President Trump proposed on Thursday that Medicare pay for certain prescription drugs based on the prices paid in other advanced industrial countries — a huge change that could save money for the government and for millions of Medicare beneficiaries.
As part of a demonstration project covering half the country, Medicare would establish an “international pricing index” and use it as a benchmark in deciding how much to pay for drugs covered by Part B of Medicare.
“This is a revolutionary change,” Mr. Trump said in a speech on Thursday at the Department of Health and Human Services. “Nobody’s had the courage to do it, or they just didn’t want to do it.”
Mr. Trump’s announcement was part of a flurry of initiatives emerging from the White House ahead of next month’s midterm elections, in which Democrats hope to take control of the House and possibly the Senate. Democrats have focused their campaigns on health care, hammering Republicans on the high cost of prescription drugs and asserting that Republicans would undo protections for people with pre-existing medical conditions — one of the most popular provisions of the Affordable Care Act.
On Thursday, the Trump administration offered an answer — but the drug proposal would take effect in late 2019 or early 2020 at the earliest.
Trump administration officials said they had the authority to use the Center for Medicare and Medicaid Innovation created by the Affordable Care Act to carry out the proposal. That agency has wide discretion to conduct demonstration projects. The Trump administration will accept public comments before starting the project. But the proposal will most likely face fierce political resistance from drug makers, some health care providers and some Republicans in Congress, and it could also be subject to legal challenges.
“The administration is imposing foreign price controls from countries with socialized health care systems that deny their citizens access and discourage innovation,” said Stephen J. Ubl, the president and chief executive of the Pharmaceutical Research and Manufacturers of America, the main trade group for the industry. He said the proposal would “threaten patient access to innovative lifesaving medicines.”
Democrats had their own reasons for skepticism.
“It’s hard to take the Trump administration and Republicans seriously about reducing health care costs for seniors two weeks before the election when they have repeatedly advocated for and implemented policies that strip away protections for people with pre-existing conditions and lead to increased health care costs for millions of Americans,” said Senator Chuck Schumer of New York, the Democratic leader.
Mr. Trump’s announcement came a few hours after his administration released a government study that said Medicare was paying 80 percent more than other advanced industrial countries for some of the most costly physician-administered medicines.
“The current international drug-pricing system has put America in last place,” Alex M. Azar II, the secretary of health and human services, said in unveiling the report.
Mr. Trump cited the government’s international drug-pricing report in his speech on Thursday, saying he was taking aim at “global free riding” that forces Americans to subsidize drug prices in other countries.
“Americans pay more so that other countries can pay less,” Mr. Trump said.
The report compares prices charged by drug manufacturers in the United States and 16 other countries for 27 drugs that are covered by Part B of Medicare.
“Over all,” the report said, “prices and reimbursement rates for Part B drugs are significantly higher for U.S. providers than purchasers outside the U.S.”
“Medicare could achieve significant savings,” it added, “if prices in the U.S. were similar to those of other large market-based economies.”
In a Twitter post, Mr. Azar said, “Medicare was found to be paying the highest price for 19 out of the 27 drugs studied.” In only one case was Medicare paying less than the international average, he said.
Medicare beneficiaries are generally responsible for 20 percent of the cost of drugs covered by Part B of the program. So if Medicare reduces its payment, the cost to beneficiaries will be “similarly proportionately reduced,” the administration said.
However, most beneficiaries now have supplemental insurance, such as a Medigap policy or retiree health benefits, to help pay their share of the bill for drugs covered under Part B of Medicare.
The new method of payment proposed by the Trump administration would be phased in from 2020 to 2025. “Overall savings for American taxpayers and patients are projected to total $17.2 billion over five years,” Mr. Azar said.
Among the drugs included in the study were Aranesp, for patients with anemia caused by chemotherapy or chronic kidney disease; several cancer medicines, such as Avastin, Herceptin and Keytruda; Lucentis, for eye conditions that can cause vision loss; and Rituxan, for rheumatoid arthritis and certain types of cancer. The list prices for Keytruda and many other new cancer medicines are substantially more than $100,000 a year.
As an example, Mr. Trump said: “One common cancer drug is nearly seven times as expensive for Medicare as it is for other countries. This is a highly used and very effective drug.” The president was apparently referring to Treanda, a cancer treatment sold by Teva Pharmaceutical Industries.
The report was notable for several reasons.
It uses foreign drug prices as a reference or benchmark to judge prices in the United States. In many foreign countries, officials negotiate prices with drug manufacturers. While Democrats have long pushed for such negotiations, Republicans in this country have blocked them, fearing Medicare could eventually dictate prices or restrict access to drugs deemed to be too expensive.
Mr. Trump campaigned for president on the promise of allowing the government to negotiate drug prices, but then backed away from that position when he unveiled his first drug-price proposals last spring. The new proposal moves back toward that plan, not by having the federal government negotiate drug prices directly, but by piggybacking on price negotiations in other countries.
Foreign countries “use their national health systems to negotiate lower prices in exchange for market access,” the Trump administration said in its report.
Democrats were still pushing a more direct route. “On the eve of the midterm elections, the president is proposing a small step on drug price relief when a giant leap is urgently needed,” said Representative Peter Welch, Democrat of Vermont. “Instead of nibbling around the edges, he should demand in his State of the Union speech that Congress send to his desk within 30 days a broad price negotiation bill that applies to all drugs in the Medicare program.”
Medicare has historically paid 106 percent of the “average sales price” for drugs that patients receive by infusion or injection in doctors’ offices. Medicare drug spending has been growing rapidly — at an average rate of about 9.5 percent a year since 2009, according to the Medicare Payment Advisory Commission, an independent agency that advises Congress.
The Trump administration said the current payment formula could provide financial incentives for some doctors and hospitals to use “the highest-priced clinically beneficial product.”
The new report acknowledged many “limitations” in the data used for its international price comparisons. The formulation of drugs, their dosage and their strength may differ from country to country, it said.
Prices cited in the study “may not accurately reflect the actual amount paid in the U.S. or abroad,” because they generally do not show the effects of rebates offered by drug manufacturers, the report said.
Obama administration officials were also troubled by the rapid growth of spending for drugs covered by Part B of Medicare. In March 2016, they proposed a nationwide experiment to reduce payments for many of these drugs. But they scrapped the plan nine months later after it was criticized by pharmaceutical companies, doctors, patients and members of Congress from both parties, who said it could jeopardize access to important medicines.
Mr. Azar said the Trump administration proposal was “more radical” than Mr. Obama’s.
About two-thirds of Part B drug spending is for biotechnology drugs known as biologics.
Countries included in the Trump administration’s drug price comparisons, besides the United States, were Austria, Belgium, Canada, the Czech Republic, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain, Sweden and the United Kingdom.