Donald Trump gives Medicare plans new tool to squeeze Big Pharma

The Trump administration said Tuesday it will allow private plans operating under Medicare to place patients on the most cost-effective drugs first, before turning to more expensive alternatives if they don’t work.

Officials said the technique, known as “step therapy,” will result in savings in Medicare Part B that will be passed along to consumers.

By wielding the option, it allows Medicare Advantage plans to negotiate better discounts from drug companies that don’t want to lose out to cheaper rivals.

“It strengthens their negotiating position with manufacturers,” said Seema Verma, administrator for the Centers for Medicare and Medicaid Services.

CMS said plans will be required to pass along more than half of the savings generated by the tactics, namely through gift cards in their reward programs. Rates for next year have been set, so plans cannot start to pass along savings in the form of lower premiums until 2020.

The administration noted that more than 20 million Americans, or roughly one-third of Medicare beneficiaries, use Advantage plans, who spend nearly $12 billion per year on Part B drugs administered by doctors.

Officials said plans can “cross-manage” between different parts of the Medicare program and select the most cost-effective drug regardless of whether a patient receives it in a doctor’s office (Part B) or the pharmacy (Part D).

The step-therapy option will take effect in 2019 and only apply to new prescriptions. Consumers who don’t like the approach will be eligible to pick a different plan.

The proposal is part of President Trump’s broader push to drive down prescription drug costs.

Democrats say the government should negotiate directly, though the administration says empowering private plans to negotiate is the wiser move.

“President Trump promised better Medicare negotiation and lower drug prices for the American people,” said Health and Human Services Secretary Alex M. Azar II. “Today, we are taking an important step in delivering on that promise.”