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Health Officials Hit Back at Critics of Trump’s Drug Price Plan

As Democrats say the president’s plan is weak, Azar calls it a ”fundamental potential restructuring” of the American economy

Department of Health and Human Services Secretary Alex Azar was to address a conference of hospitals participating in a drug discount program facing Congressional scrutiny. (Sarah Silbiger/CQ Roll Call file photo)
Department of Health and Human Services Secretary Alex Azar was to address a conference of hospitals participating in a drug discount program facing Congressional scrutiny. (Sarah Silbiger/CQ Roll Call file photo)

Top administration health officials on Monday defended President Donald Trump’s plan to address high prescription drug prices, which has drawn criticism from both the industry and those who see it as a capitulation to drug companies.

In a speech Monday in the foyer of the Health and Human Services Department, Secretary Alex Azar, a former pharmaceutical company executive, took direct aim at the industry. He said drug companies were offering the American people a false choice between the development of life-saving innovations and affordability.

“I’m not interested in hearing those talking points anymore, and neither is the president,” Azar said.

After Trump’s Friday speech to reveal his drug proposal, the pharmaceutical industry said it might limit patients’ access to medicines, while many Democrats and consumer groups said the plan was weak.

At a press briefing following Azar’s remarks Monday, the secretary pushed back, saying that proposed changes to Medicare’s reimbursement structure, stricter rules for the entities that negotiate between insurers and drugmakers, and other proposals would make a significant difference.

“We are talking about nothing short [of] the complete and fundamental potential restructuring of over $400 billion of the American economy and the health care system,” he said.

Reimbursement changes

Several parts of the plan, Azar said, could directly impact the pharmaceutical industry. He suggested that the current penalty that drugmakers must pay to Medicaid if they raise prices faster than the rate of inflation was too low, and that the administration would work with Congress to overturn a limit on the size of the penalty. He said that more than 2,500 drugs have reached the limit, making it easier for their prices to rise.

The administration has long said it would go after pharmaceutical industry practices that can stymie competition from lower-cost generic drugs, and Azar said the Food and Drug Administration would publicly identify companies that engage in one often-criticized tactic. Some drug companies, citing safety protocols, will refuse to sell samples to potential competitors, which makes it impossible for those generic drugmakers to carry out the studies they need for approval of the lower-cost drugs. FDA Commissioner Scott Gottlieb told reporters at the press briefing that the agency would launch a webpage making complaints about the practice public as soon as this week.

Azar rebutted the idea that savings would accrue from allowing Medicare to negotiate prices directly with drugmakers, a proposal previously championed and then abandoned by Trump. Azar outlined alternative ways in which the department hoped to improve Medicare’s current negotiating power.

That includes reviving a short-lived bidding program in Medicare Part B’s outpatient program — where private plans don’t negotiate drug prices — an idea that Medicare’s key advisory panel has recommended revisiting. Part B drugs include those administered in a doctor’s office or other clinical setting, while Part D drugs are those patients take themselves after picking them up from a drugstore or through the mail.

Currently, Part B drugs are purchased by the physicians administering them, who are then reimbursed at 6 percent more than the drug’s average sales price. The physician makes money for his or her services based on the difference between what he or she paid and that reimbursement. Under the new system that Azar envisions, the drugs would instead be purchased by a third party in the private sector and physicians would simply be reimbursed for their services without putting up the money to buy the drugs.

While doctors opposed an Obama administration proposal to overhaul this reimbursement structure, Azar and Centers for Medicare and Medicaid Services Administrator Seema Verma thought this change would be welcomed.

“We are entering into a new era of very, very high-cost medications that are going to be administered in Part B,” Verma said. “Some of the price tags are approaching half a million dollars and so that’s also an issue for the physicians, they don’t want to have to make that investment up front.”

The president has also asked Azar to merge Part B into Part D, he said. For now, the administration will focus on which drugs would benefit from having their payment method shifted. Azar said federal officials would weigh options for this, ranging from having all drugs move to a Part D model to targeting drugs that the U.S. has a “worse deal” on than other industrialized countries to focusing on specific drug classes. He suggested that these changes could occur without Congress, through HHS’ authority to conduct payment model demonstrations.

Earlier in the day, Azar told radio host Hugh Hewitt that drug company executives have an incentive to develop their drugs so that they would be administered by a doctor instead of a Part D drug that patients take on their own because Part B is “a pretty no-hassle program” that keeps the industry in the driver’s seat since there are no negotiations.

Azar acknowledged that shifting more drugs to a payment system based on negotiation would require the use of certain private-sector entities, which Trump on Friday described as “middlemen” the administration would eliminate.

“These are entities that know their business and know how to negotiate against big pharma quite well,” Azar said in his press briefing. But he was otherwise harsh on one type of these middlemen, the pharmacy benefit managers that currently negotiate the discounts for Medicare Part D plans.

He said that too often the benefit managers were working under an incentive system that allowed them to also benefit from high drug prices, and said the administration would see whether it had the power to more tightly regulate the PBM business model. He said the administration did have the authority to make sure the PBMs weren’t getting paid by the pharmaceutical companies they were supposed to be negotiating with.

“It is easily within our power to forbid remuneration from pharmaceutical companies — to eliminate rebates, align interests, and end the corrupt bargain that keeps driving list prices skyward,” Azar said in his speech.

HHS is also weighing ways to remove restrictions on insurance plans regarding negotiations for Part D’s six “protected classes” of drugs. The current system requires plans to cover substantially all drugs in each of these categories, which include drugs to treat HIV, cancer and mental illness. Part D plans receive only an average 6 percent discount compared to an average 20 to 30 percent discount in the private market, Azar said.

“A 6 percent discount — I’m sorry, that is not negotiating,” Azar said in his speech.

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