trending Market Intelligence /marketintelligence/en/news-insights/trending/6cZdRPHzmdhwpC6e2ro8Iw2 content esgSubNav
In This List

US health chief tweaks 'negotiation' message to sell Trump drug price plan


Baird Research is Now Exclusively Available in S&P Global’s Aftermarket Research Collection


Japan M&A By the Numbers: Q4 2023


Essential IR Insights Newsletter Fall - 2023

Case Study

A Corporation Clearly Pinpoints Activist Investor Activity

US health chief tweaks 'negotiation' message to sell Trump drug price plan

After critics largely panned the Trump administration's plan for lowering drug prices — saying it would have little impact — Health and Human Services Secretary Alex Azar tweaked his message to try to convince Americans the president did not break his promise on Medicare negotiations.

"There's been some confusion on it for a while now," Azar said during a May 14 address from HHS headquarters in Washington.

The administration's strategy will bring "effective and targeted" negotiating to Medicare, Azar said, though he acknowledged later to reporters that it did not mean having the government broker deals directly with biopharmaceutical makers, as President Donald Trump had promised throughout his 2016 election campaign.

"You've probably heard before that Medicare could save tons of money by negotiating directly for drugs," the HHS chief said. "This just isn't true."

Citing a more than decade-old report from the Congressional Budget Office, Azar said direct negotiation would generate "almost no savings" for Medicare beneficiaries.

Letting Medicare directly negotiate with drugmakers "would move us toward the kind of socialized medicine systems that have such a notorious reputation for poor quality and access," Azar said.

He said he did not expect the idea of direct price negotiation with Medicare to go away.

But Azar also continued to use direct negotiating as leverage — telling the biopharmaceutical industry that the only way to get it off the table was "to engage in meaningful negotiation with Medicare Part D plans and to stop the price hikes."

Ahead of his speech, Azar said on Hugh Hewitt's radio talk show that Trump was "doing exactly what he said."

"He's going to harness the power of Medicare to negotiate on behalf of seniors and taxpayers," Azar said on the May 14 morning program.

The health secretary said HHS would soon be issuing a request for proposal to "make new use of an alternative system" for buying Part B drugs — called the competitive acquisition program, or CAP.

The 2003 law that created the Medicare Part D prescription drug program for seniors also required the implementation of a CAP for Medicare Part B — medicines administered in a doctor's office or clinic, such as injectables to treat cancer.

When the Bush administration launched the CAP program in late 2005, physicians were given the choice of buying and billing the injectable drugs under the average sales price system, or obtaining the medicines from vendors selected in a competitive bidding process. But the Bush administration suspended the program in 2008.

Azar later told reporters he thought there were now enough players in the system to ensure secure and substantial discounts.

Moving Part B to Part D

But a key proposal from Trump's plan is to move some or all of Medicare Part B drugs into the Part D program, where pharmacy benefit managers negotiate the prices on behalf of plans.

Right now, Part B drugs are covered by the Medicare program, at the standard price plus a 6% markup, "and we pay it," Azar said.

But the Part D "plans negotiate discounts, rather than just paying full price," he said.

Azar noted during the briefing with reporters that Congress will likely have to pass legislation to permit HHS to make the move of Part B drugs into Part D permanent. But he said he intends to use the "power of the pen" to do what he can on his own in the meantime.

"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. We intend to use the full scope of the power contained in this pen rather than sitting back and waiting for Congress on all items."

Public shaming

Azar also had some stern messages for the biopharmaceutical industry — noting that Trump has "now laid down a marker about the need for reform."

"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," the health secretary said. "I can tell you I wouldn't have wanted to be the one to do that."

On the other hand, Azar said he expected Trump to be also interested in hearing which companies lowered their prices and took other actions to "support the changes we want to make."

If the drug industry is not willing to work with the administration to lower prices, Trump and his staff "will keep turning up the pressure," Azar said.

He also noted the Food and Drug Administration is going to start publicly identifying manufacturers suspected of engaging in abusive practices with the intent to game the system to thwart generic competition.

However, FDA Commissioner Scott Gottlieb said he did not think that action was "publicly shaming."

"I think this is providing transparency in situations where we see certain obstacles to timely generic entry," Gottlieb said during the May 14 HHS briefing.