Trump Releases Medicare Part B, Part D
Drug-Cost Rules

Kerry Dooley Young

November 23, 2020

President Donald J. Trump on Friday released two Medicare rules widely seen as parting shots at drugmakers, insurers, and middlemen in the pharmaceutical supply chain.

Policy experts, trade groups, and Democratic lawmakers immediately cast doubt on whether the two rules would take effect.

One rule would peg Medicare Part B's payment for many drugs administered in physicians' offices to the lower prices now charged in other wealthy nations. The second rule would redirect discounts applied to Medicare's Part D pharmacy plans toward those enrolled in the giant federal health program, which covers Americans age 65 years or older and people with disabilities.

In essence, the two rules represent a package likely to anger the two main opponents in the debate on drug prices.

The Part B rule might produce savings in the range of $86-87 billion, lowering the prices paid by Medicare for costly medicines including cancer drugs. However, that money would reflect reduced revenue for drugmakers. The Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO) on Friday issued statements protesting this rule.

Michelle McMurry-Heath, MD, PhD, the chief executive officer of BIO, described the Part B rule as an immediate hurdle that will confront President-elect Joe Biden after he takes office.

"Dumping this ill-considered, legally suspect, and operationally unworkable policy on the Biden administration will be a costly distraction as they take over the nation's response to this pandemic," McMurry-Heath said.

In a Friday press conference, Trump appeared to relish the opposition from the pharmaceutical industry.

"The drug companies don't like me too much, but we had to do it," he said.

Trump also made a claim about having won the November election. But the president also seemed to imply the ultimate fate of his newly released rules would rest with the next administration.

"It took a long time before we were able to do this because, statutorily, we had to go through a process. But there will never be anything like this. I just hope they keep it," Trump said, without describing what he meant by "they."

"I hope they have the courage to keep it, because the powerful drug lobby — big pharma — is putting pressure on people like you wouldn't believe," Trump said.

In contrast, drugmakers have been more welcoming of Trump's plan to steer savings from rebates toward older Americans.

On Friday, the Trump administration revived a proposal on Part D pharmacy rebates that it earlier had said was abandoned. The rule issued by the Office of the Inspector General of the Department of Health and Human Services (HHS) Friday included several references to estimates that indicated this rule might be costly to the federal government; one analysis projected a potential increase of as much as $196.1 billion over approximately 10 years.

Insurers and the pharmacy benefit managers (PBMs) that negotiate on their behalf have decried Trump's plans to reshuffle Part D rebates as a likely windfall for drugmakers.

America's Health Insurance Plans and the PBMs' trade group, Pharmaceutical Care Management Association (PCMA), issued statements objecting to the Part D rule released Friday.

The Part D rebate rule also appears to circumvent the normal rulemaking process, raising significant legal questions, said PCMA President JC Scott in a statement. "PCMA will explore all possible litigation options to stop the rule from taking effect and destabilizing the Medicare Part D program that millions of beneficiaries rely on," he said.

In a joint statement, the chairman of the two House committees that oversee Medicare took exception with Trump's flurry of rulemaking.

"While the coronavirus surges across the country, President Trump is spending his twilight days in office pushing through half-baked proposals that will likely be struck down in court," said House Ways and Means Committee Chairman Richard E. Neal (D-MA) and House Energy and Commerce Committee Chairman Frank Pallone Jr (D-NJ).

"If the president were serious, he should have worked with Congress to enact our bipartisan legislation to empower the federal government to negotiate lower drug prices for all Americans," they added. "We look forward to working with a president that is focused on delivering meaningful results for the American people."

Yet, the main objective of Trump's Medicare Part B rule — using prices paid in other wealthy nations as a benchmark — is echoed in part of the campaign platform of President-elect Joe Biden.

Biden suggested using "the average price in other countries (a process called external reference pricing)" as an approach for lowering the cost of new so-called specialty drugs. This class of medicine includes many cancer drugs covered by Part B.

In addition, a House-passed bill calls for Medicare to consider prices paid by other wealthy nations in negotiations with drugmakers. Known as the Elijah E. Cummings Lower Drug Costs Now Act — named for the late Democratic congressman who died in 2019 — the measure passed in the House last December in a 230-192 vote. Two Republicans, Brian K. Fitzpatrick of Pennsylvania and Jaime Herrera Beutler of Washington, supported this bill.

Most Favored Nation

The Part B rule seeks to establish a 7-year test program known as the Most Favored Nation (MFN) Model for medicines covered by Medicare Part B. This would peg the prices paid for many medicines administered in physician offices to prices paid in other wealthy nations, looking at nations included in the Organization for Economic Co-operation and Development (OECD).

The MFN Model is intended to focus on the 50 most costly drugs for Medicare Part B. The rule allows for exceptions to be made for certain drugs, including intravenous immune globulin products and COVID-19 medications. The model also carves out exceptions for certain hospitals and clinics from required participation in the MFN Model. These include cancer hospitals, children's hospitals, critical access hospitals, rural health centers, federally qualified health centers, and Indian Health Service facilities.

But the MFN model as envisioned by Trump would be devastating for smaller practices focused on cancer, said Ted Okon, MBA, executive director of the Community Oncology Alliance in a statement.

"It not only threatens community oncology providers as they struggle to treat a majority of Americans with cancer during an unchecked pandemic, but it also brazenly bypasses existing law as established by the legislative branch of the government," Okon said.

Under Trump, the Centers for Medicare & Medicaid Services (CMS) envisions kicking off the MFN program on January 1, 2021.

CMS released its Part B MFN proposal as an interim final rule with a planned comment period. This is an approach intended to allow faster adoption of federal rules, which normally go out first as proposed rules and then are finalized.

One of Trump's former advisers on Friday criticized the use of this fast-track approach. In a tweet, Brian Blase, who served as a special assistant on Trump on healthcare policy said this interim final rule "would have virtually no chance of passing legal muster."

Still, Rachel Sachs, an associate professor of law at Washington University in St. Louis, Missouri, called Trump's Part B rule a "tremendous rhetorical step forward for drug pricing reform," even though "it is unlikely to be implemented" because of procedural missteps.

"In short, with this rule, the head of the Republican Party is endorsing the proposition that Americans should not pay higher prices than do the citizens of other countries — and he is willing to endorse adopting European price controls to reduce prices here," Sachs tweeted.


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