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No Price Cuts Yet, But Azar Urges Congress to Target Drug Rebates & Transparency

Xconomy National — 

Since President Trump announced his plan last month to lower prescription drug prices, a lot of rumors have been flying around that cuts are coming from certain companies, such as those that make insulin for diabetes patients. Those rumors haven’t materialized into anything real yet, but they did heighten the anticipation for today’s testimony from Health and Human Services (HHS) Secretary Alex Azar (pictured) before the Senate Health committee.

Unfortunately, any additional details from Trump’s “blueprint” to cut prices remained scant. Most of Azar’s testimony on Tuesday was spent explaining and defending the blueprint, which put forward a few modest proposals, like putting drug prices in TV commercials, that many think would do little to lower drug prices.

Many of the more substantial possible drug pricing reforms were either ruled out (allowing the government to directly negotiate prices) or relegated to a part of the report reserved for more long-term ideas that will require further thought and discussion (restricting the use of drug rebates on list prices). After much tough talk from the president on the campaign, drug makers largely breathed a sigh of relief when the report was released in May; biopharma stocks soared that day. “We need an ambitious plan, not one so small that sends stocks soaring in relief,” said Sen. Patty Murray (D-WA) during her introductory remarks.

During a testy moment Tuesday, Sen. Elizabeth Warren (D-Mass) asked Azar whether any drug manufacturers would soon lower prices. Azar said several were “looking at” decreases but were talking with pharmacy benefit managers (PBMs), which negotiate drug prices on behalf of insurers, to make sure “they’re not discriminated for lowering prices” by being removed from formularies (the list of drugs insurers agree to cover). Azar was optimistic that the issues would be worked out, and encouraged employers and other customers of PBMs—Express Scripts, CVS Health and others—to pressure them to not push back on drug companies that want to lower list prices. He went on to encourage drug makers to voluntarily drop their prices. “The first company to do this is going to win,” he said.

Indeed, PBMs and drug rebates, the secretive pricing deals between drug makers and PBMs, were a common target of Azar and several of the senators, including the committee chairman Sen. Lamar Alexander (R-TN). Many asked about the implications of getting rid of the rebate system. Azar said it “would remove one of the incentives of list price increases” and that the government has the regulatory authority to restrict rebates for some drugs under Medicare. But Azar is studying what his department could do on rebates in the commercial system. “Let us know what you find, because that’s where Congress can step in” with legislation on the rebate system in the private sector, said Sen. Bill Cassidy (R-LA).

Senators also repeatedly blasted the lack of transparency with drug prices and how companies can game the patent and generics system to block competition. Azar encouraged Congress to enact legislation to prevent patent abuses and boost price transparency, by for example, removing “gags” on pharmacists from discussing lower-cost drug options with patients—one of the ideas outlined in the blueprint.

Democratic senators asked why the blueprint didn’t include a measure to allow the government to negotiate drug prices directly, like many other countries do. Azar said he didn’t think it would be good for patients. It would involve having a single, national formulary for covered drugs, and thus restrict the choices patients would have for drugs. Sen. Tim Kaine (D-VA) asked whether it was possible to do a trial, allowing the government to negotiate prices for just a handful of drugs, but perhaps luckily for Azar, there was no time for him to answer that question at the hearing.