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The Health 202: Here's why it's a nightmare to lower U.S. drug prices

with Paulina Firozi


Whatever President Trump suggests next week to lower U.S. drug costs, don’t forget this cold, hard fact: It’s extremely difficult to make sweeping reforms to a health-care system as piecemeal as ours.

If you’re employed, you might have coverage through your job. If you’re a senior, you have some version of Medicare. If you’re a low-income American, you may qualify for Medicaid. If no insurance is available to you through those avenues, you’ve probably bought subsidized, private coverage through the state-based Obamacare marketplaces. Or, maybe you’re simply uninsured.

Health insurance typically isn’t such a patchwork system in other countries with wealth comparable to the United States. In Canada, Australia and many European nations, the government plays a far greater role in delivering coverage, keeping people's out-of-pocket costs low — and putting a damper along the supply chain on how much private industry can pocket from medications.

It’s true that spending on pharmaceutical products has been rising just about everywhere in the past three decades, as specialty medicines for complex or rare, chronic conditions such as cancer, rheumatoid arthritis and H.I.V. have become more widely available. But in the United States, average spending on prescription drugs exceeds $1,000 per person per year — a hefty figure compared to, say, the United Kingdom, where it’s $497, or even Switzerland, where it’s $783.

It’s a situation garnering increasing attention from liberals and conservatives alike. Policymakers from Sen. Bernie Sanders (I-Vt.) to Trump to his top health chief Alex Azar have been sounding the alarm that the government and individuals are paying far too much for prescription medicines.

Speaking yesterday at the World Health Care Congress, Azar said action on drug costs is “desperately needed.” He listed several problems he said “plague drug markets” — including high list prices, the government’s lack of negotiating tools, rising out-of-pocket costs for consumers and other countries “free-riding” off the investments of U.S. companies in developing high-cost specialty drugs.

Trump proposed a smorgasbord of policies in his 2019 budget aimed at tweaking prices downward. But Azar hinted the president may suggest bolder reforms in his speech next week, although he didn’t provide specifics.

“HHS is currently working with the president on a comprehensive strategy to solve these problems,” Azar said. “We’ll be building on the proposals in the president’s budget, but he wants to go further.”

Books could be — and have been — written on why drug costs are so high in the United States. The prescription drug industry is perhaps the most complicated ecosystem I’ve tried to understand, driven by all sorts of pricing pressures along the supply pipeline. But it’s possible to boil down a few key differences between the United States and other developed countries who are able to offer cheaper medicines to their citizens.

Here they are:

1. The U.S. government has less leverage over how much drugmakers are paid.

The most significant avenue available for the government to influence drug prices is through Medicare’s prescription drug program, which covers about 42 million elderly and disabled Americans. Prices for medicines offered in these Medicare "Part D"  plans are negotiated between pharmaceutical companies and the private insurers who bid for the right to sell the program's plans.

In the past, Trump has joined in calls from Democrats to allow the government to directly negotiate prices with the drugmakers, thereby pushing down prices. It’s unlikely — although possible — the president will call for Congress to make such a change in his address planned for next Tuesday.

But there’s a plethora of ways other countries attempt to rein in drug prices — such as by capping how much government plans will pay for them, regulating how much the industry can charge private insurers or limiting markups along the supply chain.

England’s National Health Service, which is the country’s main buyer of drugs, sets payments based on a government evaluation of the drugs’ cost-effectiveness. Germany’s sickness funds, which are its version of a public-health insurance system, also apply a value assessment to medications to determine reimbursement levels.

These price levers are harder for the U.S. government to come by because of the point outlined earlier: Our health insurance system is a lot more fragmented. Only about one-third of Americans are on some form of government-sponsored insurance. And the U.S. government has traditionally played a much smaller role in regulating private industry overall.

“[Other countries] have policies in place that are more centralized in the pricing of their drugs,” said Shawn Bishop, a vice president at the Commonwealth Fund. “They have policies in place that directly link the price of the drug to the value of the drug — we don’t have anything like that.”

2. There’s less regulation along the supply chain.

Paying for drugs isn’t a simple matter of what the manufacturer charges. As companies sell their medicines to pharmacies, which in turn bill private or government insurance plans, pharmacy benefit managers (known as PBMs) act as middlemen to negotiate which drugs are covered and how generously.

The system is further convoluted by increasingly common rebates that drug companies pay to PBMs. Critics charge these rebates incentivize PBMs to favor higher-cost drugs or charge insurers more than they’re charging the pharmacy — and pocketing the difference.

Translated, it’s a lot harder to find the list price of drugs, there is a huge imbalance in what different payers are charged and plenty of room for all the involved parties to try to get a bigger piece of the pie via markups and transaction costs.

In most other wealthy countries, the government puts a lot more limits on prices along the supply chain, said Anna Kaltenboeck, program director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center.

