The so-called "target price" of these drugs, which include treatments for cancer, would be 126% of the average of what other countries pay.
"It's hard to take the Trump administration and Republicans seriously about reducing health care costs for seniors two weeks before the election when they have repeatedly advocated for and implemented policies that strip away protections for people with pre-existing conditions and lead to increased health care costs for millions of Americans", said Senator Chuck Schumer of NY, the Democratic leader, The Times reported.
Why it matters: This is the Trump administration's most aggressive move yet to lower drug prices.
"The administration is imposing foreign price controls from countries with socialized health care systems that deny their citizens access and discourage innovation", stated Stephen J. Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA).
The announcement came hours after the Trump administration released a report Thursday morning highlighting the steep spending by the USA government on prescription drugs.
Creating an index of prices tabulated from what countries with more centralized health coverage pay would allow the administration to drive down US drug costs without putting in place direct curbs on prices - though Azar rejected the idea that the administration was reading from the playbook of nationalized medical programs to bring the USA on par with the rest of the world. "It is wrong, it is unfair, it is not surprising".
Still, even if implemented, the rules would not take effect until Spring 2020 and would only last through Spring 2025.
KHN's coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.
The speech also comes at an interesting time given the proximity to the midterm elections.
Under the plan, Medicare payment for drugs administered in doctors' offices would gradually shift to a level based on global prices.
Many governments use similar benchmarks to decide how much to pay for drugs, according to Moreno-Serra. American pharmaceutical companies charge obscene amounts for drugs like insulin because they can get away with it. Prices are lower in other countries because those nations have structures in place that allow them to negotiate prices. Those are the same initiatives he's recently slammed as "freeloading".
"We are taking aim at the global freeloading that forces American consumers to subsidize lower prices in foreign countries through higher prices in our country", Trump said in a speech Thursday at the Department of Health and Human Services.
That assumes drug companies couldn't increase prices in Europe or Japan, Azar noted, and that they couldn't create efficiencies elsewhere in their budget. Today, Medicare reimburses doctors and hospitals the average sales prices of the drugs, plus 6 percent to cover the cost of giving medications to patients.
About 10 years ago, CMS tried to revise how Part B pays for drugs through a Competitive Acquisition Program (CAP), which authorized approved vendors to provide drugs to physicians.
While Part B spending on drugs has doubled since 2006, Part D spending on drugs has risen much more slowly. They're typically made by one drugmaker, which means there isn't a lot of competition over price. But it's largely been business as usual for drugmakers even as Trump has predicted "massive" voluntary price cuts. The approach bears some similarities to price negotiations by government healthcare programs in European countries like the UK.
It would represent a sea change for a country that has long resisted controls on drug prices.
Trump's speech came as his administration has made its work on drug pricing a priority - and as that work, too, has increasingly taken direct aim at pharmaceutical companies. Officials said they're seeking input on how to select the areas of the country that will take part in the new pricing system.
"You can look at some of the countries; their medicine is a tiny fraction of what the medicine costs in the USA".
Trump has criticized foreign governments with single-payer healthcare systems, such as the UK and France, that are able to negotiate prices directly with drug companies and often pay far less for the same medications than the United States. "It's time to end theglobalfreeloadingonce and for all".
"Medicare could achieve significant savings if prices in the U.S. were similar to those of other large market based economies, " the report concludes. But instead of pushing other countries away from the practice, Trump seems to be moving closer to their system. And, he said, they would "face insurmountable challenges".