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HHS Secretary Alex Azar says government setting prices with big pharma won't lower drug costs

Practice of PBMs being financially rewarded by drug manufacturers for setting higher prices needs to end, he says.

Susan Morse, Senior Editor

Health and Human Services Secretary Alex Azar told a Senate health committee that having him set the best and lowest price for prescription drugs with manufacturers could do more harm than good.

"It's superficially appealing," Azar said. "But I don't know that it really would work and we might end up paying more for the drugs."

Azar was questioned by the Health, Education Labor and Pensions Committee about how he plans to lower drug prices after President Donald Trump's promised reform in a blueprint released last month.

Senator Tim Kaine of Virginia said he wanted Azar to negotiate the best price with manufacturers, to stop them from charging more for drugs in the United States than they do in Europe and elsewhere.

The Gleevec cancer drug his father takes costs less in the United Kingdom than in the United States and is even lower in Brazil, Kaine said.

"You having price negotiating capability," Kaine told the former Eli Lilly executive. 

Senator Michael Bennet of Colorado said the number one question he gets at  town hall meetings is why the government isn't negotiating drug prices.

"I've thought a lot about best price," Azar said, adding that drug manufacturers make most of their profit in the United States.

But manufacturers leave countries such as the UK and Germany which set reference prices for what they will pay. In those countries, people who want the most innovative drug treatment have to come to the U.S., he said.

Azar referred to previous comments made by Peter Orszag, who headed the Office of Management and Budget under President Barack Obama.

The only way a uniform national decision on drug pricing can lead to discounts is to have a single formulary that would set the drugs that are covered. Seniors on Medicare would have no drug options, he said.

Azar said he would prefer seniors to be in the driver's seat instead of having the government make one-size-fits-all choices.

Solutions include working with the pharmacy benefit managers to get the same type of rebates and discounts that private sector entities get and to "unleash" PBMs by taking away government restrictions that may be hindering lower prices.

"We need negotiating, we're paying sticker price," Azar said of Medicare Part B drugs. "We ought to be able to get 40 percent discounting as we do in Part D. That's $30 billion of spend."

In Medicare Part B, which pays for physician services, there's a single unified price on drugs as compared to the Part D retail program. 

But Azar said he would be careful about transitioning drugs from Part B to D, as was outlined in the president's blueprint. 

Financial incentives for PBMs to set higher list prices must change, he said. PBMs shouldn't be getting money from big pharma.

HELP Committee Ranking Member Patty Murray said drug companies are doing what they can to delay competition and protect their patents from less expensive generic alternatives. Among several examples, Murray cited Allergen's attempt to hide its drug patents for Restasis by selling them to a New York State Indian tribe to gain their sovereign immunity, a move challenged in a Texas court.

Senator Elizabeth Warren said that after President Trump's promise for lower drug prices, she spoke to ten manufacturers. None have lowered drug prices and zero plan to do so, she said.

Twitter: @SusanJMorse
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