Obama administration scraps controversial drug pricing proposal

by Peter Sullivan - 12/15/16 9:06 PM ET

The Obama administration announced Thursday night that it is calling off a controversial initiative to fight high drug prices.

The administration is essentially admitting defeat in the battle over its proposed changes to how Medicare pays for drugs. The proposal had faced intense opposition from the powerful pharmaceutical lobby, but also from other areas, like doctors groups.

The proposal also faced resistance among many Democrats on Capitol Hill.

The administration had long planned to soldier on with the changes after issuing a proposal in March, saying it would make changes to address concerns when it issued the final version.

{mosads}But now the administration is throwing in the towel altogether.

Donald Trump’s White House victory has also taken the wind out of some efforts to fight high drug prices, leaving open the possibility of the new administration scrapping the initiative anyway.

“After considering comments, CMS will not finalize the Medicare Part B Drug Payment Model during this Administration,” said Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services.

“While there was a great deal of support from some, a number of stakeholders expressed strong concerns about the Model,” Albright added. “While CMS was working to address these concerns, the complexity of the issues and the limited time available led to the decision not to finalize the rule at this time.”

House Democratic Leader Nancy Pelosi (Calif.) released a statement Thursday praising the administration for scrapping the proposal.

“While the proposed Medicare Part B demonstration had admirable goals, our Members raised a number of concerns, and we are pleased the Center for Medicare and Medicaid Innovation has decided not to move forward,” Pelosi said.

She called for a “bipartisan way to address the soaring costs of prescription drugs in a way that supports the search for cures while ensuring that patients can afford these treatments.”

The White House had previously touted the proposal as a leading part of its efforts to fight high drug prices, a hot-button topic on the campaign trail this year.

President Obama cited the proposal in a journal article he wrote on healthcare this summer, while calling out the pharmaceutical industry for its opposition.

Obama wrote that some healthcare industries had worked with the administration, “yet others, like the pharmaceutical industry, oppose any change to drug pricing, no matter how justifiable and modest, because they believe it threatens their profits.”

The proposal came from an innovation center within the CMS that was created by ObamaCare and has put forward a range of proposals to make Medicare payments more efficient. Some proposals have been less controversial.

The future of the entire innovation center is in doubt now that Republicans are moving forward with ObamaCare repeal, though some elements could be kept.

The administration’s drug pricing proposal had targeted a system where Medicare currently pays doctors the average price of a drug plus 6 percent.

The administration warned that system gave doctors an incentive to prescribe higher-cost drugs so that they get paid more. The pilot program would have reduced the 6 percent add-on to 2.5 percent plus a flat fee of about $16.

The argument in opposition was largely that the new system would have jeopardized patient access to certain drugs if doctors’ acquisition costs rose above what they were reimbursed by Medicare.

The administration had argued that industry groups were simply worried about their profits.

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