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HHS' Azar Touts Trump Plan to Cut Drug Prices to Senate Panel

Kerry Dooley Young
June 13, 2018

In an anticipated appearance before the US Senate's health committee to discuss high drug prices, the Trump administration's top health official primarily focused blame on one part of the drug pipeline, telling senators that pharmacy benefit managers (PBMs) are discouraging drugmakers from cutting their prices.

US Department of Health and Human Services (HHS) Secretary Alex Azar appeared Tuesday before the Senate Health, Education, Labor and Pensions Committee to discuss details of President Donald Trump's plans to lower pharmaceutical costs.

"We've had several drug companies come in who want to execute substantial material reductions in their drug prices," Azar told the committee. "They're finding hurdles from pharmacy benefits managers and distributors that I think will get worked out, I really do."

Americans are facing sticker shock for both older widely used drugs, such as insulin, and newer innovative products, including many cancer drugs. A March poll by the Kaiser Family Foundation suggested that about half of the American public (52%) would say passing legislation to bring down the price of prescription drugs should be a "top priority" for Trump and Congress.

At the Tuesday hearing, Azar did not name which organizations of pharmacy middlemen might be at fault. He maintained that PBMs have a vested interest in keeping list prices for drugs high.

"Right now, everyone in the system makes their money off of a percentage of list prices: both drug companies and pharmacy benefit managers, who are supposed to keep prices down," Azar said in testimony. "Everybody wins when list prices rise — except for the patient."

Azar encouraged employers and other large customers of PBMs to ask whether these businesses have received any commitment of lower list prices and, if they have, how they will share them with customers.

Azar, himself a former top executive with Eli Lilly & Co., went on to make a prediction for a major upheaval in the pricing of medicines once PBMs and pharmaceutical companies reach an accord. In an exchange with Sen. Todd Young (R-IN), Azar also said that benefit consultants play a role in keeping initial drug costs high. The benefit consultants pitch to large employers on plans that guarantee a flow of rebates, instead of seeking the lowest prices, Azar said.

He still expects drug companies to break free of these pricing constraints with middlemen. Once that happens, there could be widespread change, he told Young.

"This whole system will flip on its head and have to be redone," Azar said.

'It's Going to Break'

Azar also argued that the first pharmaceutical companies to drop prices would have advantages over rivals.

"It's going to break. Somebody is going to do it," he said. "If I were a drug company executive, I wouldn't want to be beaten by my competitor over that line, because the first companies to do this are going to win."

At the hearing, Azar also recapped ideas that the Trump administration put forward in May in its blueprint for reining in rising drug prices. These include several plans for increasing the clout of insurers to negotiate on behalf of Medicare. Azar again pitched the idea of requiring list prices for drugs in television ads, while noting that HHS almost certainly would be sued if it tried this.

At the hearing, Azar focused intently on the PBMs and the complex negotiations around drug prices.

"We may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts," he said. "Such a system's incentives, detached from artificial list prices, would likely serve patients far better."

Democrats at the hearing were skeptical about the seriousness and potential for success of Trump's plan.

Trump on May 30 said Americans would soon "see, for the first time ever in this country, a major drop in the cost of prescription drugs." He said "some of the big drug companies would in two weeks" announce "voluntary massive drops in prices."

"That's going to be a fantastic thing," Trump said.

Democrats Take Issue

Democrats at the hearing were skeptical about the seriousness and potential for success of Trump's plan.

On Monday, Sens. Elizabeth Warren (D-MA) and Tina Smith (D-MN) released a statement saying they had polled the leaders of 10 large drug companies to ask whether they would voluntarily reduce prices. Not one company has done so, Warren and Smith said in the statement.

In fact, one of the few companies that gave a clear answer to the question in the senators' letter indicated that it had 'some planned price increases later this year,' the senators said.

At the Tuesday hearing, Warren asked Azar about Trump's prediction on a quick, notable drop in drug prices. "It's been 2 weeks, and there have been no decreases and an indication of increase," Warren said.

Azar responded to Warren by raising the issue of PBMs, introducing the same ideas he'd explore with Young later at the hearing.

"So you don't actually have anyone lined up who's actually going to decrease drug prices?" Warren said.

Azar again told Warren that she should focus on the PBMs and drug distributors.

"I'm simply focusing exactly where the president told us to focus. He told us there would be massive decreases in prices within 2 weeks," she said. "The only thing you've done is set it up so that maybe if a drug company reduces a price you can give them a cheap PR moment and then let them jack up prices later."

In a statement about the hearing, the trade group for PBMs argued that the easiest way to lower drug costs would be for pharmaceutical companies to cut their prices.

"Simply getting rid of rebates and other price concessions would leave patients and payers, including Medicaid and Medicare, at the mercy of drug manufacturer pricing strategies," the Pharmaceutical Care Management Association said.

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SOURCE: Medscape, June 13, 2018.

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