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.
- The Trump administration has backed off a key part of its plan to bring down US drug prices.
- That puts pharmaceutical companies at risk from another Trump administration proposal that focuses on the much lower prices that other countries pay for drugs, said Veda Partners analyst Spencer Perlman.
- Especially threatened by such a policy are drugmakers like Swiss pharma giant Roche and biopharmaceutical companies Amgen and Regeneron, according to Perlman.
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The Trump administration just yanked a policy that it had proposed earlier this year in an effort to bring down the cost of prescription drugs for patients.
The Trump proposal would have banned payments called rebates in two government-funded health programs: Medicare, which covers the elderly and some disabled individuals, as well as parts of the Medicaid program for low-income people. The policy change was first reported by Axios.
"The Trump administration is encouraged by continuing bipartisan conversations about legislation to reduce outrageous drug costs imposed on the American people, and President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline," White House spokesman Judd Deere said in a statement.
The decision to pull the policy is seen as good news for some in the healthcare industry. CVS and other drug-plan providers have seen their stock prices surge after the policy was pulled, for example.
But according to Spencer Perlman, director of healthcare research at the investment advisor and consultancy Veda Partners, the decision is bad news for drugmakers, as it suggests they're back in the administration's cross hairs.
"Pharmaceutical manufacturers are the clear losers from this development, partly because the sector stood to benefit from the rebate rule and partly because this signals to us that the White House is dead set on targeting drug manufacturers directly in its effort to lower prescription drug prices," he said.
"At the very least, it is becoming increasingly clear that drug manufacturers have a target on their back and very few friends to protect them."
Trump proposal would have boosted drug companies
Rebates are a major and established part of the US healthcare system. Drugmakers make rebate payments to middlemen called pharmacy-benefit managers like Express Scripts, CVS Caremark, and UnitedHealth Group's Optum so they include a particular drug on their lists of which prescriptions a patient can take.
Drug companies say this works to increase the prices of their products. PBMs, in turn, blame drugmakers for setting high costs for their treatments, and say they're negotiating discounts on behalf of patients.
The Trump proposal, then, would have benefited the pharmaceutical industry and come at the expense of PBMs.
A new focus on drug prices paid outside the US
Now, the administration will likely turn its attention to another policy that would tie the amount paid for drugs to prices paid in foreign countries, Veda's Perlman said.
That's significant because drug prices are notoriously cheaper outside the US. Pharmaceutical companies really don't like this idea.
Called the "International Pricing Index (IPI) Model," this would apply to Medicare's Part B program, which only pays for certain types of drugs.
This could threaten drugmakers with drugs that get largely bought through Medicare Part B, like the Swiss drugmaker Roche and biopharmaceutical companies Amgen and Regeneron, "since the IPI's stated goal is to lower by 30 percent over 5-years Medicare's payments for Part B drugs in the half of the country mandated to participate in the IPI," Perlman said.
The IPI proposal was put out last fall and, after a review by the White House's Office of Management and Budget, could be published in August. The end of the rebate rule "meaningfully increases the odds that the IPI will
be formally proposed and perhaps finalized and implemented," Perlman said.
Roche, Amgen, and Regeneron did not immediately return Business Insider's request for comment.