Plan to reduce drug costs is withdrawn after bipartisan criticism

The Obama administration said Thursday that it had scrapped one of its most significant efforts to rein in spending on prescription drugs: a plan for a nationwide experiment in which Medicare would have reduced payments for many drugs given to patients in doctors’ offices and hospital clinics.

Federal health officials withdrew the proposal after it was criticized by pharmaceutical companies, doctors, patients and members of Congress from both parties. One of the sharpest critics was Rep. Tom Price, R-Ga., the man chosen by President-elect Donald Trump to be his secretary of health and human services.

Ben Wakana, a spokesman for the Department of Health and Human Services, said that, after considering public comments on a proposed rule, the agency had decided not to move forward with the demonstration project, which was announced in March.

“The proposal was intended to test whether alternative drug payment structures would improve the quality of patient care and the value of Medicare drug spending,” Wakana said. “While there was a great deal of support from some, a number of stakeholders expressed strong concerns.”

He added, “The complexity of the issues and the limited time available led to the decision not to finalize the rule at this time.”

Drug costs have again become a hot political issue as the price tag on some medications is now well over $50,000 a year. But the proposal for lowering spending, Obama administration officials said, was killed by the drug industry and its lobbyists.

However, the House Democratic leader, Rep. Nancy Pelosi of California, welcomed the administration’s decision. The proposal had “admirable goals,” Pelosi said, but “our members raised a number of concerns, and we are pleased the Center for Medicare and Medicaid Innovation has decided not to move forward.”

She added, “Congress must come together in 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 Obama administration says Medicare’s payment formula rewards doctors for prescribing expensive drugs. Sylvia Mathews Burwell, the secretary of health and human services, had proposed a five-year nationwide test to encourage doctors to prescribe less expensive therapies under Part B of Medicare.

Patients’ advocates joined doctors and drug companies in warning that the federal plan could jeopardize access to important medications. Every member of the Senate Finance Committee — 14 Republicans and 12 Democrats — and more than 300 House members expressed concern about the proposal, which could have reduced payments for drugs to treat various types of cancer, rheumatoid arthritis, macular degeneration and other conditions.

The lobbying arm of the American Cancer Society said the proposal did not protect patients’ access to lifesaving drugs, but focused more on the potential for cost savings.

Allyson Funk, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, a trade group that lobbied against the proposal, said, “We are pleased the Part B demonstration, which would have jeopardized access to treatment for millions of patients, will not move forward.”

In its proposal, the Obama administration said it wanted to require “mandatory participation” for doctors and hospitals that provide Part B drugs to Medicare beneficiaries in three-fourths of the nation’s 7,000 “primary care service areas,” using reimbursement formulas different from those in federal Medicare law.

In the Affordable Care Act, Congress gave the health secretary power to waive federal Medicare law to test innovative ways of paying for health care. Rep. Brett Guthrie, R-Ky., said President Barack Obama and Burwell had gone far beyond what Congress envisioned.

Some consumer organizations supported the administration’s proposal. AARP, the lobby for older Americans, said it could have reduced out-of-pocket costs for Medicare beneficiaries. And some Democrats, including Rep. Jan Schakowsky of Illinois, voiced support for the project.

“We are actively reforming every other aspect of our health care system to pay for value except pharmaceuticals,” Schakowsky said in the spring. “Drug manufacturers are the only entity that can charge Medicare anything they want.”