Health and Human Services Secretary Alex Azar Monday defended the Trump administration's strategy to lower drug prices against critiques that President Trump has abandoned his popular campaign promise to use the government's bargaining clout to negotiate on behalf of Medicare.
Azar said at a briefing that instead of “trite, gimmicky political proposals” on direct Medicare negotiation, Trump's plan would increase the ability of commercial prescription drug plans to negotiate on behalf of Medicare beneficiaries.
He added that there are widespread misperceptions about the effects of direct government negotiation on drug prices, which, he said, would achieve minimal savings — unless the government were willing to deny access to certain medicines or set drug prices.
“This is a topic the President and I have discussed at great length, and the idea of direct negotiation in Medicare has come up. He is tired of the government getting bad deals on the drugs seniors need, and I couldn’t agree more,” Azar said, in a speech before the briefing at Health and Human Services headquarters. “We formulated this plan with fixing that problem as the number one priority, and the President is following through on his promise.”
The idea of importing drugs from abroad, Azar said, is also a gimmick because there is no way to ensure the drugs aren't counterfeit and "Canada’s drug market is simply too small to bring down prices here." Azar said: "They are a lovely neighbor to the north, but they’re a small one."
Azar, a former executive at Eli Lilly, also sent a warning shot to the pharmaceutical industry, calling it a "tired talking point" when drug companies argue that if profits drop at all, American innovation will end.
At a press briefing Monday, Azar offered a few new details about the drug price blueprint revealed last week in a Rose Garden speech by the president, and said he has the authority to make sweeping changes without legislation.
Stocks of health care companies rose after Trump's speech, but Ana Gupte, an analyst at Leerink Research noted the proposal had “potential for transformative change longer term, across the drug supply chain."
Azar also challenged drug companies to start putting their prices in television ads before they may be forced to do so.
At the same briefing, Food and Drug Administration commissioner Scott Gottlieb said that his agency will launch a website that will identify branded companies accused of exploiting a federal safety program to block generic companies from obtaining their drugs to make cheaper copies.
But several health policy specialists said that although the 44-page blueprint contains serious ideas that could threaten different industries within the pharmaceutical supply chain, it leaves open many key details.
“The reaction of the stock market was pretty telling in the fact that, at the moment, the plan feels very much in a brainstorming format,” said Stacie Dusetzina, associate professor of cancer research at Vanderbilt University Medical Center. “While there are potentially some very good policy ideas there, when the industry sees this, it feels like nothing is going to happen very soon — and even if these changes are put into place, there's not maybe that fear that there’s actually going to be a direct change on their bottom line.”
At the core of the plan are changes to Medicare that could increase the power of commercial plans to negotiate on drug prices.
Azar cited Peter Orszag, director of the Office of Management and Budget under President Obama, who once wrote that negotiation alone — without the ability to exclude drugs — would have a “negligible effect on Medicare drug spending” and tweeted his agreement that “negotiating ability alone is largely feckless.”
On Friday, Democrats leaped on the lack of Medicare negotiation as an example of a broken promise on drug prices and called the plan a win for drug companies.
In lieu of direct government negotiation, the plan has a long list of policy ideas to increase Medicare prescription drug plans' ability to negotiate. For example, plans are required to cover drugs in certain “protected classes," which are a big driver of spending -- and they could be given more flexibility to design their list of covered drugs to drive better deals. They also could get the power to negotiate on drugs that are administered in doctor's offices, which don't currently benefit from negotiation.
“They're very hard to explain, they're very nuanced,” said Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh of the various Medicare proposals. “My view is that they will help temper the rise in prices, but they're not going to be the wholesale reduction in drug prices that will match the rhetoric of even what we heard Friday by the President.”