The Media Cower as Trump Stands Up to Big PhRMA: Part 1
by John Cleer

Two weeks ago today, President Trump announced the signing of 4 executive orders intended to bring down prescription drug costs meaningfully for American patients. “We’ve been waiting for Congress to take action for many decades to reduce drug prices for more than just a small handful of people,” said the president, accurately. “I’m unwilling to wait any longer.”

Driven by an unseen force, like the allegorical tail of Einstein’s lion, the media have converged on these executive orders, delivered their perfunctory dismissals, and scattered. The orders have generally if not universally been described as a hollow, misleading and/or unlikely-to-succeed set of “campaign talking points”; but more importantly, they have been treated as a minor story, already near-forgotten, when they are anything but—and most certainly will be remembered, one way or the other as they won’t go out with a whimper. A reversal is unlikely to happen without first passing through years of litigation (as is now happening with DACA), and would coincide with extreme, immediate and painful premium hikes.

The most significant changes of Trump’s executive orders will come under Medicare, specifically Part B (in-visit drugs) and Part D (prescriptions): since 2003, Medicare had been prohibited from negotiating the drug prices for either. Instead the manufacturer names their own price, which on FDA approval, Medicare has been obligated to pay. In the meantime, every other country on the planet was negotiating their own prices down to much lower numbers, which we've subsidized by paying more. Trump is not wrong when he calls this “global freeloading.”

Additionally, a 4.3% prescription fee (brought down from 6% by former President Obama) to the doctor was tacked on in Part B, and Part D pricing was layered with rebates to “middlemen” that drive up the prices and aren’t passed on to the patient. In the industy this price structure is known as ASP plus 6, or in HHS Secretary Azar’s words, as “Hey, manufacturer, invent whatever list price you want, and we'll pay a 6 [now 4.3] percent premium on top of that.” Not only were these measures expensive, they created the wrong incentives.

“[The middlemen] make more money perhaps than even the drug companies themselves,” President Trump said in his announcement, “and they don’t do much. Maybe they don’t do anything. Nobody even knows who they are, but the middlemen are making a fortune, and Pharmacy Benefit Managers and people are just bilking Medicare patients with these high drug prices while they pocket gigantic discounts. The amount of money they’ve made over the decades is too incredible even to speculate or say. It’s massive.”

The rebates will be reclassified as kickbacks, making them illegal, and the executive orders will reverse every one of these Medicare problems pending HHS enactment, which as explained below, should be uncontestable in the short term and would take years for Trump’s successor to rescind.

These orders also  make insulin and injectable epinephrine (life-saving drugs) available for pennies to millions of low-income patients at Federally Qualified Health Centers (FQHC’s) by ordering these centers to pass their discounts, effectively a full federal subsidy for the drugs, onto their patients. Diabetes is a huge problem in America and one that disproportionately afflicts low-income people. More than 130 million American adults and adolescents—roughly 40% of the US population—have  diabetes or pre-diabetes.

Prior to this executive order, the average low-income patient was charged $500 or more for two vials of insulin every month and $600 per unit of injectable epinephrine, and as noted in the order, many of them are uninsured or pay out-of-pocket due to high deductibles. The government was allowing these FQHC’s to resell these federally subsidized drugs at full price, marking them up to tens of thousands of times their cost for patients who can’t afford it but need them to live. What other drugs does this happen with?

Now they will get insulin and epinephrine at the discount the government was already subsidizin; in turn, this should reduce the burden on the American taxpayer and future generations, who together subsidize massive industry losses when patients can’t pay. More importantly, no more lives will be ruined by this abusive billing at the FQHC's.

For diabetes patients outside of these centers, Trump has authorized the reimportation of insulin at the (much lower) prices other countries pay. This is part of the order at long last lifting prohibitions on foreign drug importation. "No president has ever taken action on drug prices as bold as any of today's individual actions," says HHS Secretary Azar. "Today's executive orders will deliver billions of dollars in discounts directly to patients at the pharmacy counter."

Americans can now legally buy low-cost prescription drugs from Canada and other countries, as many American seniors and others have had to do illegally, and potentially unsafely, for decades. Waivers will be made available to individuals to bypass the federal restriction, “provided such importation poses no risk to public safety,” and thus drug costs will go down and waiver oversight will protect patients from unsafe medication — and provide guidance independent of the powerful pharmaceutical lobby.

Pharmaceutical Research & Manufacturers of America (PhRMA) ranked fourth in 2019 spending by registered U.S. lobbies (related lobbies American Hospital Association, American Medical Assoc. and Blue Cross/Blue Shield took the next three ranks). They have been defeating U.S. drug importation bills for more than 20 years, even with tremendous public support for importation and even when the bills are approved . In one case under President Clinton, they were somehow able to defeat re-importation after it was approved by both chambers of Congress, signed by the president and passed into law—bizarrely, Clinton let (or had) his HHS secretary undo the program with under a month left in his presidency.

But they won’t defeat this one.

The reasons for that are a new legal precedent and the obvious lack of leverage evidenced by Trump’s willingness to take the lobby on in an election year. The legal precedent, described in more detail here, was established in June by the Supreme Court’s DACA ruling. In short it allows presidents via executive fiat to stop enforcing any law they want to, under prosecutorial discretion, and mandates any challenge of an executive order to comply with the Administrative Procedure Act even if the order is not legal (like Obama’s DACA).

Predictably the press are downplaying Trump's executive orders and as always, questioning his inner motivation. Yes the conservative side did the same to Obama, and the liberals to Bush before him (who may have been slightly more justified), but these are primarily liberal outlets, and Trump just signed into policy some of the same positions that liberals have championed since the 1990’s.

Canadian drug importation was a campaign promise for past party nominees Barrack Obama, Hillary Clinton, John McCain, John Kerry and this year, Joe Biden: that’s right, every Democratic Party challenger since Al Gore, plus a Republican they’ve embraced during the Trump Era. It was also supported by Bernie Sanders and nearly every single other Democratic candidate this year. It's unknown if any but Obama would have delivered, but Trump should get some credit for this, after so many leading Democrats have acknowledged it will benefit their base. Unfortunately the conversation has reached the point where neither side of the aisle will give the other any credit, for anything, and I think we’ve reached it by design.

The already-common media refrain that Trump is only doing this for the election ignores his publicly-stated reason for doing it now: “The DACA [Supreme Court] decision allowed me to do things that some people thought the president didn’t have the right to do. I was given that right. Drug prices will be coming down very, very substantially.” The refrain also ignores his campaign pledges, past attempts at the same and similar reforms and common standards of fairness and decency, and it flies in the face of common sense: how can something their favored candidates pledge to address every election become a scam when it actually happened?

The dismissals, however, are few and far between, as the press has largely elected not to cover this—they are pretending it never happened, as they’ve done with proxy wars in the Middle East, improprieties in the 2016 Democratic Primaries, six-figure pay-for-play exchanges with numerous other countries that were all uncovered at once on clandestine email servers that appear likely to have been used in the selling of classified information.

Drug importation is a titanic victory for President Trump, even if the Court dropped it right in his lap with the DACA ruling — I can’t imagine other presidents taking on such a powerful lobby while up for re-election. In his speech announcing the orders, Trump pointedly challenged a powerful industry on many points that few in politics have dared to speak out on, presidents included—as he seems to do regularly. Trump namedrops the military industrial complex in interviews, publicly trashes the Federal Reserve and their propaganda outlets and openly wars with the CIA every day, in the process making the Deep State a mainstream topic and challenging the biparty consensus that vulture capitalism, shuttered factories and an import-based economy, with the reliance on other countries that they have brought us, are ok. They’re not.

Trump has no problem confronting powerful institutions, he even seems to relish it and this is what sets him apart from everyone who’s been allowed to contend for party nomination for the past 30 years. Trump was not allowed, but rather took the presidency by force, by telling the truth and bringing it to light.

Above all, what Trump has brought to the table has been an insistence the US negotiates the deals it makes, as any competent entity must do, to meet its own interests. Drug makers have been given an August 24 deadline “to substantially reduce prices”; if they fail to meet this deadline, Medicare will purchase Part B drugs at “Most Favored Nation” pricing, meaning the lowest price anywhere in the world (instead of the highest). Immediately, industry executives set a meeting date for Tuesday - which they later canceled.

Overnight, their fortune changed so sharply that they don't know what to do. They are already threatening and no doubt planning to fund a disinformation campaign targeting the president's reelection campaign in battleground states.

As we are the world’s largest purchaser, “most favored” pricing would not be unreasonable, but it would be a drastic change for drug makers. In composite, these executive orders will make drug manufacturers restructure the way they charge everyone, and cost them dearly if they don’t pass our burden onto other countries.

But for the American patient, it’s an unqualified and long-awaited win, and Canadian imports, which should be headlining the newspapers, are only the beginning.

In fairness, the impact of out-of-pocket access to Canadian prices has diminished slightly over the years (this doesn’t include insulin re-importation), after Presidents Bush, Jr. and Obama each reduced the demand: Bush by signing into law an amendment prohibiting Customs seizures of up to 90-day supplies of Canadian-bought drugs at the border; Obama by enacting the phasing-out of the Part D "donut hole" coverage gap (that was enacted by Bush), which capped the annual Part D drug benefits seniors could receive - after receiving $2,250 in coverage, their next $2,850 would come out-of-pocket (and be many times cheaper over the border). I have no problem giving these men credit for this, even though I think their policies were tremendously harmful. It's true that neither is up for re-election and that makes it easy to praise them, but in a vacuum, these actions that they took, if not sufficient, were objectively good for the nation’s people.

Nonetheless there are many Americans with high deductibles, coverage limits or no health insurance who  want full, legal access to Canadian prices and don't want or can't afford to go back every three months, and now they won't have to—pending Azar’s enactment.