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Azar Stumps for Plan to Hold Down Prescription Drug Costs

Mary Caffrey
The HHS secretary took on critics who said the plan went too easy on pharma and touted provisions that he said would change incentives that have worked in favor of companies and against patients.
After early reviews found the Trump administration’s plan to contain drug costs too pharma-friendly, HHS Secretary Alex Azar—a former Eli Lilly president—hit the airwaves with a campaign-style speech that called the plan “more sweeping than any drug-pricing initiative ever.”

In appearances on the Hugh Hewitt show and before a gathering of HHS staff, Azar touted the details of the plan, insisting it would “shake up this system” while he vowed to listen to industry, patients, and other stakeholders.

If Azar succeeds with help from FDA Commissioner Scott Gottlieb, MD, and CMS Administrator Seema Verma, they will have tackled the single issue that united voters from across the political spectrum in one of the most contentious elections in US history. Polls showed that young and old, rich and poor, Democrat and Republican, Americans either experienced the frustration of high prescription drug prices or knew someone who did, and they blamed pharmaceutical companies.

Among the specifics Azar touted in remarks at HHS:
  • Medicare would stop overpaying for drugs in “protected classes,” which are defined as those that are essential to treat serious conditions. Current rules bar real negotiations on these drugs, which Azar said cost taxpayers $30 billion a year.
  • He pushed back on charges that expanding the ability of health plans to negotiate on behalf of taxpayers breaks President Donald Trump’s campaign promise. Instead, Azar claimed that former Obama advisor and Congressional Budget Office chief Peter Orzsag had concluded that direct negotiation would not yield savings and the only other solution was to refuse to cover certain drugs. The Trump plan would have different Medicare Part D plans cover different drugs, and let seniors choose.
  • Azar elaborated at length on Trump’s wish to merge Medicare Part B and Part D, to end brokering over different reimbursement rules, and to dramatically cut costs. At a minimum, Trump wants to at least create a Part B “Competitive Acquisition Program.” Congress will have to get involved for this part, but for taxpayers, it could mean an end to annual price hikes to old drugs—and for consumers who take chemotherapy, increases for their part of the 20% cost-sharing.
“The President has called on us to to merge Medicare Part B into Part D, where negotiation has been so successful on so many drugs,” at the health plan level, Azar said. “This is how we follow through on his promise to do smart bidding and tough negotiating for our seniors.”

Azar addressed Trump’s failure to call for allowing patients to import drugs, something he endorsed as a candidate. “Canada’s market is simply too small to bring down prices here,” the secretary said, and US regulators could not ensure imports would meet safety standards.

Finally, the HHS secretary address the pharmaceutical industry's gamesmanship that he said keeps competitors off the market through methods like denying samples to test generics to gag clauses to a rule in the Affordable Care Act that he said caps penalties that companies pay when price hikes exceed inflation. “There are now 2500 drugs that have hit this cap,” Azar said.

He also took aim at the Average Manufacturer Price, the basis for what government pays even though it should have much better purchasing power. This change alone could save 30% to 40% of many drugs, he said.

Azar took another turn at manufacturers’ rebates, the payments that go to health plans and pharmacy benefit manufacturers to ensure formulary placement, and said that instead of “middlemen” taking a cut, fixed-price discounts could be the new normal. FDA and CMS are working on rules to require posting prices in direct-to-consumer advertising, he said.

While many evaluations noted that pharmaceutical stocks rose and analysts’ notes did not find the plan would do damage, Forbes' Avik Roy wrote in The Apothecary that the Trump team was not getting enough credit. “The hot take is that the new plan will achieve little, because it doesn’t ask Medicare to directly negotiate drug prices."

But the hot take is "badly misinformed," Roy wrote. “The Trump plan, if enacted, represents a sea change in pharmaceutical pricing policy, one that will have a significant effect on drug prices in the future.”

In his remarks, Azar said based on personal experience, the chief problem is that the drug business is insulated from normal market forces, and “is set up to benefit the manufacturers and the middlemen, not the patients.”

“The necessary changes here represent opportunities—opportunities not just to better serve our patients and communities, but to move away from a system that frustrates so many Americans, and attracts endless political ire.”

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