Trump Scraps Plan to Lower Drug Prices

Plus - The race is on to avoid a debt ceiling crisis

Trump Scraps Key Part of Plan to Lower Drug Prices

The Trump administration has abandoned a key part of its plan to lower prescription drug prices, withdrawing its proposal to eliminate the rebates drugmakers give to pharmacy middlemen.

The administration’s rule would have required those rebates to be passed onto patients, theoretically lowering retail costs for consumers overall. In unveiling the proposal in January, Health and Human Services Secretary Alex Azar called it “an incredibly important proposal that could fundamentally change how drugs are priced and paid for at pharmacies.”

But administration officials were sharply divided over the plan, even as experts questioned how it effective it would be at lowering prices. Fiscal hawks including chief domestic policy adviser Joe Grogan and acting chief of staff Mick Mulvaney opposed it, along with much of the health insurance industry and pharmacy benefit managers.

An analysis by the Congressional Budget Office found that the proposal would raise Medicare Part D premiums for seniors and cost the federal government $177 billion in higher premium subsidies between 2020 and 2029.

Opposition to the plan within the administration reportedly had a political component as well, with senior White House advisers expressing concerns about increasing Medicare premiums ahead of the 2020 election.

“At the end of the day, while we support the concept of getting rid of rebates … we’re not going to put seniors at risk of their premiums going up,” Azar told reporters Thursday.

The middlemen win a round: “This is very bad news for the pharmaceutical industry, which blames middlemen for high drug prices and vocally supported the proposed rebate overhaul,” said Axios’s Caitlin Owens. “It's very good news for insurers and [pharmacy benefit managers].”

Investors were pleased: The reaction on Wall Street made it clear that investors had been worried about a threat to industry profits. Shares of pharmacy benefit managers, health insurers and drug distributors rose sharply Thursday, with Cigna up as much as 13%. Drugmakers, which had hoped the proposed rule would limit the power of middlemen, were down, with Merck and Pfizer falling more than 3%.

Trump’s blueprint takes some serious blows: The rebate rule is the second key element of the Trump administration’s plan to lower drug prices to collapse this week, after a federal judge on Monday ruled that the Department of Health and Human Services does not have the authority to force pharmaceutical companies to disclose the list prices of their drugs in advertisements. The ruling blocked a policy designed to increase transparency and thereby lower prices that was to take effect this week.

What’s next: With two key legs of its drug-pricing agenda now gone, the administration reportedly indicated it may be open to a proposal, favored by progressives, to limit drug price increases to the rate of inflation.

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Citing fierce resistance from hospitals, California lawmakers this week pulled back a piece of legislation that was intended to limit surprise medical bills. Larry Levitt of the Kaiser Family Foundation reflected on what the failure of that bill might suggest for health care reform at the national level:

The Race Is On to Avoid a Debt Ceiling Crisis

Eager to avert a debt ceiling crisis, the White House is pushing lawmakers to agree to a budget deal and raise the nation’s borrowing limit within a few weeks — and is signaling a willingness to raise spending for the next fiscal year to get it done, The Washington Post reports.

The increased urgency follows warnings that the Treasury Department may have less wiggle room than previously forecast as it juggles funds and uses accounting maneuvers to avoid a default. The Treasury technically hit the debt limit in March but has been employing those “extraordinary measures” since then.

The Bipartisan Policy Center said this week that, while the government likely has until October before it can no longer pay all its bills, the deadline could come as soon as early September. That report echoed warnings from Treasury Secretary Steven Mnuchin, who is the Trump administration’s point person for negotiations.

House Speaker Nancy Pelosi has insisted that any debt limit increase should be paired with a broader, two-year budget deal to avoid a possible government shutdown and raise caps that would otherwise require steep spending cuts. Senate Republicans have also favored that approach, which would let them avoid having to take a painful separate vote to raise the borrowing limit. The White House, meanwhile, had floated the idea of a one-year stopgap extension of current spending levels, but lawmakers panned that idea.

Now the Post’s Damian Paletta and Erica Werner report that administration officials have indicated they may be open to increasing spending for next year in order to facilitate a deal. “It’s about whether the administration will come up with some reasonable numbers that are compromises,” House Majority Leader Steny Hoyer told reporters, according to Bloomberg.

Mnuchin reportedly met this week with GOP leaders and spoke by phone with Pelosi. He was set to speak with Pelosi again Thursday afternoon. But it’s not at all clear whether the parties can reach a deal before lawmakers are scheduled to depart for their August recess, which has them out of session until September 9. Unless their recess plans change, they have just 10 legislative days left to get a deal done.

Pelosi on Thursday told reporters that she doesn’t want there to be “any doubt about the full faith and credit of the United States of America.” But she was less definitive about passing a debt ceiling hike before August. “We’ll just see about our timing,” she said.

Further complicating matters, Politico suggests, are the Trump administration’s controversial plans to launch mass immigration enforcement raids starting on Sunday. Will Democrats be in any mood to negotiate if the administration follows through on those raids?  

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Budget Deficit Totals $747 Billion So Far in 2019, On Pace to Top $1 Trillion

The federal budget deficit grew to $747 billion in the first nine months of the 2019 fiscal year, a 23% increase over the same period a year earlier, the U.S. Treasury said Thursday.

The deficit is rising in the wake of the Republican tax cuts, which will add about $1.9 trillion to the national debt over a decade, and higher spending by Congress. In fiscal year 2019, spending has grown by 6.6% but revenues have grown by just 2.7%, despite relatively strong economic growth.

President Trump’s trade war provided a small boost to revenues, with tariff collections nearly doubling to about $50 billion. But custom duties account for a small share of revenues overall.

The Treasury estimated that the deficit for the full fiscal year will exceed $1 trillion.

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