HHS Chief Builds Case for Tougher Medicare Drug Negotiations

Kerry Dooley Young

May 14, 2018

WASHINGTON — US Department of Health and Human Services (HHS) Secretary Alex Azar outlined tools and tactics today that the Trump administration will use to try to rein in rising pharmaceutical costs, including hinting at a potential targeted presidential public outburst and detailing revisions to Medicare and Medicaid purchasing policies.

In a meeting with reporters held here, Azar repeatedly referred to the changes he can make directly to federal programs through regulations and demonstration projects. He spoke about improving the clout of insurer-run Medicare Part D plans by giving such plans greater ability to decline to cover certain competing drugs. Azar also envisions shifting some medicines from Medicare Part B reimbursement into likely less lucrative insurer-run Part D coverage.

"This pen has a lot of power at HHS," Azar said. "The secretary of HHS is vested with incredible authority to regulate, to modify programs, to do demonstrations, to experiment, 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 offered detailed explanations about Medicare and Medicaid policies, putting on display his deep experience with both HHS and the pharmaceutical industry. He served in the George W. Bush administration as it put the Medicare Part D plans into effect. He then worked for a top pharmaceutical company, Eli Lilly & Co.

"Tired Talking Points"

At an earlier Monday morning press conference, the secretary spoke more pugnaciously about the Trump administration's attempts to bring down drug prices.

"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, and neither is the president."

Azar's speech appeared in part to be an attempt to use his post as HHS chief to persuade pharmaceutical companies to voluntarily limit price increases. During his public speech, he said that he and President Donald J. Trump have discussed the concept of direct Medicare negotiations "at great length. " He thus raised the pharmaceutical industry's chief fear even while seeking to thwart such an approach. Azar added that Trump has a set a "marker about the need for reform" of drug prices.

"I can imagine he is going to be very interested in the next company that takes a price increase not justified by inflation or change in clinical benefit," Azar said of Trump, who is known for using Twitter to lash out at people or companies that provoke his ire. "On the other hand, I expect the president will be interested in hearing which companies lowered their prices and took other actions to support the changes we want to make," he said.

Azar then offered concrete suggestions on ways that the pharmaceutical industry and agencies within HHS could address drug prices. The US Food and Drug Administration and the Centers for Medicare & Medicaid Services are looking into whether drug companies can be compelled to post their list prices in direct-to-consumer advertising, Azar said. Such a move likely would spur legal challenges from conservative and free-speech groups. But the pharmaceutical industry could act on its own, Azar said.

"Drug companies don't have to wait on us," Azar said. "Today, I am calling on America's pharmaceutical manufacturers to level with the American public — be honest about what you're trying to charge us, put your list price in your ads."

Tough Sell

Congress is unlikely to complete much major legislation in the months ahead of the November midterm election. Instead, the Trump administration at this point may be largely building a case for future major changes in federal drug purchasing. It posted on Friday a 45-page formal notice of its "request for information" on a wide number of approaches on drug pricing. Many of the ideas presented are recycled, having been proposed unsuccessfully in the past.

At the Monday session with reporters, though, Azar argued that the circumstances have changed so as to improve the odds for success in some cases.

The Trump administration, for example, has proposed easing the restrictions on the so-called "protected classes" in Part D in order to give insurers more clout in negotiating. For most kinds of drugs, Part D plans need to cover at least two medicines. For cancer, antiretrovirals, immunosuppressants, antidepressants, antipsychotics, anticonvulsant agents, and antineoplastic medicines, the Part D plans are required to ensure a patient's broad access to all drugs in these protected classes. The Obama administration made a failed bid to remove antidepressants, antipsychotics and immunosuppressants from the protected classes. There was considerable backlash to the proposal at the time.

Yet, in Azar's view, easing the protected class restrictions would be bringing Medicare Part D in line with the operations of commercial plans, which cover many Americans.

Part D's approach was "cutting edge" in its inception, with consumers, CMS, and insurers adjusting to managed drug plans, Azar said. The market has since evolved, and insurers have gained significant experience in managing drug programs with limits on choices with therapeutic classes.

"Like so many things when government regulation is creating a program, government regulation can sometimes freeze things in place, and it froze many aspects that might have made perfect sense in 2005 in place," Azar said. "In the last 13 or so years, the world has changed. The commercial marketplace has adapted."

Drugmakers and many patient groups would still move to block an easing of the restrictions that now make Part D plans cover many drugs in protected classes. There would also likely be resistance to Azar's idea of shifting some drugs from Part B coverage to Part D. Under Part B, Medicare's rules call for adding a 6% premium to the reported average sale price of drugs administered by physicians. (Budget sequester laws have slimmed that payment in recent years.) There is no restriction on choices of drugs, as is seen in Part D.

Azar said he could put a Part B to Part D shift into effect for a drug, using CMS' broad authority to test policies.

"I'm certainly able to sign an order that does a demonstration or a pilot" program, Azar said.

The spike in the cost of oncology drugs is drawing increased attention to Part B's drug reimbursement policies. At the meeting with reporters, CMS Administrator Seema Verma said the United States is entering a "new era" in oncology treatment. The high up-front costs of newer therapies may change physicians' view on the buy-and-bill approach to oncology treatment, she said.

"I don't think that Part B, when it was created, envisioned paying 6% on top of a half-million-dollar drug," she said.

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