Trump's drug plan.
Health and Human Services Secretary Alex Azar talks about drug prices with President Donald Trump at the White House on May 11, 2018.

Earlier this year, President Donald Trump outlined a set of proposals (PDF) that he hopes will lower the high cost of prescription drugs for millions of Americans.

Recently, the administration provided additional details of those plans, including one that could change how doctors are paid for very expensive drug treatments under Medicare Part B plans, and another that would require companies to include prices in TV drug ads.

And earlier this week it released a proposal to loosen restrictions on which drugs Part D plans must cover.  

If enacted, several of the most dramatic proposals could alter how drugs are purchased and sold among drug companies, insurers, and industry middlemen, fundamentally restructuring a complex, decades-old system.  

Several of the changes could also potentially lower the out-of-pocket costs Americans pay at the pharmacy counter. One proposal, for example, ended the so-called “gag clauses” that prevent pharmacists from discussing lower-cost drug alternatives with consumers. It was signed into law by Trump earlier this year.

More on High Drug Costs

But some argue the proposals don’t go far enough.

For example, democratic lawmakers have released their “A Better Deal” (PDF) proposal, which includes allowing the federal government to negotiate with drug companies for lower Medicare drug prices. Other measures introduced by some Democrats in Congress would permit U.S. citizens to legally purchase medication from Canada, where drugs typically cost much less.

Foreign nations, however, have drawn particular ire from Trump. He believes that they take advantage of U.S. innovation to keep their own drug prices low. “When foreign governments extort unreasonably low prices from U.S. drugmakers, Americans have to pay more to subsidize the enormous cost of research and development,” Trump said during a press conference in April.

Since then, the administration has proposed benchmarking at least some drugs purchased by the federal government for Medicare Part B plans against prices in other nations, such as Canada, France, Germany, Sweden, and the U.K. Health and Human Services estimates that prices in these countries are, on average, 44 percent lower.

Some experts say that while that particular step could help, it may translate to only limited savings for consumer. However, several other proposals could have a more direct and bigger effect. Here’s how.

Proposal: Limit Hidden Payments Between Drug Companies and Industry Middlemen

Drugmakers often cut deals with companies called pharmacy benefits managers, or PBMs. These companies, including CVS/Caremark and Express Scripts, act as middlemen between drug and insurance companies. Such deals—which come in the form of rebates, or payments made from drug companies to PBMs to secure favorable coverage for their drugs—totaled $129 billion in 2017, according IQVIA, a firm that tracks the drug industry. Yet this system can lead to higher list prices for many prescription drugs, Scott Gotlieb, the Food and Drug Administration commissioner, said in a speech last week.

If such payments were reduced, list prices for brand-name drugs could be cut by 25 to 40 percent, says Stephen W. Schondelmeyer, Ph.D., a pharmacoeconomics professor at the University of Minnesota, in Minneapolis. That could directly lower prices for consumers who must pay near full price for drugs because they either have a high-deductible insurance plan or their medication is not well covered by their insurer.

“Although it would be disruptive if we restructure the market this way, it would remove a lot of administrative waste out of the system,” Schondelmeyer says.

Downside: It could take several years. This system of buying and selling medication is decades old and is the backbone of how business is done in the U.S. Undoing it would require Congress to pass clarifying legislation, and help from the Federal Trade Commission to unravel the rebate system. And it’s unclear what would replace it.

Proposal: Give Instant Rebates to People on Medicare Part D

Drug companies also make rebate payments to insurance companies that manage Medicare Part D drug plans, as a way to attract their business. In late 2017, the Centers for Medicare and Medicaid Services (CMS) proposed that drug companies give these discounts directly to consumers instead, at least for certain expensive, brand-name meds. People on Part D could get those discounts when they fill prescriptions at the pharmacy counter.

The Medicare Rights Center, a nonprofit organization that advocates for affordable healthcare access for seniors, said earlier this year (PDF) that it supports giving rebates to people on Medicare Part D who are experiencing higher drug costs.