“I don’t see Express Scripts operating in Germany, for example,” said Kaltenboeck, referring to the country’s largest PBM.

3. Drug companies use coupons to lower prices for consumers while they raise their medications’ list prices.

There’s another practice growing increasingly popular in the United States. Drug companies are offering coupons to customers to incentivize them to buy brand-name drugs rather than generics. While these coupons lower consumers’ out-of-pocket costs, they ensure their insurance plans pays for more expensive drugs. By 2016, one in five brand-name drugs in commercial insurance plans used a co-pay assistance coupon.

This practice isn’t found in other developed countries, where patients’ out-of-pocket costs tend to be more fixed and much lower, Kaltenboeck told me.

“It allows manufacturers to increase prices and maintain very high prices,” she said.

The Cybersecurity 202 is coming to your inboxes May 9. Derek Hawkins will break down the latest news on election security, major hacks and what lawmakers are planning to do about it all in the newest member of our 202 franchise. Sign up here.


AHH: Trump is interviewing former congressman Jeff Miller (R-Fla.) this week to lead the Department of Veterans Affairs, Reuters reports. Miller, who works as a lobbyist for McDermott Will & Emery, served in Congress from 2001 to 2017 and chaired the House Veterans' Affairs Committee.

Miller's name has been circulating as a possible VA head since then-White House doctor Ronny Jackson withdrew from consideration following allegations of misconduct. Miller led the VA panel during a tumultuous time for the agency, when it was found to have generated long wait times for veterans -- an issue leading to the 2014 resignation of Eric Shinseki, who led VA under President Barack Obama.

OOF: Yesterday, former HHS secretary Tom Price walked back his comments questioning Republicans' decision to repeal the Affordable Care Act’s individual mandate. Price, formerly a harsh critic of the mandate, raised eyebrows Tuesday when he said the move would increase prices for people buying insurance through the government-run marketplace.

Price said his remarks were taken out of context. “Repealing the individual mandate was exactly the right thing to do. Forcing Americans to buy something they don’t want undermines individual liberty as well as free markets,” Price said in a statement through the Job Creators Network, Politico's Rachana Pradhan reports. “The only fair and effective way to bring down healthcare costs is to allow markets to create more choices for consumers and small businesses.”

Speaking at the World Health Care Conference, Price had said that “there are many, and I’m one of them, who believe that that actually will harm the pool in the exchange market, because you’ll likely have individuals who are younger and healthier not participating in that market, and consequently that drives up the cost for other folks within that market.”

OUCH: E.coli in contaminated romaine lettuce has killed one person in California, the first known death in the weeks-long, nationwide outbreak. The infections have spread to 25 states and sickened a total of 121 people, the CDC said yesterday. That's 23 more people and three more states since the CDC’s latest update on Friday, our colleague Joel Achenbach reports. “With the numbers ratcheting up every week, this outbreak is approaching the scale of the 2006 baby spinach E. coli illness outbreak, in which 205 people became sick and five of them died,” Joel writes.

Bill Marler, a Seattle-based food safety lawyer, told Joel it’s surprising the CDC has not yet been able to trace the origin of the contamination.  “It’s 2018, and we’re basically a month into this outbreak, and they can’t link it to a farmer or a farm or a processor? I mean, candidly, that’s ridiculous,” Marler said.

President Trump's relationship with his former personal physician Harold Bornstein began to sour more than a year ago. Here's what you need to know. (Video: Allie Caren/The Washington Post)

— We now have more details on why the letter from President Trump’s longtime doctor Harold Bornstein sounded so ...Trumpian. Bornstein says Trump wrote it himself. “He dictated that whole letter. I didn't write that letter,” Bornstein said in an interview with CNN. “I just made it up as I went along.”

“His physical strength and stamina are extraordinary,” read the letter the Trump campaign released in December 2015, right before the GOP primaries started. “If elected, Mr. Trump, I can state unequivocally, will be the healthiest individual ever elected to the presidency.”

The letter included rhetoric Trump had used at political rallies to attack Hillary Clinton, our colleague Callum Borchers writes, adding the stunning admission from the president’s former physician could be a troubling sign of what’s to come. “What ought to worry Trump is not the shattering of his image as the ‘healthiest individual ever elected to the presidency’; what should concern him is that Bornstein is suddenly saying unhelpful things in the press — and that could embolden others who feel burned by Trump to do the same."

The Post’s Philip Bump notes this latest revelation means even “something we thought we knew — at least in broad strokes — we actually didn’t.” “While no one took the report from Trump’s personal physician... terribly seriously… it at least seemed to be an actual analysis from an actual doctor that provided some reassurance that Trump was sufficiently fit to serve as president.”

Now, his health is yet another political controversy Trump is facing. “Trump and his White House have only compounded the confusion by insisting on near-secrecy about the president’s health and refusing to answer basic questions that predecessors have commonly addressed,” The Post’s Ashley Parker and Lenny Bernstein report. “The irony is also not lost on the president’s detractors that Trump — who at 70 become the oldest person elected president and who repeatedly attacked Hillary Clinton’s health and ‘stamina’ during the 2016 campaign — may have misled the American public about his own physical well-being.”

