The Trump administration wants to lower drug prices. Here’s what they’ve already done.

Start adding items to your reading lists:
Save this item to:
This item has been saved to your reading list.

November 20, 2019


President Donald Trump has long identified drug pricing as a priority for his administration. After first releasing a drug pricing “blueprint” for action in 2018, the Trump administration has released new policies, proposals and regulations in a bid to lower list prices, decrease what consumers pay at the pharmacy counter and allow insurers to negotiate more aggressively.

PwC’s Health Research Institute has been closely following these developments. Read on for our analysis of various drug pricing proposals made by the administration and how they might affect the healthcare industry.

Page last updated November 20, 2019

For more information on the Trump administration’s thinking on drug pricing, subscribe or bookmark the Health Research Institute’s Regulatory Center here.

International Pricing Index (October 2018)

The International Pricing Index (IPI) proposal, released on Oct. 30, 2018, as an advance notice of proposed rulemaking, is also part of a broader attempt by the Trump administration to rein in drug pricing, in part by inducing greater competition in the US. The proposal would base reimbursement of drugs in the Medicare Part B program on prices paid for the same drugs in 14 countries including Canada, Japan and 12 European countries.

CMS officials estimate using target prices based on foreign competition could reap substantial savings for Medicare Part B—and about 30 percent on a per-drug basis. Between 2020 and 2025, they expect to generate net savings of $17.9 billion for Part B, as well as $1.8 billion in reduced Medicaid spending due to impacts on the dual-eligible population.

According to an HRI analysis of data from HHS’s Office of the Assistant Secretary for Planning and Evaluation (ASPE), if the US adopted volume-weighted international pricing, five companies would be expected to lose revenue of $500 million per year or more – the difference between their international and domestic prices. Another six companies have between $100 and $500 million in annual revenue at stake.

Because prices under the IPI model would be tied to countries that have pricing regulators, which limit price increases, the IPI model could also limit pricing growth under Part B and reduce long-term spending. Twenty-seven percent of drugs covered by Medicare Part B saw greater than 10 percent annual average growth in the cost per dose between 2012 and 2016, according to an HRI analysis of CMS data. Another 40 percent saw some form of increase.

The changes under the IPI model would subject 29 of the top 50 drugs under Medicare Part B to competition, according to an analysis of 2016 Medicare drug data and 2018 patent data by HRI. Those drugs accounted for $14.4 billion in spending in 2016, and the vast majority are biological medicines. 

The International Price Index Model for Medicare Part B drugs proposed rule has been deemed economically significant, and is currently pending review at the Office of Management and Budget.

Read more on this proposal in HRI’s new report: CMS considers foreign drug prices to hold down Medicare Part B spending.

Generic approvals (2018)

The FDA is setting records for the number and speed of its generic drug approvals. The FDA approved 781 generics in fiscal year 2018, up from a then-record-setting 763 in fiscal year 2017. Regulators also tentatively approved 190 generics, double the 95 the agency approved in fiscal year 2017. And the agency is approving these drugs faster than it was even a few years ago. For some generics, approvals are coming in as few as eight months instead of the previous standard of 15 months in fiscal year 2016.

Increased competition isn’t just about speeding up access to never-before-approved generics, but also providing more options for existing generics. In part, the FDA is trying to increase competition in markets where there is only one generic. This could create significant price competition for some products. At present, many drugs lack competition on the market.

An HRI analysis of data from Medicare Part D, which covers almost all pharmaceuticals, shows that 672 drugs (44 percent) have just one manufacturer. Industry consolidation—by generic manufacturers and retail channels—and low margins may reduce or eliminate the incentive to compete in some of these areas, leading to scarcity of competition.

A swelling number of new generics may affect drug prices less than regulators and policymakers hope because biological medicines have a growing influence on the market, and the number of patent expirations is decreasing. Generic competition won’t affect 46 percent of the estimated sales revenue of the top 100 drugs through 2023, according to an HRI analysis.

And, lastly, not all drugs going off-patent will be eligible for traditional generic competition. Many are biologics approved through the Public Health Service Act and the FDA’s 351(a) pathway, not the Federal Food Drug and Cosmetic Act and the FDA’s 505(b) pathway. That means those drugs will require biosimilar, not generic, competition.

An HRI analysis shows that generic competition would have no effect on 41 percent of the top 100 drugs by revenue, worth more than $600 billion. This trend is likely to accelerate in the years ahead as the FDA approves an increasing number of biologics each year.

In November, the GAO released a report describing difficulties that some generics manufacturers continue to have with respect to accessing reference products from brand manufacturers. The Creates Act, versions of which have been introduced in both the House and Senate, would, if passed into law, allow generic manufacturers to bring civil lawsuits against brand manufacturers that don’t provide access to reference product samples. 

For more data and analysis, read HRI’s report: The FDA is approving more generic drugs than ever before. Is it enough to lower drug costs?

Use of rebates in Medicare Part D and Medicaid (February 2019) - Rule withdrawn

Rebates paid by drug manufacturers would no longer have been protected from anti-kickback laws under a proposed rule released by HHS in February 2019.


The White House announced in July 2019 that it would no longer proceed with the rule. However, the current (as of September 25) version of the Senate’s Prescription Drug Pricing Reduction Act of 2019, does include a provision that would require manufacturers to provide any drug discounts directly to the patient at the point-of-sale.

The rule would have amended safe harbor regulations to explicitly exclude discounts from drug manufacturers, which have historically been protected from liability, for Medicare Part D plans and Medicaid managed care organizations as well as pharmacy benefit managers (PBMs).

The agency would have instead created a new safe harbor protection for prescription drug discounts offered directly to patients at the point of sale. It would add a second new safe harbor to protect discounts when PBMs provide services that relate to arrangements with health plans. In those cases, the safe harbor would protect manufacturer’s payments for the services the PBM provides to them and not those the PBM provides to a health plan.

HHS believed the proposal will “curb list price increases, reduce financial burdens on beneficiaries, lower or increase federal expenditures, improve transparency, and reduce the likelihood that rebates would serve to inappropriately induce business payable by Medicare Part D and Medicaid [managed care organizations].”

According to a 2018 Health Affairs study, PBMs retain $23 billion, or 4.8 percent, of all pharmaceutical spending in the US through the fees, discounts and rebates they negotiate on behalf of their customers. If the rule went into effect, the changes could impact PBM revenues and could prompt PBMs to consider new business models.

For pharmaceutical companies, reducing the influence of drug rebates could be beneficial. High rebates can drive up list prices, which leads to bad publicity for the industry, and potentially, more congressional hearings. However, net price growth is often significantly lower than the growth in the list price. According to research published by IQVIA, in 2018 list price grew 5.7 percent from 2017, while net price only grew 1.5 percent.

An analysis by the Congressional Budget Office (CBO) determined pharmaceutical companies would likely use 85 percent of what they now spend on rebates on point-of-sale rebates to patients, which CMS’ rule would for the first time allow, while retaining the remainder, about 15 percent.

Because pharmacy benefit managers (PBMs) would no longer receive rebates, which in many cases are passed on to the drug insurance plan to use the money to lower premiums, CBO estimated that premiums would increase. This in turn would require CMS to increase its premium support. The government now subsidizes 74.5 percent of basic beneficiary premiums, CBO noted. This would increase federal spending by $177 billion over 10 years, the agency estimated.

This analysis was originally in the HRI weekly newsletter as "HHS proposes major shift to protections for Part D and Medicaid MCO drug rebates

Part D negotiating leverage (November 2018) - Withdrawn

Medicare Part D plans would have had more tools to negotiate drug prices for beneficiaries under a proposed rule released by CMS in late November 2018. The proposed rule would change how Part D plans cover drugs in six protected classes of drugs—antidepressants, antipsychotics, anticonvulsants, immunosuppressants for treatment of transplant rejection, antiretrovirals and antineoplastics. 

Plans also would have been permitted to exclude a protected class drug from formularies altogether if its price increases beyond the Consumer Price Index for Urban Consumers. Medicare Advantage plans would also be permitted to use step therapy as a utilization management tool for Part B plans under the proposed rule, a formalization of guidance CMS released in August 2018.

However, Medicare Part D insurers will not be allowed to exclude pharmaceuticals in protected classes of medicines from their formularies, as had been proposed by CMS in 2018. In May 2019, the federal agency, in its Medicare Part D pricing final rule, left out that proposal to the relief of some pharmaceutical companies.

The savings from these proposals appear to be modest. According to CMS’ analysis, allowing Part D plans greater flexibility in covering protected class drugs could save the government $1.85 billion and beneficiaries $692 million over 10 years. Permitting step therapy for Medicare Advantage Part B drugs would save the Supplementary Medical Insurance Trust Fund between $340 million and $425 million by 2029, according to CMS.

This analysis was originally in the HRI weekly newsletter as "Pharma companies win battle over proposed Part D protected class changes.

Including drug prices in advertising (October 2018) - Court declared illegal

Drug companies will soon be required to include information in direct-to-consumer television advertising about the cost of their drugs under a final rule unveiled this week by HHS. Similar to the original proposed rule, the final rule requires companies to include information in television ads about the Wholesale Acquisition Cost (WAC) of the drug, also known as the “list price,” for a typical 30-day supply of the product or a full course of treatment.

A disclosure of the drug’s cost for a 30-day supply or full course of treatment will need to be included at the end of each advertisement, along with a disclosure that the real costs for consumers with health insurance may be less. Drugs that cost less than $35 per month or per course of treatment are exempt from the TV disclosure requirement. The pricing information contained in the advertising will have to be kept up-to-date as of the first day of the quarter, which could require greater coordination between a company’s drug pricing teams and its advertising and promotion teams. The rule goes into effect 60 days after publication in the Federal Register.

HHS would enforce the rule primarily by listing violators online at least once a year. The proposal also notes that private parties could file lawsuits over alleged violations under the federal trademark law, specifically Lanham Act Section 43(a), 15 USC Section 1125(a).

The final rule could have an impact on the way companies advertise their drugs and biologics. While television is the dominant method of promoting pharmaceutical products, according to an analysis by Kantar Media, a relatively small number of products are touted in these ads. For these products, companies may shift some of their ad spend from spots promoting specific products to ones aimed at disease awareness.

Companies also could transfer some of their marketing budgets away from direct-to-consumer TV spots toward more hands-on patient engagement efforts. The proposal also may prompt some companies to look toward social media or online ads, which are not covered by the proposed rule.

Under the proposed rule, TV ads would include list price info as well. If ads conclude with the pricing information, it may stick in viewers’ minds, especially if the list prices are large. Some patients may decide to ask their doctor not to prescribe them the product, even if their share of the cost would be dramatically lower.

Update: The final regulation has been struck down by the US District Court of the District of Columbia, with a district court judge ruling in favor of an advertising trade group and several pharmaceutical companies that the regulation lacked a proper legal basis on which to stand. Judge Amit Mehta wrote that while the court “does not question HHS’s motives in adopting” the transparency rule, it found that “it lacks the statutory authority under the Social Security Act to adopt” the rule as written. The Trump administration may still appeal the ruling. In August, the Trump administration appealed that decision.

This analysis was originally in the HRI weekly newsletter as "‘Drugmakers will have to broadcast prices during TV ads, HHS says."

Two-sided risk for reinsurance phase of Part D (January 2019)

Under a model released in January 2019 by CMS that aims to reduce spending, Medicare Part D payers will be able to keep a portion of what they are able to save the Medicare program if they can reduce spending compared to spending benchmarks. The voluntary, five-year model would introduce two-sided risk to a reinsurance phase of Part D, which pays for 80 percent of claims incurred during the “catastrophic” liability phase (costs above $8,140 per year as of 2019).

From 2008 to 2017, federal spending on these liabilities increased $28 billion to $37.4 billion, or 17 percent per year, CMS said. Starting in January 2020, when the model will begin, Part D plans will be able to keep for themselves some of what they save the Medicare program by lowering costs, though they would also be liable for 10 percent of overspending compared to a benchmark. The exact details of the plan will be detailed in a forthcoming request for applications, CMS said.

The new benefit design could put additional pressure on the prices of some drug products. CMS has noted what it calls a “bifurcation” in spending, with increasing adoption of generics driving prices for some products lower, and specialty and branded drug prices driving spending up.

Efforts to reduce spending in these categories could help Part D beneficiaries, who pay varying percentages of claims, and 5 percent of costs during the catastrophic coverage phase. However, branded and specialty drugs are typically the most resilient to pricing pressure since they are protected by patents, often face little or no competition, and Part D is required to cover all drugs in certain classes, including all cancer drugs.

This analysis was originally in the HRI weekly newsletter as "CMS model to take aim at Part D drug pricing with sweeteners for plan sponsors in 2020." 

Citizen petitions and petitions for stay of action (October 2018)

The FDA announced a draft guidance in October 2018 under which it would make public the names of pharmaceutical companies found to be unnecessarily delaying generic competition approvals. Companies also could be investigated by the Federal Trade Commission (FTC) under the proposal.

The proposed change involves citizen petitions and petitions for stay of action, through which companies can ask the FDA not to approve a product—or to pull its approval—for reasons related to science, regulation or public health.

The FDA has long said that many of these petitions are frivolous. The proposal would allow it to deny petitions that fail to raise valid scientific or regulatory issues. Notably, the FDA also would publish the names of companies whose petitions it denies in an annual report to Congress and would refer petitions it believes were submitted solely to delay or deny competition to the FTC for potential enforcement action.

From 2008 to 2016, the FDA received 182 petitions; it granted eight in full, according to the agency. Of those remaining, 127 were denied; five were withdrawn; and 42 were partially denied. Some petitions have, for example, asked the FDA not to approve a generic that could be split in two when the original drug had been reformulated to be split into three parts, according to the AU Law ReviewThe FTC has sued some companies for their use of citizen petitions.

