HHS: Trump’s drug pricing plan dramatically changes rebates, Medicare, other programs

President Donald J. Trump
Donald J. Trump
Alex M. Azar II
Alex Azar

President Donald J. Trump’s plan for lowering drug prices was described as “aggressive” and “comprehensive” by various attendees of a Senate Committee on Health Education, Labor and Pensions hearing today.

The plan would necessitate changes to rebates, Medicare B and pharmacy benefit manager programs. However, many of these efforts will require cooperation from federal agencies and lawmakers and may take time to come to fruition, HHS Secretary Alex Azar said during the informational hearing about the president’s plan, adding that the winds of change regarding drug pricing will occur.

“Let me be really clear,” Azar said. “If you’re a drug company, a [pharmacy benefit manager], a distributor or anyone else in this channel and you think you’re untouched, [you] are not going to be touched and [you] are not going to have to completely change your business model, [then] you cannot read, you cannot listen.”

Rebates

Azar said the president’s plan may call for removing rebates and negotiations for fixed-price contracts.

“The key is, can we detach the incentives of everybody in this system from these artificial list prices? ... [Rebates] ferment this game we have of ‘if list price goes up, rebate goes up’ where everybody’s winning except the patient who’s paying out of pocket,” he said.

Sen. Lamar Alexander, R-Tenn., asked if eliminating rebates would remove that scenario.

“It would remove one of the major incentives to list price increases that we have today,” Azar responded.

Medicare Part B

The president’s plan would bring negotiation to Medicare Part B “for the first time ever,” Azar said.

“Right now, HHS just pays the bill. ... This system may actually be driving the doctors to prescribe more expensive drugs while potentially tempting drug companies to develop drugs that fit into Part B rather than Part D,” he said. “We’re going to look at ways to merge Part B drugs into Part D to create competition where savings can be safely obtained.”

Pharmacy benefit managers

“We will not tolerate [pharmacy benefit managers] that penalize drug companies that actually lower their list prices for patients,” Azar said, adding that customers should know when a lower list price has been offered for a drug.

The president’s plan also calls for the pharmaceutical companies to stop paying these managers for the role in drug pricing, he said.

The president's plan to lower drug prices was the subject of a Senate committee hearing today.
Photo Source: Shutterstock

Other plan components

Azar, a former executive with Eli Lilly, also discussed the importance of congressional support in banning the gag clauses that keep pharmacists from discussing certain drug prices with their patients; mandating pharmaceutical companies to put their list prices in advertising; ensuring site neutrality on drug payments are based on quality rather than where the drug is administered or received; and removing the 180-day exclusivity on generics.

When pressed by some senators, Azar briefly discussed reports from last month that quoted the president as saying drug companies are going to announce "voluntary massive" price cuts in 2 weeks, a window of time that is rapidly closing.

“We have had several drug companies that want to execute substantial, material reduction in their drug prices but they are finding hurdles from pharmacy benefit managers and distributors that I think will get worked out,” he said, though he would not commit to the 2-week timetable the president announced on May 30.

Timeframe for change

Patients will need to give the plan some time to come to fruition, Azar said.

“We’re talking about the wholesale restructuring of the drug pricing and drug distribution in this country,” Azar said. “[This plan] is nothing short of comprehensive reform of how drugs are priced. That doesn’t happen in a week or two; across the board change will take time.”

Next steps

Though Azar emphasized the importance of Congress backing the president’s plan during today’s hearing, it remains uncertain how much Congress is willing to act on the president’s strategy in a midterm election year.

That caveat notwithstanding, most of the experts who previously analyzed the president’s plan on behalf of Healio Family Medicine suggested the president’s plan missed the mark in terms of the root causes of high drug prices and, thus, is not likely to make a significant dent in the cost of medications. – by Janel Miller

For more information:

HHS.gov. https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf. American Patients First. Accessed June 11, 2018.

Disclosure: Azar is Secretary of HHS. Healio Family Medicine was unable to determine other relevant financial disclosures prior to publication.

