won't be so rich anymore."

The president also directed the Department of Health and Human Services to allow more substitution through Part D for single-source generics, require health plans to share a minimum portion of drug rebates with patients, and limit Part B price increases above the inflation rate.

Related: Trump's Drug Pricing Plan Praised, Panned, Parsed

Trump also acknowledged the multifaceted challenge to high prescription drug prices, noting that the solution must come from both the private and public sectors.

"Everyone involved in the broken system—drug makers, insurance companies, distributors, pharmacy benefit managers, and many others—contribute to the problem," Trump said. "Government has also been part of the problem because previous leaders turned a blind eye to this abuse."

While the Trump administration laid out "sweeping" reforms regarding drug pricing, industry members remain skeptical as to the effectiveness of the plan.

Below are four takeaways from the policy proposals introduced by the president:

1. PBMs and status quo in the crosshairs

The administration is questioning the current rebate system for PBMs, aiming to restrict its use in the future, and seeking formal input on how to restructure it, Azar said.

• In the plan, the administration correlates the "hidden negotiation and wealth transfer" from drug manufacturers to PBMs with the increase in out-of-pocket costs for consumers.

• Azar said the administration's proposals will also attempt to discourage the incentive for drug companies to charge higher list profits in order to stay profitable.

• "The system doesn't make that work," Azar said. "My job now, with the president's commission, is to make that work so that the incentives actually bring prices down, and charge less on the list price. No one company on their own can change that dynamic. The entire system is built for increased prices and high prices, this plan reverses those dynamics."

2. Healthcare-policy weather balloons launched

Azar said the administration has 50 relevant policy proposals in the works, though some are being implemented as immediate actions while others are under consideration and headed for a public comment period.

• One of the more provocative ideas being floated would require that drug manufacturers advertise the cost of prescriptions in televised commercials and create incentives to discourage price increases for drugs used in Part B and D.

• Additionally, the administration is looking to eliminate incentives for physicians to write high-price prescriptions, while reducing out-of-pocket spending by consumers through reforms to the 340B Discount Drug Pricing program.

• The administration projects the changes to the 340B program will save seniors $320 million in 2018.

3. Ending 'global freeloading'

Trump's drug pricing proposals are consistent with his "America First" philosophy, renamed "American Patients First" for the healthcare sector.

• Trump said the U.S. will no longer be cheated or "extorted" by foreign governments for lower prices from drug makers. The president also objected to Americans subsidizing foreign costs for the same prescription, and in some cases the same ingredient, of pills sold abroad.

• "In many other countries, these drugs cost far less than what we pay in the United States," Trump said during his State of the Union in January. "That is why I have directed my Administration to make fixing the injustice of high drug prices one of our top priorities. Prices will come down."

4. Markets decline before speech, rise during

Despite the administration's rhetoric, the speech did little to discourage the performance of healthcare organizations in the stock market Friday afternoon.

• Healthcare organizations saw their stocks dive prior to Trump's speech, only to recover then grow afterward.

• Express Scripts Holding Co., CVS Health Corp., and both the Dow Jones and S&P 500 health care indexes dropped sharply when just after 2 p.m., when the speech began, before eclipsing session highs following the end of the speech at 2:30 p.m.

Prior to Trump's speech, Azar, FDA Commissioner Scott Gottlieb, and CMS Administrator Seema Verma penned an op-ed for Fox News, promising the administration would address major problems in the prescription drug market.

 Related: What's in Trump's 'American Patients First' Plan?