HHS Secretary Azar Plans Sweeping Changes

Posted by Emerald Coast Medical Association on Jun 1, 2018 9:00:00 AM

"The pen is mightier than the sword" is an age-old adage, coined by English author Edward Bulwer-Lytton. Health and Human Services Secretary Alex Azar would agree, and would go on to add that the pen is also mightier than Congress.

Mr Azar had a pen, just a regular ballpoint, with him on Monday at a press briefing. He held it up multiple times, though it was not remarkable, stating "This pen has a lot of power at HHS. And we intend to use the full scope of the power contained in this pen on any of these rather than sitting back and waiting for Congress."

Azar was making the point that in the area of drug prices, the head of HHS, which runs the Medicare and Medicaid programs and buys about $130 billion in prescription drugs each year, can make a lot of changes in the pharmaceutical market. And he doesn't need congressional approval to do it, just a simple writing tool. He's got plans to force a change in the way Medicare and Medicaid pay for medications and how the Food and Drug Administration goes about approving drugs for marketing, using his pen.

Azar, a former president of Eli Lilly’s U.S. operations, opened his talk by dispensing with the industry's long-embraced argument that high prices are necessary to pay for research into future cures. "I've been a drug company executive. I know the tired talking points: the idea that if one penny disappears from pharma profit margins, American innovation will grind to a halt," Azar said. "I'm not interested in hearing those talking points anymore."

Azar's most ambitious initiative would ban pharmacy benefit managers, the companies that administer prescription drug plans for insurance companies or employers, from negotiating discounts with drugmakers as a percentage of the list prices.

As things currently stand, pharmaceutical companies offer up to 30 percent off the list price of their drugs if the PBM places the medicines in a favorable spot on the preferred drug list. When prices go up, PBMs can make more money as the rebates grow. "They're taking money from both sides," Azar says, "They've built into their system a regime where they get more money as the list price goes up."

Azar intends to force PBMs to write contracts based on a set price for drugs, rather than a percentage-based rebate. He would also seek to ban them from making any directly from pharmaceutical companies. Instead, the companies would earn money from fees paid by the insurance companies or by the employers who hire them. He claims “This is nothing short of the complete and fundamental restructuring of over $400 billion of the U.S. economy.”

Express Scripts spokesman Brian Henry takes issue with targeting PBMs. "The root cause is the pharmaceutical companies who set these prices," he said. "We are the ones who help drive down the costs. We drive competition."

Azar also says he wants to simplify the way Medicare pays for many drugs by moving some expensive medications administered in doctors' offices, such as cancer treatment drugs, into the standard Medicare prescription drug program. Under the current system, many of these are paid for through Medicare Part B, so the government pays the full list price and doctors make more money when they prescribe more expensive drugs. Azar said he wants to move some of the most expensive to Part D, which is administered by private health insurance companies that negotiate discounts with the manufacturers. "This move from B to D gives us the power to negotiate against drug companies," he claims. Analysts though, are cautioning that it could lead to higher out-of-pocket costs and less choice for patients.

On top of that, Azar says he is looking at whether he can require drug companies to include the price of their products in those television ads that already include seemingly endless lists of scary side effects. Finally, he wants to eliminate what he refers to as a "gag rule" in some PBM contracts that forbids pharmacists to tell patients they can get their drug cheaper outside their insurance plan.

Emerald Coast Medical Association is committed to keeping our members up to date with not only the latest medical research and developments, but also news from Tallahassee and Washington D.C. that impacts our work. We will be monitoring the changes that come from Mr Azar’s pen and will pass the information along to our valued physicians and medical practitioners. Click below to learn more about membership or to find out when our next meeting will be and how you can attend, even if you are not yet a member. 

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