- Donald Trump keeps losing the war to lower healthcare costs, this week alone losing three key battles against Big Pharma and other healthcare companies.
- The White House has said that it has more plans to lower costs in the works, but the ones it has are extremely divisive within the President’s own party.
- That means getting them across the finish line will be hard. And we have yet to see proof that this administration can do hard.
Big healthcare companies handed the White House three major losses in its quest to lower drug prices this week, and the way things are going it doesn’t look the Trump administration has any sure-fire plan for victory any time soon.
- Loss 1: A judge ruled that the White House had to scrap its rule forcing drug companies to disclose prices in commercials. The judge said the White House lacked the authority to make this rule in the first place after after three pharmaceutical firms sued over the measure.
- Loss 2: The White House announced its plan to lower the cost of dialysis, a business so costly and corrupt that HBO’s Last Week Tonight with John Oliver did a segment on it. So it’s great that Trump decided to do something but it’s unfortunate that his plan was so lacking in substance that shares of DaVita Inc., the largest for-profit dialysis company, didn’t even budge after it was announced. Trump’s speech on the kidney didn’t make much sense either, for what that’s worth:
- Loss 3: On Thursday the White House completely scrapped its plans to eliminate drug price rebates. These rebates are handled by companies called pharmacy benefit managers (PBMs), who act as middle men between insurers and drug companies. Critics (like this columnist) say these rebates work in an opaque system that actually makes drug prices more expensive, and even drug companies supported this measure.
But the administration feared that initially scrapping rebates would raise prices during an election year. So the plan was thrown out entirely. Pharmacy benefit manager stocks soared, as you can imagine.
All of this losing is the continuation of a trend. Over the past two and a half years all the moves the Trump administration has made to curb sky-high healthcare costs have blown up in its face. Either the measures are ultimately toothless, or the administration simply can’t get any meaningful policy past the finish line.
And so it was this week. After the White House announced that it was scrapping the rebate rule one official told reporters there were still plans in the works to lower costs but wouldn’t get into specifics. We’ve heard that before.
‘Was it over when the Germans bombed Pearl Harbor?’
There are now reports making it from Washington to Wall Street that the President has had it with all this losing, and that he’s willing to do something drastic.
Reports say the White House is now willing to resort to "Sanders-style" (yes, as in Bernie) tactics to bring prices down. Specifically, that means tying specific drugs in the Medicare part B program to inflation, and allowing states to import drugs. It means going forward with threats to tie drug prices in the US to drug prices abroad where they’re much cheaper.
Coming from a Republican administration making any of that happen would be a big deal, and it would show that Big Pharma is not as invincible as Washington and Wall Street once thought.
All of that is why, according to Wells Fargo analyst David Maris, pharma stocks dropped on Thursday despite the industry’s victories.
"We think the market is correctly interpreting this as a potential risk to drug makers," he wrote in a note to clients, "As the absence of a rebating fix does not mean there will not be a plan to address drug prices, but perhaps a greater risk that the absence of a rebate fix will put additional pressure to come up with ways to actually lower prices in ways that could more greatly impact drug makers than the rebating fix would have."
Now perhaps that’s true. Sources close to Big Pharma’s lobbyists tell Business Insider that they’re telling their clients to tread lightly, as this administration can become unpredictable when it gets angry.
That warning doesn’t change what Big Pharma has seen from this White House so far though — and that is a general disorganization, lack of experience and incompetence. Already, in the midst of all this chaos, there is talk that Health and Human Services Secretary Azar is on his way out according to Maris, meaning someone new would have to pick up this burden already set in (slow) motion.
The White House’s anger doesn’t change the Republican Party either, which still has major misgivings about all of the plans to lower prices currently on the table — and not just the White House’s "Sanders-style" stuff.
For example: Over in Congress Senator Chuck Grassley (R-IA) is working on a deal to lower drug prices with Senator Ron Wyden (D-OR). Wyden has proposed that drug companies pay back Medicare Part D for any price increases above the rate of inflation. This has become a sticking point. Some in the GOP are amenable to the idea, but others say that the measure smacks of price controls and they want no part of that.
In short, to stick it to the drugmakers and other healthcare companies now this administration is going to have to herd some very right-wing cats far to the left. On the one hand that’s going to complicated and delicate but it’s doable — possibly.
But on the other hand, when has the Trump administration ever shown that it can pull off something complicated and delicate? This is very different from the dynamics of something like tax reform. Now the President is asking his own party to buck itself — and that means there are no guarantees.
- Drug companies have a ‘target on their back and very few friends to protect them’ after a shift from the Trump administration. 3 could be especially at risk.
- More than 7,500 stores are closing in 2019 as the retail apocalypse drags on — here’s the full list
- The best stylish smartwatches for women