By Sy Mukherjee
May 11, 2018

President Donald Trump delivered his long-awaited drug pricing proposal on Friday. The president, who once famously said pharmaceutical companies were “getting away with murder” on prices and often sent biotech shares tumbling with his harsh rhetoric, offered a number of policies meant to tackle the sky-high prescription drug costs borne by many in a plan dubbed “American Patients First.” But most Trump’s drug price reforms may largely spare the drug industry itself—a possible reason that both S&P and NASDAQ biotech indices rose nearly 3% following the address. And a lack of specifics may have fueled 2% to 4% stock spikes for other health care companies like CVS, McKesson, and Express Scripts.

Trump and Department of Health and Human Services (HHS) Secretary Alex Azar laid out the main planks of the drug pricing blueprint in a White House Rose Garden address. The overall message was that players up and down the drug supply chain—including insurers, pharmacy benefits managers (PBMs), pharma firms, and federal agencies—along with foreign governments, are taking advantage of or failing American patients.

The administration’s plan has four main pillars: increasing competition; better negotiation on prices; incentives to lower list drug prices; and reducing patients’ out-of-pocket spending.

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These broad goals would ostensibly be achieved through a variety of regulatory and legislative measures. Some are pretty technical, such as giving the Medicare Part D prescription drug program authority to negotiate lower prices for certain drugs under Medicare Part B. Others are more aspirational and politically controversial, such as Trump’s broadsides against foreign countries that supposedly “free ride” by paying less money for drugs than Americans through their single payer systems. It’s unclear how increasing costs for foreign governments and patients would help reduce prices in the U.S., but Trump nonetheless framed the issue as “putting American patients first.” Azar also asserted that pharmaceutical company ads on TV should disclose prices (although he didn’t specify which ones would be listed given the convoluted U.S. price negotiation regimen).

There’s a lot to parse through (you can read the entire blueprint here). But the document also asks more questions than it provides in the way of immediate action, as the University of Pittsburgh professor Walid Gellad noted on Twitter. For instance, will PBMs be forced to share more of the rebates they negotiate with drug makers (a largely opaque process that many critics say is lifting up prices) directly with consumers?

It’s also important to consider what the blueprint doesn’t include—such as a plan to allow Medicare to directly negotiate drug prices and establish a formulary, or permitting lower-priced drug imports from other countries. Those were proposals loathed by the biopharma industry that Trump had previously floated; they didn’t make it into Friday’s speech, drawing a deep sigh of relief from the sector.

I sat down with Steve Ubl, CEO of the drug industry’s main lobbying group, PhRMA, yesterday preceding Trump’s speech. “We fully expect the president will put forward ideas we don’t agree with,” he told me, pointing to the Medicare Part B/Part D initiative. But he also emphasized that other parts of the medical supply chain deserve just as much, if not more, scrutiny than drug makers do. This issue isn’t going away anytime soon—but Trump’s address doesn’t appear to have rocked big pharma’s (or other industry players’) apple cart.

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