HHS Secretary Alex Azar hinted Monday that drugmakers intent on raising prices could not only see some public shame, but a crackdown from Medicare Part D plans pushing discounts.
Drug companies looking for intel about how the Trump administration plans to deploy its "friendly to pharma" price-fighting plan have some new clues, thanks to Azar's Monday speech. And apparently, some less than friendly naming-and-shaming could be part of it.
Azar indirectly singled out Celgene's Revlimid as an example of how the flawed U.S. pricing system allows pharma companies to "run up huge profits" while patients struggle to afford their meds.
The administration plans to spotlight drugmakers that abuse regulations to thwart generic competition, free Medicare prescription drug plans to negotiate more prices, end pharmacist gag clauses and encourage drugmakers to be good citizens by lowering costs themselves, Azar said. If drugmakers don't cooperate, they could anger an unpredictable president, the HHS secretary suggested.
Trump will be "very interested in the next company that takes a price increase not justified by inflation or change in clinical benefit," Azar said.
"I can tell you I wouldn’t have wanted to be the one to do that," Azar added. On the flip side, Azar said Trump "will be interested in hearing which companies lowered their prices and took other actions to support the changes we want to make."
Trump has previously said he'll use Twitter to shine a light on pharma's activities, and he's regularly used the medium to put companies from varying industries in the spotlight. He blasted Merck for "ripoff drug prices" after its CEO Ken Frazier quit a manufacturing council in the wake of Trump's equivocal response to white supremacist violence in Virginia. He criticized Boeing for an "out of control" Air Force One contract and Lockheed Martin for fighter jet prices. He's weighed in on car manufacturing and on Amazon's tax payments.
For those interested in the nitty-gritty of the plan, Trump's team will use strategies to strengthen negotiating powers in Medicare Part D and Part B, Azar said, specifically in "protected" drug classes for which they currently must cover every drug. In those classes, discounts are now about 6%, Azar said, compared with private-market discounts of 20% to 30% on the same meds. The administration plans to bolster negotiating powers in those classes to drive savings.
According to a note from Evercore ISI analyst Umer Raffat, the protected drug classes in Part D—where "all or substantially all drugs" must be covered—are HIV antiretrovirals, immunosuppressants, antidepressants, antipsychotics, seizure meds and antineoplastics for cancer treatment. The meds amount to about $30 billion in government drug spending a year, and Azar said giving plans the power to negotiate coverage for those meds will expand patient access and lower costs.
But not all drugs in those classes have substitutable alternatives, Raffat noted. Among them are Celgene's multiple myeloma, mantle cell lymphoma and myelodysplastic syndrome drug Revlimid, which Azar called out during his speech, in fact if not by name. Azar detailed Celgene's 20% price increase over the last year as an example of why seniors have trouble affording their meds. Despite the attention from Azar, Raffat said Revlimid will keep its pricing power under the proposal. In fact, many new multiple myeloma regimens are prescribed on top of Revlimid, the analyst pointed out.
Azar also took a chance to hit back at criticisms that the Trump plan doesn't go far enough by including direct Medicare pricing negotiation and importation. He said direct Medicare negotiation would "move us toward the kind of socialized medicine systems that have such a notorious reputation for poor quality and access." On importation, he blasted the strategy as a "gimmick" that wouldn't lower prices but instead would put patients at risk due to possible counterfeit meds. Canada is too small of a drug market to substantially reduce prices in the U.S., Azar added.
We look forward to working with industry to lower prescription drug prices. But if industry isn’t willing to work with us, @POTUS & his administration will keep turning up the pressure—until the system finally puts American patients first. https://t.co/wVHQPG24lw pic.twitter.com/B0nK7QnDGx— Alex Azar (@SecAzar) May 14, 2018
Aside from pharma, PBMs won't escape scrutiny through the process. Azar said the "entire system of pharmacy benefit managers negotiating rebates needs to be re-examined." He proposed the question "What if, instead of the current system where drug companies get paid rebates and middlemen take a cut, we just had fixed-price discounts?"
On the campaign trail and since taking office, Trump has made high drug prices a priority. On Friday, he gave a much-anticipated speech about his plan, which Azar previously called the "most comprehensive plan to attack prescription drug affordability" proposed by any president in U.S. history. Critics said the strategies don't go far enough, and that many favor the drug industry. But some industry watchers said it was refreshing to see drug pricing dialogue at the top level of U.S. government.