Setbacks for Trump's drive to lower prescription drug costs

Trump drops once-touted Medicare drug rebate plan

Healthcare providers sector-related exchange traded fund was among the best performers on Thursday, breaking above its long-term resistance, after the Trump administration withdrew plans to curb billions of dollars in annual rebates that drugmakers provided middlemen in Medicare.

Pharmaceutical tablets and capsules are arranged in the shape of a US dollar sign on a table in this picture illustration taken August 20, 2014.

Under the administration's plan, drugmaker rebates now paid to insurance companies and their middlemen would have gone directly to seniors in Medicare's Part D program when they filled their prescriptions.

It was a defeat for the pharmaceutical industry, which had lobbied to promote rebates. After mostly languishing this year, shares of companies that operate large pharmacy-benefit managers rallied, with CVS Health Corp. rising 7% to $59.23 at 9:35 a.m.in NY, while UnitedHealth Group Inc. advanced 3% to $254.98.

Shares of UnitedHealth Group Inc and CVS Health Corp were also up as were those of drug distributors like McKesson Corp and pharmacy Walgreens Boots Alliance Inc.

Pharmaceutical company shares fell, with Merck & Co off 4%, Bristol-Myers Squibb Co down 3% and Pfizer Inc off 2%.

"There are still many headwinds for the supply chain, but today's news clearly rerates the space higher".

"Shelving the rebate reform initiative, which pharma strongly supported, feels like payback", he added.

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The Trump Administration has abandoned yet another pillar of its plan to reduce medicine prices in the U.S., this time its proposal to eliminate rebates from federal health plans.

"Any solution should start with addressing drug prices". The rebates aren't passed directly to consumers at the pharmacy counter, but they tend to be plowed back into plans to lower premiums for everyone.

"Only drug manufacturers have the power to set drug prices".

Trump's big remaining play now is a proposal to peg the price the United States is prepared to pay for medicines prescribed by a physician in a hospital or clinic to the lowest price among a list of 'favoured nations'. That pushback stiffened after the nonpartisan Congressional Budget Office estimated that the plan would have little effect on manufacturer prices and would cost Medicare $177 billion over 10 years by leading to higher premiums subsidized by taxpayers.

The proposed rule was the second major Trump drug pricing effort to collapse this week after a federal judge blocked an administration rule that would have required drugmakers to disclose the list prices of their medicines in television ads.

"Political momentum was building against the 2020 implementation of the CMS proposal to eliminate pharmaceutical rebates in government programs due to the perceived unintended windfall profits that might have accrued to pharmaceutical manufacturers", JP Morgan analyst Gary Taylor wrote in a research note.

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.

"Based on careful analysis and thorough consideration, the President has made a decision to withdraw the rebate rule", White House spokesman Judd Deere told Business Insider in a statement Thursday". That decline, plus ongoing bipartisan talks to produce legislation to lower "outrageous drug costs", reportedly led to President Donald Trump to say the changes to rebates were no longer necessary because other policies were in place.

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