President Trump announced two sweeping drug pricing rules Friday that his administration is rushing to finalize before Inauguration Day to make good on his long-standing 2016 campaign promise to reduce what Americans pay for their medicines.
“I was very proud to have gotten this done,” Trump said at an afternoon news briefing, at which he took no questions. “We’re pushing it very hard, as we did with the vaccines and other things.”
One of the rules — known as the “most favored nations” rule and adamantly opposed by the pharmaceutical industry, which has vowed to sue to stop it — would tie the prices of drugs in Medicare Part B to the lower prices in other developed countries, many of which negotiate those prices directly with drugmakers.
The other, the “rebate” rule, would end a widespread practice in which drugmakers give rebates to insurance middlemen in government programs such as Medicare to include those drugs in their coverage. The idea is to channel that money to consumers instead. However, the administration scuttled earlier plans for such a rule more than a year ago because its own analyses showed it would raise, rather than lower, seniors’ premiums and increase government spending.
Although the administration had discussed both ideas for several years, Trump health officials still found themselves rushing to get the rules finalized because of significant internal feuding over the proposals. Trump introduced both rules again in July as executive orders, but legal experts questioned whether they went through proper rulemaking processes and said those questions left them particularly vulnerable to legal challenges.
Friday was the last day the administration could release a rule to be finalized in the 60 days before Inauguration Day on Jan. 20.
It is unclear whether the Biden administration would implement and uphold the rules or overturn them after being sworn in. The Biden transition team did not respond to a request for comment Friday.
As vice president, Biden, along with President Barack Obama, tried to get Congress to change a law prohibiting Medicare officials from negotiating drug prices directly with manufacturers — but the proposal was repeatedly blocked by congressional Republicans.
In meandering remarks Friday, Trump touted the new rules while also falsely claiming that he won the presidential race and lambasting Pfizer for the timing of its announcement — several days after the election — that its coronavirus vaccine candidate is more than 90 percent effective. Trump has baselessly accused both Pfizer and the Food and Drug Administration of intentionally withholding the news until after the vote, even though Pfizer did not have access to the data until the Sunday after the election.
“Pfizer and others decided to not assess the results of their vaccine … until just after the election. That’s because of what I did on ‘favored nations,’” the president said, without offering any evidence. “We are doing something that nobody thought anybody would do. The savings are going to be incredible.”
Democrats and Republicans alike praised some of the measures announced Friday. Sen. Mark R. Warner (D-Va.) called an anti-kickback rule enabling increased coordination between physicians and other health-care entities “a significant step in the right direction for improving patient care.”
But some lawmakers raised concerns about Trump’s effort to push through such sweeping rules at the end of his term.
“By delaying until the end of his presidency taking action he could have undertaken at the beginning, Trump offers an invitation to legal challenges — not a guarantee of relief from price gouging,” said Rep. Lloyd Doggett (D-Tex.).
The pharmaceutical industry, which has already killed at least one significant Trump administration drug pricing rule in the courts, signaled that it would challenge the administration over the “most favored nations” rule. The industry argues that the rule — affecting drugs in Medicare Part B that are often administered by a health-care provider or through medical equipment at home — would result in fewer new medicines being developed. The proposal is also anathema to most congressional Republicans, who say it is akin to price controls.
And the Pharmaceutical Care Management Association, a trade group representing pharmacy benefits managers — the middlemen targeted by the rebate rule — said it would “explore all possible litigation options to stop the rule from taking effect and destabilizing the Medicare Part D program.”
The Department of Health and Human Services “had time to put these through the normal processes and issue them in accordance with relevant law,” said Rachel Sachs, a law professor at Washington University in St. Louis. “The fact that they’ve chosen not to do so puts any gains in jeopardy. … On these drug pricing rules, there will be strong legal challenges to both of them, not only on the basis of their substance but the procedural way in which they are being pushed.”
Trump’s decision to finalize the rebate rule marks a significant win for Health and Human Services Secretary Alex Azar, a former Eli Lilly official, who began pushing the proposal almost immediately after being sworn in to his post in early 2018. The rule caused significant infighting last year with key White House staffers, who persuaded Trump in the summer of 2019 to withdraw the rule after government analyses showed it could raise premiums in Medicare.
Experts said that since the administration withdrew the rule, the process should have restarted with another notice and comment period. But administration officials maintain that both rules went through all the necessary steps.
“With the final rebate rule, we are taking on a broken system and delivering big discounts directly to American patients,” Azar said in a statement. “Our action on rebates has the potential to be the most sweeping change to how Americans’ drugs are priced at the pharmacy counter, ever.”
The pharmaceutical industry supports the rebate rule because drug rebates are essentially discounts off the list prices of medications that drugmakers have to pay to pharmacy benefit managers, or directly to insurers, in exchange for a drug being covered by a given health plan.