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US to lower Medicare drug prices based on overseas prices

26 Oct 2018 (Last Updated October 26th, 2018 10:15)

US President Donald Trump has outlined a new payment model to lower drug prices in the country by modifying what Medicare pays for some medicines based on the price policies in other countries.

US to lower Medicare drug prices based on overseas prices
Drug prices in the US are reported to be 1.8 times higher than overseas. Credit: TaxRebate.org.uk/ Images Money.

US President Donald Trump has outlined a new payment model to lower drug prices in the country by modifying what Medicare pays for some medicines based on the price policies in other countries.

As part of the new proposal, the US Department of Health and Human Services (HHS) would enable Medicare to implement the new International Pricing Index (IPI) Model.

The model is expected to move Medicare payments for certain prescription drugs to a lower level observed in other countries. According to a report by HHS, prices in the US are 1.8 times higher compared to overseas.

Trump said: “When foreign governments extort unreasonably low prices from US drug makers, Americans have to pay more to subsidise the enormous cost of research and development. It’s unfair and it’s ridiculous, and it’s not going to happen any longer.”

HHS said that the proposed rule would cover the majority of the drugs in Medicare Part B, which comprises physician-administered medicines such as infusions. It would also ‘correct’ existing incentives associated with prescribing higher-priced drugs.

“The IPI model will ensure that American patients get a more fair deal on the discounts drug companies voluntarily give to other countries.”

Under the IPI model, private-sector vendors will be able to negotiate prices and supply the medicines to physicians and hospitals. This is expected to introduce competition into the industry.

In a statement, HHS noted: “The IPI model will ensure that American patients get a more fair deal on the discounts drug companies voluntarily give to other countries, saving patients and the Medicare programme billions.

“We propose no changes to the Medicare benefit, just more discounts from drug companies.”

When effective, the proposed rule is estimated to result in $17.2bn savings over five years for taxpayers and patients across the country.

The transition from existing prices to the proposed new payment levels will be phased in over a period of five years, and the move would be initially applicable to 50% of the country.