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The Health 202: The Trump administration is taking on middlemen that inflate drug prices

with Paulina Firozi


The Trump administration is declaring its boldest move yet in its battle to lower the high cost of prescription drugs, proposing to outlaw the secretive rebates that many blame ballooning drug prices in the United States.

The Department of Health and Human Services had already drawn ire from the pharmaceutical industry for its efforts to link Medicare payments to pharmaceutiucal prices in other countries. The latest move drew swift condemnation from health insurers and the organizations that negotiate lower drug prices on their behalf, reflecting the buck-never-stops here attitude of the players in the drug supply chain even as prescription drugs remain far more expensive in the United States than those in other countries.

The  Trump administration's draft rules, which were anticipated for weeks but thought to be delayed because of the government shutdown, would allow drug manufacturers to offer discounted prices directly to consumers but would no longer permit them to give rebates to the middlemen known as pharmacy benefit managers (PBMs), my Washington Post colleagues Amy Goldstein and Christopher Rowland report.

Health and Human Services Secretary Alex Azar tweeted:

The new rules would apply only to Medicare drug plans and Medicaid managed-care plans. But it’s likely the effects would reverberate throughout the entire insurance pharmaceutical industry, as the government insurance programs typically set the tone for private insurers.

Here’s a quick refresher on how pharmacy benefit managers (PBMs) work. They act as a negotiator between drug companies and health insurers to determine which drugs are covered by a given health plan. PBMs negotiate a discount, and drug companies pay the PBM a rebate to make sure their drug is "listed" (and therefore covered) by insurers. But insurers and PBMs often pocket the rebate instead of passing the savings along to consumers. That whole dynamic prompts drugmakers to push list prices higher.

“It’s a cockamamie system that’s never made any sense,’’ David Balto, who was a policy chief for the Federal Trade Commission under the Clinton administration, told Amy and Chris. “When it comes to the PBM claims of saving money through their rebate schemes, everyone’s going to realize the emperor wears no clothes.”

It’s been one year since President Trump promised in his State of the Union address that drug prices would come down and vowed to make the issue one of the “greatest priorities” for his administration (his next SOTU is on Tuesday). In May, he rolled out a series of policy ideas in a drug pricing blueprint. Azar launched several efforts throughout the fall aimed at putting downward pressure on drug costs in Medicare’s doctor and prescription drug programs and requiring more transparency by drugmakers.

The efforts have been mostly limited to the government’s health insurance programs, and the administration hasn’t gone nearly as far Democrats want, with the president backing away from his prior promises to allow the government to negotiate lower drug prices in Medicare.

Yet Azar has insisted he’s devoted to lowering drug prices — he’s scheduled to deliver a speech this morning at the Bipartisan Policy Center on the subject — and this latest proposal is more evidence the administration is willing to risk the wrath of major players in the health-care industry. There's likely to be especially strong pushback from the three largest PBMs: Express Scripts, CVS Health and UnitedHealth Group's OptumRx.

Matt Eyles, president of the insurance trade group America’s Health Insurance Plans, said insurers and the PBMs with whom they work “are not middlemen.”

“We are your bargaining power,” he said in a statement. “We cannot achieve those savings if our leverage and negotiating power is weakened through harmful actions like this proposed rule.”

“The focus on rebates has been a distraction from the real issue — the problem is the price,” Eyles added. “Manufacturers have complete control over how drug prices are set. Already this year, more than three dozen drugmakers have raised their prices on hundreds of medications.”

The main trade group that represents PBMs also characterized the administration’s proposal as harmful to consumers. The change “would increase drug costs and force Medicare beneficiaries to pay higher premiums and out-of-pocket expenses, unless there is a viable alternative for PBMs to negotiate on behalf of beneficiaries,” said J.C. Scott, president of the Pharmaceutical Care Management Association.

That’s quite the contrast to how Trump has described PBMs in the past, calling them “dishonest” and “double-dealing.”

Drugmakers, who have blasted most of the administration’s other drug pricing efforts, sounded optimistic about the proposal to end rebates. Stephen Ubl, president of the Pharmaceutical Research and Manufacturers of America, said it would lower patients’ out-of-pocket costs and “fix the misaligned incentives in the system that currently result in insurers and pharmacy benefit managers favoring medicine with high list prices.”

So did independent analysts, who said it would end distortions in the market.

“It’s about time,” Sam Richardson, a professor of health economics at Boston College, told Amy and Chris. “We know that rebates have been increasing substantially over the past few years. There’s little business or economic justification for that.”

Analysis from Chris Sloan, director of Avalere Health:


AHH: Federal officials announced their largest seizure of fentanyl ever, saying they captured 254 pounds of powder and pills hidden in a secret floor compartment of a truck during a search at the Nogales port of entry in Arizona.

The U.S. Customs and Border Protection officers seized over the weekend what was equivalent to more than 100 million lethal doses of the potent synthetic opioid, which is 50 times more potent than heroin, our Post colleague Nick Miroff reports.

When a CBP canine team searched a trailer carrying cucumbers, officers opened a false compartment and found the fentanyl as well as 395 pounds of methamphetamine. It was an estimated $3.5 million worth of fentanyl and $1.1 million worth of methamphetamine.

The 26-year-old Mexican national driving the truck will face federal trafficking charges, Nick reports, adding no other arrests have been made.

A point from Miroff:

OOF: Nearly a week after the record-long partial government shutdown ended, the Trump administration’s move to dole out food stamp benefits early is still causing problems for some of the 39 million Americans who rely on such benefits.

During the shutdown, the Agriculture Department decided to pay almost $5 billion in benefits from the Supplemental Nutrition Assistance Program ahead of schedule. But that meant millions of beneficiaries who usually get food stamp benefits paid out around the middle of each month suddenly had to live off what they had for 50 days, our Post colleague Taylor Telford reports.

“Food banks, already strained from supporting workers whose lives were upended by the shutdown, have been left to deal with the maelstrom of confusion and misinformation caused by the early rollout,” Taylor writes. “And when SNAP runs dry, they’ll face a flood of needy families.”

Taylor spoke with Quatashia Cuff, a 26-year-old food stamp recipient who had $359 in benefits meant to last until at least March 1 after benefits were paid out early. Now, Cuff, who is pregnant, has $242 left for her, her partner and their 9-month-old son. “I’m just wondering if I’m going to have enough,” she told Taylor.

“The law stipulates that no household have intervals of more than 40 days between SNAP benefits, but now, SNAP recipients in most of the country will have to go longer than that,” our colleague writes. And a spokesman from the USDA said the department is examining the current issue in an effort to provide future guidance to state agencies.

Del. Kathy Tran (D-Fairfax) issued a video statement Jan. 31 clarifying the intent of her bill which she says would help remove barriers to abortion. (Video: Delegate Kathy Tran/Facebook)

OUCH: Virginia Del. Kathy Tran (D-Fairfax) says she “misspoke” this week during a legislative hearing about her proposed bill that would have loosened restrictions on late-term abortions.

“I wish that I was quicker on my feet and I wish that I was able to be more agile in that moment,” Tran told our Post colleague Antonio Olivo. “And I misspoke, and I really regret that.”

Tran, a 41-year-old first-term Democrat from Fairfax County, had said her bill would allow abortions up to the point of delivery,  but now says she “should have said: Clearly, no, because infanticide is not allowed in Virginia, and what would have happened in that moment would be a live birth.’ “

After a clip of her testimony went viral on social media, the comments prompted death threats against Tran and her family and criticism from Republican politicians across the country, including President Trump.

The uproar also targeted Gov. Ralph Northam (D), Antonio writes, who was asked about Tran’s remarks in a radio interview.

In a Thursday news conference, Northam defended his remarks but said he regrets “those comments have been mischaracterized.” “The personal insults toward me I really find disgusting,” said Northam, a former pediatric neurologist.

Meanwhile, Virginia Republicans doubled down on their criticism in an “effort to paint Gov. Ralph Northam and other Democrats as radicals who favor infanticide” while Democrats “also dug in on abortion, trying to paint Republicans as extremists looking to meddle in women’s health care,” our colleagues Laura Vozzella and Gregory S. Schneider report.

At a Republican news conference, Virginia’s House Speaker Kirk Cox (R-Colonial Heights) said: “I really do feel like we’re at a crossroads in Virginia. I think the Democrats have been very, very clear . . . that their goal is to flip this legislature, flip this House of Delegates and this [abortion bill] will become law.”

— President Trump is considering including anti-abortion language in his State of the Union address next week, Politico’s Gabby Orr and Andrew Restuccia report.

While the issue of abortion rights has been top of mind for some following the uproar in Virginia and after New York Gov. Andrew Cuomo (D) signed a late-term abortion bill last Tuesday, Gabby and Andrew report it’s not clear whether Trump will directly mention either state in his address, “and to what extent he’ll broach the politically charged topic.”

“Trump, who has publicly supported abortion rights in the past, has maintained strong support from religious conservatives who might otherwise be turned off by his persona thanks to his administration’s attentiveness to their social-conservative agenda,” they write.

“The legislation in New York and Virginia is really forcing his hand and he’s reacting to people who have just gone off the rails. I don’t think he’s going to mention it for political reasons because I don’t think it will help him much politically,” Liberty University President Jerry Falwell Jr., who is fervent Trump supporter, told Politico. “I think he’s doing it because he really believes it’s important to protect life.”


— Abortion providers in Louisiana have delivered a quick test for the Supreme Court’s conservative majority, calling on the high court for an emergency stay of a law that would leave the state with only one doctor eligible to perform abortions, our Post colleague Robert Barnes reports.

A state law passed in 2014 requires a doctor who provides abortion services to have admitting privileges at a hospital within 30 miles. The law never went into effect, and Robert writes Louisiana acknowledges that a similar law in Texas was struck down by the Supreme Court in 2016.

“The court said the admitting privilege requirement, along with additional standards for clinics, ‘provides few, if any, health benefits for women, poses a substantial obstacle to women seeking abortions, and constitutes an ‘undue burden’ on their constitutional right to do so,’ ” Robert writes.

“Justice Anthony M. Kennedy joined the court’s liberals to strike down the Texas provisions. Chief Justice John G. Roberts Jr., Justice Samuel A. Alito Jr. and Thomas were in dissent,” he reports. “But those three have since been joined by President Trump’s choices, Justice Neil M. Gorsuch and Brett M. Kavanaugh, both of whom were supported by antiabortion activists who said they hoped that the new court majority might one day overturn the fundamental right to abortion the court advanced in Roe v. Wade.”

While the Supreme Court appears to have had a "low-key approach to this term, after an unwelcome moment in the political spotlight during the partisan brawl over Kavanaugh’s nomination," Robert adds "cases such as this one often forces its hand."


— In the latest signal that Republicans are making drug pricing a priority, Sen. Mitt Romney (R-Utah) sat down for a closed-door meeting with PhRMA, the trade group representing the country’s top drug companies, and warned the group lawmakers are working to tackle skyrocketing drug costs.

“My view was that there is going to be change with regards to pharmaceutical pricing and that I think they would be wise to try and shape the reforms as opposed to hoping nothing will happen, because I think some change is coming,” Romney told Stat’s Nicholas Florko about the meeting.

Romney is a member of the Senate Health, Education, Labor and Pensions Committee. But Nicholas reports the Utah Republican has not yet introduced or co-sponsored any drug pricing measures.


— Months after it was approved for sale, the generic version of Mylan’s EpiPen is not available at many major pharmacies and drug distributors, according to pharmacy chains and a group that monitors drug shortages, Reuters’s Michael Erman and Jilian Mincer report.

Teva Pharmaceutical, which produced the generic version of the life-saving allergy treatment, did not explain the supply shortage. “The generic version of EpiPen Auto-Injector is currently available and we are continuing to build supply,” Teva said in statement emailed to Reuters. “We are actively manufacturing and shipping product throughout the country.”

Back in August, the Food and Drug Administration touted its approval of the generic version of the medication, saying it would present a lower-cost option for those who depend on the allergy relief device.

“The short supply represents a missed opportunity for Teva to compete with Mylan NV in a roughly $750 million a year U.S. market,” Michael and Jilian report. “Mylan’s EpiPen dominates that market, but has been in short supply since May, leaving many patients and their families keen for alternatives.”

— And here are a few more good reads: 

Massachusetts releases its full lawsuit against Purdue Pharma (Stat)

El Chapo trial provides a deep look inside the Sinaloa cartel’s drug empire (Edith Honan, Mark Berman and Katie Zezima)


Republicans Seize on Late-Term Abortion as a Potent 2020 Issue (New York Times)


Short-term insurance plans can't be regulated by states (Modern Healthcare)


Pot brownies, and other edibles, could be next for Maryland’s medical marijuana industry (Rachel Chason)


‘If we die, we die.’ Frigid weather heightens concerns for the city’s homeless (Paul Duggan and Peter Jamison)



  • HHS Secretary Alex Azar is scheduled to give a keynote address at a Bipartisan Policy Center event. 

In remarks to the Drug Enforcement Administration, Vice President Pence called for a "physical barrier" at the U.S.-Mexico border:

Vice President Pence on Jan. 31 said the U.S. must use an “all-of-the-above strategy” to border security, including a “wall” and a “physical barrier." (Video: The Washington Post)

Late-night hosts mock Trump’s insistence that ‘A WALL is a WALL!'

President Trump on Jan. 31 urged lawmakers to "stop playing political games," adding, "A WALL is a WALL!"" (Video: Drea Cornejo/The Washington Post)