It might be easy to brush off this latest plot line from Bornstein as another wild episode in this season of the Trump administration, but our colleague Aaron Blake warns that trivializing it would be a mistake.

“While the Bornstein saga is certainly not shorn of entertainment … what he's now alleging is the stuff of scandal,” Aaron writes. “The combination of Bornstein's strangeness and the fact that the bar has been so lowered when it comes to Trump's medical disclosures shouldn't temper that fact. Just as the Stormy Daniels situation seemed trivial and even overly salacious before becoming arguably the White House's biggest legal liability, it would be a shame to relegate the Bornstein show to the side of the stage. It may ultimately come to nothing, but there are real questions here — both for the legal system and for democracy.”

Here's how The Daily Beast’s Sam Stein put it:

Iowa's Republican-controlled legislature passed the most restrictive abortion ban in the country, outlawing the procedure after a fetal heartbeat is detected. (Video: Reuters)

— Yesterday, Iowa’s predominantly Republican legislature passed a bill to ban most abortions once a fetal heartbeat can be detected, typically around six weeks of pregnancy. It’s a step toward one of the strictest abortion laws in the nation -- one that could set up a Supreme Court showdown, our colleague Kristine Phillips reports.

"The bill would require women seeking an abortion to first have an ultrasound, at which time a physician would detect whether there is a heartbeat,” Kristine writes. “The bill also would prohibit someone from acquiring, providing, receiving, transferring or using a fetal body part in Iowa. A violator could be charged with a Class C felony.”

The “heartbeat” bill passed the Iowa House 51 to 46, and passed the state Senate early Wednesday 29 to 17. It awaits a signature from Republican Gov. Kim Reynolds, who has called abortions “equivalent to murder.” It follows similar "heartbeat" bills in Mississippi and Kentucky, although federal judges have temporarily blocked those measures.

— Three national groups supporting abortion rights filed lawsuits yesterday against the Trump administration over changes to its national family planning policy. One suit filed by Planned Parenthood and another filed by the National Family Planning & Reproductive Health Association and the American Civil Liberties Union challenge February guidance from HHS's Office of Population Affairs, NPR’s Sarah McCammon reports. The guidance emphasizes abstinence and mentions “fertility awareness" such as the rhythm method or natural family planning, without explicitly mentioning contraception.

“This is a radical shift, and the way the [Federal Opportunity Announcement] is written, it just flies in the face of the best medical practice,” said Tanya Atkinson, president of Planned Parenthood of Wisconsin, one of the plaintiffs. “It is a radical shift that could have a big impact on people's health.”


— Three prominent health-policy experts say Obamacare enrollment should be more automatic in order to help bring more people into the ACA marketplaces now that the individual mandate has been repealed. Because additional Americans are now likely to go without coverage, policymakers need to enact replacement policies to limit instability in the marketplaces, Stan Dorn, James Capretta and Lanhee Chen write in Health Affairs.

They argue the use of automatic, default enrollment into insurance plans could help mitigate the damage. "An automatic enrollment program can improve participation by creating options that require little or no premium payment and that require very little effort from the consumer—apart from providing consent, perhaps through failing to opt out," they write.

"We propose an approach aimed at making enrollment into insurance as automatic as possible," they continue. "This will be a complex undertaking. Nonetheless, once it is up and running, we believe this approach can dramatically improve enrollment into insurance, and thus help to stabilize the market and make it more attractive for all consumers."

— A few more good reads from The Post and beyond:


Pro-Trump groups air ads against Montana’s Tester for questions that derailed VA pick (John Wagner)

On Anniversary of House Obamacare Repeal, Democrats Look to Extract a Price (New York Times)


CVS ‘Moving Forward’ With Aetna Deal, Profit Tops Estimates (Bloomberg)


The Opioid that Made a Fortune for Its Maker — and for Its Prescribers (New York Times)



  • Politico hosts an event on the prescription drug supply chain.

A super PAC that backs President Trump released a spot attacking Sen. Jon Tester (D-Mont.) for his role in ending Ronny L. Jackson’s bid to head VA:

A super PAC that backs President Trump released a spot attacking Sen. Jon Tester (D-Mont.). (Video: America First Action)

Former New York mayor Rudolph W. Giuliani said President Trump reimbursed his personal lawyer Michael Cohen for a $130,000 payment Cohen had made to the adult-actress Stormy Daniels:

Rudolph W. Giuliani said President Trump personally repaid his lawyer the $130,000 that was used to buy Stormy Daniels's silence about an alleged affair. (Video: Amber Ferguson/The Washington Post)

Stephen Colbert on President Trump's threat to "get involved" with special counsel Robert Mueller's investigation: