Medicare Advantage

President Trump is Taking on Big Pharma – Maybe

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With all the news surrounding healthcare reform since President Trump took office in January, there’s been plenty of speculation and few facts on how the new administration is going to handle Medicare. The president’s campaign promises and conflicting statements from members of Congress don’t help. Trump also muddied the waters this week with statements on medication costs for those on Medicare. Trump’s policy for Medicare is a big deal for the majority of Americans. Polls show that Medicare is consistently a top issue, and it’s certain to remain at the forefront in the coming years as much of the American healthcare system gets reshaped once more.

Over the next few years, the Baby Boomer generation will continue aging and facing an increasing number of health issues as they retire. People live longer today, and the number of chronic diseases that need to be managed with daily medications will continue to increase. An increase in use of prescription medications, coupled with a larger number of seniors on Medicare, exacerbates the problem. The high cost of pharmaceuticals, which are currently set by large drug manufacturers, is a hot button issue. If there are governmental regulations put in place to negotiate lower costs for Medicare participants, that could translate into saving billions of dollars of taxpayers’ money.

Campaign Promises

President Trump adopted a Democratic stance on Big Pharma on the campaign trail. According to NPR, he claimed that big pharma was “getting away with murder” with their high prices for medications. He vowed to rectify the situation by helping Medicare to bid properly when negotiating medication prices, which could potentially save billions of dollars over the years. Trump’s background is in business, and it certainly seems like he should have some business negotiation skills to bring to the table. This is an unusual stance for a Republican politician, as Republicans traditionally seek to refrain from that much government intervention in healthcare. But taking on the pharmaceutical industry is a popular stance regardless of political affiliation, making Trump’s statements more in line with his status as a populist president.

Conflicting Stories

Saving billions of dollars in medication costs sounds great for Medicare patients, but implementing this strategy won’t be easy with pharmaceutical lobbyists. Last week, President Trump met in the Roosevelt Room of the White House with executives from five leading pharmaceutical companies. He was noted to say that he would oppose anything that keeps small, young drug companies from bringing a medication product to the market. He stated that medication price fixing shouldn’t happen and that Medicare represents the largest portion of the market in subsidized pricing. According to Fox News, Trump also claimed that he wants to lower medication costs and encourage pharmaceutical companies to come back to the United States. Once more, the president’s statements appear to conflict with one another, not to mention with the opinions of members of his own party.

White House liaison Sean Spicer attempted to clarify the president’s true stance on Medicare medication costs, alleging that the president is “absolutely” for lowering Medicare medication costs. Spicer said that Trump will use his previous skills as a businessman to negotiate a better contract for Medicare. He also pointed out that Trump is trying to do what leaders in other countries do, meaning use the government’s ability as a large consumer to leverage a more beneficial contract.

Medicare patients are responsible for 29 percent of the money spent on prescription medications in the United States every year. Many other countries use their weight as the largest purchasing power in the market to negotiate better deals for their citizens’ medication costs. This has also already happened in the U.S. with the Veterans Administration (VA). Medicare drug costs are currently dictated by private insurance companies, which isn’t always the most cost-effective option. A study in 2015 showed that Medicare pays 80 percent more than the VA for the same medications. Allowing Medicare to negotiate drug pricing directly could translate into big savings for patients and taxpayers.

Possible Ramifications

A government report in 2007 claimed that government intervention in medication costs showed only negligible reductions. There’s concern, however, that this isn’t necessarily true. Dr. Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, claims that government intervention would reduce medication costs. He points out that the government can refuse to pay for a certain medication if the costs are too high. This means that pharmaceutical companies will have to lower costs to maintain government business. It also seems to be working for the VA.

If the government intervenes in medication costs, it could negatively impact pharmaceutical companies at the outset. Just moments after Spicer’s press release on Trump’s opinions about Medicare, the Nasdaq Biotechnology Index dropped 0.8 percent. It’s also been noted that pharmaceutical companies are big contributors to many political campaigns, so decreasing drug company profits may also lead to a decrease in campaign funds.

Before taking office, President Trump made campaign promises to voters that he’d protect many government programs, including Medicare and Social Security. Now that he’s in office, there’s concern that he won’t stick to those promises. He nominated Rep. Tom Price (R-Ga.) as his Health and Human Services secretary, and Price advocates privatizing the Medicare program.

During a Senate health committee meeting last month with Sen. Bernie Sanders (I-Vt.), Price vowed to work towards “reasonable” medication costs. He hasn’t offered any definitive statements detailing his intentions, so at this point, it’s hard to tell how far the Trump administration will go in securing lower medication costs. Sanders, who also ran in the last presidential election and leans towards socialist values, feels that Price’s answer is too ambiguous. Price also support raising the minimum eligibility age for Medicare and increasing monthly premiums.

It’s difficult to discern President Trump’s true colors on the issue of medication costs for Medicare. If President Trump supports free market rates from pharmaceutical companies with no intervention from the government, he leans toward more traditional Republican views. This also lines up with his election of Price in the role of Health and Human Services secretary. If, however, he chooses to legislate and negotiate for better prices for Medicare medications, then he may be crossing party lines on the issue, which isn’t unusual once a president takes office. In either case, Trump appears to be trying to appease both medication manufacturers and consumers. How all of this affects policy and actual medication costs has yet to be determined.