A 2018 report (PDF) from the Pharmaceutical Research and Manufacturers of America, an industry group, estimates that these instant rebates could help 7 in 10 people on Medicare Part D.

The approach could also help people not on Medicare. Aetna and UnitedHealth, for example, have said they will make similar changes to some plans they offer employers.

A related proposal released by the administration this week would offer another type of discount when consumers purchases  medication at the pharmacy. Under this proposal, a person would be charged the lowest possible price for a drug after other discounts are applied—discounts that the consumer usually would never see. These price concessions are usually made to the pharmacy from the insurance company long after the prescription has been filled.

Downside: Rebate payments are typically pooled together, and companies that administer Part D plans say that helps keep monthly premiums low for everyone in a plan. CMS has said that giving rebates directly to consumers could make premiums go up for everyone, and also increase the total federal spending on Medicare Part D by about $42 billion.

“Redirecting rebates and price concessions to enrollees can be a helpful way to reduce sticker shock at the counter,” says Dena B. Mendelsohn, senior attorney and healthcare policy advocate in Consumer Reports’ advocacy division. “But at the end of the day, it does not address the looming healthcare-cost crisis, which affects consumers, from the price of individual prescriptions to their annual health insurance premiums.”

Proposal: Loosen Medicare Part D Formulary Requirements

Medicare Part D plans must now include at least two drugs to treat a condition and, for some diseases, cover all available drugs. Insurers argue that limits their ability to negotiate with drug manufacturers because they can’t drop a medication if they’re not satisfied with the terms or if the drug doesn’t work better than existing treatments.

So earlier this week, CMS proposed that Part D plans (and Medicare Advantage plans) could instead cover just a single medication for a condition, perhaps allowing insurers to negotiate better deals with drug companies. CMS estimates that doing so could reduce prices by up to 30 percent.

Downside: Consumers could have less choice for drugs to treat some conditions, says the University of Minnesota’s Schondelmeyer. And for some consumers, it could make it difficult to find any plan that covers all the drugs they need. In addition, the proposal would allow Part D plans to require consumers to try and fail on specific medications first before moving on to more expensive treatments. That could cause some consumers to have to jump through more administrative hoops to get their medications covered by their drug plan.

Proposal: Speed Approval of Generic Drugs

Changes already underway and recently proposed at the Food and Drug Administration would speed approvals for certain generic drugs, particularly those that are not yet available in generic form or approved for only one manufacturer. That could give consumers quicker access to low-cost generic drugs. And it could spur more competition among generic-drug manufacturers, would could also help lower prices.

Downside: “Speed to market is not the only issue,” says Aaron Kesselheim, M.D., associate professor of Medicine at Harvard Medical School, who has studied this topic. “We need to make sure there are sufficient numbers of competitors and that there is adequate post-approval oversight of the safety of generic drugs.” He notes that to keep the FDA on the cutting edge, it requires resources, including funding and expertise.

Proposal: Give Free Generics to Low-Income Individuals on Medicare Part D

The Trump administration has raised the possibility of providing certain generic drugs free of charge to people who earn less than 130 percent of the poverty level. That comes to about $1,300 per month for an individual and $1,760 for a couple.

Downside: Providing these free drugs could increase the federal government’s overall Part D costs.

Enacted: End Pharmacist "Gag Clauses”

Drugs can sometimes cost consumers less without their insurance than with it. But some pharmacists have previously been bound by gag clauses in contracts with PBMs from sharing that information with consumers. While consumers can bypass that problem by simply asking the pharmacist how much they would pay without insurance, in October Trump signed into law a bill that made gag clauses illegal. (Several states, including Arkansas, Connecticut, Georgia, Louisiana, Nevada, New York, North Dakota, and South Dakota, have already banned gag clauses.)

Downside: Consumers need to know that if they don’t use their insurance, what they spend won’t count toward the deductible or out-of-pocket maximum.