Takeaway: SOTU and Azar speech suggest that they are unlikely to change policy course and are not signally they would even consider it.

We have heard from clients that we do not share the prevailing view that the Trump administration will walk back the scope of the recently released amendments to the safe harbor regulations and delay implementation. Considering the length of time the proposal was vetted and the way Secretary Azar was able to overcome the White House's political concerns about increased Medicare Advantage premiums suggests to us that they are prepared to defend the proposal. We are less certain about the implementation date but think the need for a political message demonstrating the president's willingness take on drug prices will overwhelm any practical concerns plan sponsors may have. We think candidate Trump will want more ads like this next year:

Politics and policy are dynamic things so we are always ready to change our minds if the facts on the ground demand it. For that reason we are watching closely what the president and Secretary Azar say about drug prices generally, and the rebates in particular.

So far, we see nothing to alter our view. The President gave his annual State of the Union  speech last night and Secretary Azar spoke to the Association for Accessible Medicines, a generic pharmaceutical trade group, today. Here are the relevant points in each related to drug prices and health care:

State of the Union. Given the preoccupation Americans have with health care these days, as reflected in the polls, the president included as his second priority health care including drug prices, behind only infrastructure. That means that drug prices have been a feature in both of President Trump’s State of the Union speeches.

The president called out the disparity between brand name drugs sold overseas and those distributed in the U.S. He specifically called on Congress to pass legislation that addresses these price disparities and what he referred to as “free-loading.”

Second, while not specifically referring to two recent initiatives – price disclosure by hospitals effective Jan. 1, 2019 and the safe harbor regulation – President Trump suggested that price disclosure by insurance companies, drug makers and hospitals should be required.

Association for Accessible Medicines. Secretary Azar promoted his mission of eliminating manufacturer rebates and stuck to the talking points:

That is why, last week, President Trump released a bold proposal to replace today’s rebate system with a system of upfront discounts—delivered directly to patients at the pharmacy counter. This has the potential to be the biggest change in how American patients’ drugs are priced at the pharmacy counter, ever. This reform is a priority for President Trump, because he understands how broken today’s system is.

Administration is full steam ahead for now but we will keep an eye on it. 

Call with questions, comments.

Emily Evans
Managing Director – Health Policy



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Thomas Tobin
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Andrew Freedman, CFA
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