President Donald J. Trump
Donald J. Trump
Alex M. Azar II
Alex Azar

President Donald J. Trump’s plan for lowering drug prices was described as “aggressive” and “comprehensive” by various attendees of a Senate Committee on Health Education, Labor and Pensions hearing today.

The plan would necessitate changes to rebates, Medicare B and pharmacy benefit manager programs. However, many of these efforts will require cooperation from federal agencies and lawmakers and may take time to come to fruition, HHS Secretary Alex Azar said during the informational hearing about the president’s plan, adding that the winds of change regarding drug pricing will occur.

“Let me be really clear,” Azar said. “If you’re a drug company, a [pharmacy benefit manager], a distributor or anyone else in this channel and you think you’re untouched, [you] are not going to be touched and [you] are not going to have to completely change your business model, [then] you cannot read, you cannot listen.”

Rebates

Azar said the president’s plan may call for removing rebates and negotiations for fixed-price contracts.

“The key is, can we detach the incentives of everybody in this system from these artificial list prices? ... [Rebates] ferment this game we have of ‘if list price goes up, rebate goes up’ where everybody’s winning except the patient who’s paying out of pocket,” he said.

Sen. Lamar Alexander, R-Tenn., asked if eliminating rebates would remove that scenario.

“It would remove one of the major incentives to list price increases that we have today,” Azar responded.

Medicare Part B

The president’s plan would bring negotiation to Medicare Part B “for the first time ever,” Azar said.

“Right now, HHS just pays the bill. ... This system may actually be driving the doctors to prescribe more expensive drugs while potentially tempting drug companies to develop drugs that fit into Part B rather than Part D,” he said. “We’re going to look at ways to merge Part B drugs into Part D to create competition where savings can be safely obtained.”

Pharmacy benefit managers

“We will not tolerate [pharmacy benefit managers] that penalize drug companies that actually lower their list prices for patients,” Azar said, adding that customers should know when a lower list price has been offered for a drug.

The president’s plan also calls for the pharmaceutical companies to stop paying these managers for the role in drug pricing, he said.

The president's plan to lower drug prices was the subject of a Senate committee hearing today.
Photo Source: Shutterstock

Other plan components

Azar, a former executive with Eli Lilly, also discussed the importance of congressional support in banning the gag clauses that keep pharmacists from discussing certain drug prices with their patients; mandating pharmaceutical companies to put their list prices in advertising; ensuring site neutrality on drug payments are based on quality rather than where the drug is administered or received; and removing the 180-day exclusivity on generics.

When pressed by some senators, Azar briefly discussed reports from last month that quoted the president as saying drug companies are going to announce "voluntary massive" price cuts in 2 weeks, a window of time that is rapidly closing.

“We have had several drug companies that want to execute substantial, material reduction in their drug prices but they are finding hurdles from pharmacy benefit managers and distributors that I think will get worked out,” he said, though he would not commit to the 2-week timetable the president announced on May 30.

Timeframe for change

Patients will need to give the plan some time to come to fruition, Azar said.

“We’re talking about the wholesale restructuring of the drug pricing and drug distribution in this country,” Azar said. “[This plan] is nothing short of comprehensive reform of how drugs are priced. That doesn’t happen in a week or two; across the board change will take time.”

Next steps

Though Azar emphasized the importance of Congress backing the president’s plan during today’s hearing, it remains uncertain how much Congress is willing to act on the president’s strategy in a midterm election year.

That caveat notwithstanding, most of the experts who previously analyzed the president’s plan on behalf of Healio Family Medicine suggested the president’s plan missed the mark in terms of the root causes of high drug prices and, thus, is not likely to make a significant dent in the cost of medications. – by Janel Miller

For more information:

HHS.gov. https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf. American Patients First. Accessed June 11, 2018.

Disclosure: Azar is Secretary of HHS. Healio Family Medicine was unable to determine other relevant financial disclosures prior to publication.

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