Setbacks for Trump's drive to lower prescription drug costs

Heap of medical pills in white blue and other colors. Pills in plastic package. Concept of healthcare and medicine

The administration of United States President Donald Trump has scrapped one of its most ambitious proposals for lowering prescription drug prices, backing down from a policy aimed at health insurers but raising the possibility of new measures focused more squarely on drugmakers.

The iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) jumped 3.7% on Thursday, breaking back above its 200-day simple moving average.

It was not immediately clear whether that meant the end of the debate on rebates because other proposals on the same issue could surface on Capitol Hill, where lawmakers are working with the administration on drug cost legislation.

The rule would have forced companies like Cigna and CVS to either forgo these discounts or pass them onto Medicare patients enrolled in their health insurance plans and drug plans.

Health and Human Services Secretary Alex Azar and top White House policy advisers had disagreed over the merits of the drug rebate rule, with Azar continuing to champion it and most White House policy officials arrayed against him over concerns it would cost almost $180 billion over the next decade and could raise Medicare premiums.

The administration's about-face was the second setback in a week for the president's drive to lower drug prices.

"Based on careful analysis and thorough consideration, the President has chose to withdraw the rebate rule", said a White House spokesman.

The proposal was part of the Trump administration's efforts to reduce drug costs.

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PhRMA, the main pharmaceutical industry lobby group, disagreed, saying in a statement that the move ended the only government proposal that would have provided immediate savings at the pharmacy counter for patients.

The government had hoped that by eliminating rebates of 15 percent to 30 percent of a drug's listed price, the prices would fall.

Drug rebates, which Azar in January termed "a shadowy system of kickbacks", are essentially discounts off the list prices of drugs.

Grassley said in a statement that he had concerns about the administration's rebate rule, but was confident about the prospects for legislation. The Associated Press reported that the administration reversed course after the nonpartisan Congressional Budget Office estimated the plan would have cost Medicare $177 billion over 10 years by increasing insurance premiums.

A White House spokesperson said in a statement obtained by Politico the administration will "consider using any and all tools to ensure that prescription drug costs will continue to decline". Rebates are a big business for PBMs such as Cigna-owned Express Scripts, CVS Health's Caremark business, and UnitedHealth Group-owned OptumRx.

The practice, critics said, gives drugmakers a reason to keep list prices high, distorts incentives for drug plans who are supposed to prioritize the interest of their clients and leaves consumers paying more out of pocket for prescription drugs. Moreover, last week the president announced his intentions to deliver an executive order that would create a "favored nations" clause, where USA spending for drugs would be tied to prices paid by other countries. Meanwhile, insurers would raise premiums to compensate for the loss of rebates.

Labor Department data indicate that something different may be happening to drug prices.

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