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Trump administration plans to use Medicare to lower prescription drug costs

Health plan for seniors would base payments on what drugs cost in other countries

Photo (c) rpernell - Getty Images
Consumers have long complained about the cost of prescription drugs, especially when the same drugs are sold for much less in other countries.

It's one reason some consumers attempt to illegally purchase these medications from sources in Canada and other countries where they're much cheaper.

In an attempt to put downward pressure on drug prices, the Trump administration hopes to use Medicare's buying power. In an interview on CNBC's "Squawk Box," Food and Drug Administration (FDA) Commissioner Dr. Scott Gottlieb said Medicare is changing its formula for drug purchases to include what the drugs cost in other developed countries.

"Right now Medicare pays what's called an average sales price, which is the average price paid across the U.S. market," Gottlieb said. "What the administration is proposing to do is to bake into that average prices across the OECD countries. We know a lot of those drugs are sold for less money in Europe right now and we want to make sure patients here are getting the same deal that European patients are getting."

World price for prescription drugs

The idea isn't exactly new. Gottlieb says policymakers have discussed having a world price for prescription drugs and said the administration action would move the industry in that direction.

"And remember, when it comes to Medicare Part D these drugs are not subject to competition, the government is a price-taker," he said.

The pharmaceutical industry opposes the move, accusing the administration of importing price controls. Gottlieb dismissed that claim but said it does change the bargaining position.

"It's disruptive and it's going to nudge pricing in the right direction," Gottlieb said.

Consumers struggle to pay for drugs

The proposed policy shift comes at a time when studies show consumers are struggling to pay for medication. A new survey by DrFirst shows nearly half of consumers have stopped taking a medication their doctor prescribed because they couldn't afford it.

But even finding out what drugs cost is often an issue. The survey also showed 73 percent of consumers would switch pharmacies if they knew it would save them money.

The survey showed that if consumers could save as little as $10 by purchasing the drugs elsewhere, 38 percent would keep taking the medication.

The study also faulted physicians for failing to discuss the cost of prescribed medication with their patients. Fewer than half of consumers say their physician advised them about medication costs or offered lower-cost therapeutic alternatives.

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