If the new policy is enacted, its impact might be limited. The outcomes of citizen petition proceedings already are public through the federal docket. Many companies enlist third parties, such as law firms, to file petitions on their behalf.

The issues that companies raise in citizen petitions often aren’t obviously frivolous and may therefore not be easy to dismiss. For example, a branded drug company may have reformulated its drug in response to public health concerns, so it may be reasonable to reject a generic that refers to the original formulation. Companies also may choose to file several citizen petitions—some companies may file dozens—in a bid to persuade the FDA to delay a drug’s approval pending the petitions’ resolution.

This analysis was originally in the HRI weekly newsletter as "FDA proposal would 'name and shame' companies delaying generics." 

Gag clauses (October 2018)

President Trump signed two bills into law in October 2018 that prohibit insurers and pharmacy benefit managers (PBMs) from restricting a pharmacy’s ability to inform patients about lower drug cost options.

Under some contracts between pharmacists and insurers or PBMs, a so-called “gag clause” restricts pharmacists from telling patients when the cash price of a medicine is less than what they would pay under their insurance plan. “All our citizens deserve to know the lowest price available at our pharmacies, and now that’s what they’ll be getting,” Trump said as he signed the bills, according to a report in The Hill.

Prohibiting “gag clauses” represents some of the lowest-hanging fruit in the efforts to reduce drug costs. A study by the University of Southern California’s Leonard D. Schaeffer Center for Health Policy and Economics found that 23 percent of filled pharmacy prescriptions involved a patient overpayment of $7.69 on average. The study suggests that while each overpayment may be relatively small, the total dollar amount associated with the practice could be significant.

This analysis was originally in the HRI weekly newsletter as "‘Gag clause’ bills become law."

Speeding generics (February 2019)

Generic pharmaceutical manufacturers stand to benefit from new FDA policies and funding designed to lower barriers to competition and hasten reviews of their products. The changes involve two new guidance documents and an additional $269 million in federal funding for the FDA, including $25.1 million in new funding for generic drug development.

One draft guidance focuses on Competitive Generic Therapies (CGT)—generic drugs approved for conditions for which there is “inadequate generic competition.” Under the FDA Reauthorization Act, the successful approval of a CGT grants the applicant a period of marketing exclusivity during which time the FDA will not approve identical generics for the same condition. The FDA also fast-tracks the review of CGTs.

The FDA also is attempting to get a handle on which approved generic drugs are available to consumers. A new guidance document outlines requirements for companies to regularly submit to the FDA information about the marketing status of their products. Under the FDA Reauthorization Act, companies are required to submit to the FDA a one-time report on a drug’s marketing status and updates if the drug is withdrawn from the market or not available for sale.

Additional generic approvals could help decrease costs for drugs with little to no competition. The FDA’s latest moves should help researchers and industry determine which drugs fall into that category. These changes could create modest new opportunities for companies to get their drugs to market more quickly. The FDA’s new priority review pathway for generic drugs is eight months long, compared to the standard 10 months for nonpriority drugs.

This analysis was originally in the HRI weekly newsletter as "‘Generic drug makers see gains from FDA."

Penalties for misclassification (April 2019)

Life sciences companies will face new penalties under a law passed in April 2019 that aims to ensure companies don’t misclassify their drugs under the Medicaid Drug Rebate Program (MDRP).

The law, the Medicaid Services Investment and Accountability Act of 2019, establishes penalties for companies that misclassify their drugs under this system in an attempt—accidental or deliberate—to minimize the rebates they pay. Companies found to have intentionally misclassified their drug products will be liable for twice the difference in improper payments. In addition, they are also liable to pay the difference back to CMS.

The MDRP requires that a pharmaceutical company offer the government the “best price” available for the drug, and then pay a rebate to the government. The rebate is greater for innovative drugs (23.1 percent of the Average Manufacturer Price), and less for noninnovative drugs like line extensions (17.1 percent) or generic drugs (13 percent). The bill was signed into law by President Trump on April 18, 2019. 

While the legislation is meant to prevent intentional cases of misclassification from occurring, it makes clear that such actions don’t have to originate from the C-suite. An action taken by any “officer, director, agent or managing employee of such manufacturer” can make a company vulnerable to civil penalties. To keep from incurring fines, companies should design internal processes and systems to protect against inadvertent or intentional efforts. 

This analysis was originally in the HRI weekly newsletter as "Life sciences companies face new penalties under Medicaid rebate program."

Contact us

Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Alexander Gaffney

Senior Manager, Health Research Institute, PwC US

Tel: +1 (202) 836 1604

Jason Ranville

Senior Manager, Health Research Institute, PwC US

Follow us