Investopedia/Reuters: Trump Blasts Drugmakers, Middlemen for High U.S. Drug Prices

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Trump Blasts Drugmakers, Middlemen for High U.S. Drug Prices
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By Reuters | May 11, 2018 — 3:42 PM EDT
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U.S. President Donald Trump on Friday blasted drugmakers and healthcare "middlemen" for making prescription drugs unaffordable for Americans, but healthcare stocks rose as experts said the administration avoided taking aggressive and direct measures to cut drug prices.

Trump said his administration would take aim at the "middlemen" in the drug industry who became "very very rich," an apparent reference to health insurers and pharmacy benefit managers. He also said the pharmaceutical industry is making an "absolute fortune" at the expense of American taxpayers.

"Everyone involved in the broken system - the drugmakers, insurance companies, distributors, pharmacy benefit managers, and many others -- contribute to the problem," Trump said.

Shares of the major U.S. companies in each of those sectors rose after the speech, with the S&P 500 healthcare sector , a broad gauge of large healthcare stocks, up 1.4 percent.

Trump also placed blame on foreign governments, which negotiate lower drug prices than in the U.S., saying they "extort" unreasonably low prices from U.S. drugmakers.

Trump was speaking as his health deputies released a series of proposals to address high drug costs.

The Department of Health and Human Services released what it called a blueprint titled "American Patients First" with details of its plan. It said the administration's immediate actions would include allowing commercial plans that administer Medicare Part D prescription drug benefits for seniors more power to negotiate prices with drugmakers.

The U.S. Food and Drug Administration would evaluate requiring drugmakers to include the list prices they set on medicines in their advertising. Drugmakers argue that list prices do not reflect actual cost with discounts and rebates.

Some of the administration's longer-term priorities include restricting use of rebates, creating incentives for drugmakers to lower list prices in Medicare, and investigating tools to address foreign government practices that it said could be harming innovation and driving up U.S. prices.

Healthcare experts said Trump's plan sounded like rhetoric rather than substantive change for an industry where prices rise substantially more than inflation each year.

"There's not a big proposal here that is going to make a huge difference. There are a bunch of smaller technical changes," said Sam Richardson, Associate Professor of Economics at Boston College.

Regarding forcing other countries to pay more for drugs, Richardson said: "We don't really have the policy levers to get that to happen."

Health and Human Services Secretary Alex Azar said during a White House briefing that many of the actions the government was considering would not require the U.S. Congress, but could take place through executive action within months. He said it would take years to restructure the U.S. drug system.

Healthcare stocks were volatile during Trump's speech, with shares of companies involved in the pharmaceutical supply chain, such as Express Scripts Holding Co and CVS Health Corp , hitting session lows. But those stocks quickly reversed course, with Express Scripts shares up 2.4 percent and CVS up 3 percent. (Reporting by Yasmeen Abutaleb in Washington, additional reporting by Caroline Humer, Lewis Krauskopf and Michael Erman in New York; editing by Bill Berkrot)
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