A number of drugmakers have been in discussions with the U.S. Department of Health and Human Services about lowering their prices, Secretary Alex Azar told lawmakers on Capitol Hill. But the U.S. health chief was unable to provide evidence those companies were ready to commit.
"There are actually several drug companies that are looking at substantial and material decreases of drug prices in competitive classes and actually competing with each other and looking to do that," Azar told members of the Senate Health, Education, Labor and Pensions Committee.
But Sen. Elizabeth Warren, D-Mass., said "looking at" was not the promise President Donald Trump made May 30 when he said he would announce in two weeks that some "big drug companies" had committed to "voluntary massive drops in prices" in response to the administration's strategic plan, unveiled May 11.
"It's been two weeks and there have been no decrease and an indication of increase," Warren said.
The Massachusetts lawmaker said she and Sen. Tina Smith, D-Minn., had sent letters on May 30 to 10 of the largest drugmakers — AbbVie Inc., Amgen Inc., Gilead Sciences Inc., GlaxoSmithKline PLC, Johnson & Johnson, Merck & Co. Inc., Novartis AG, Pfizer Inc., Roche Holding AG and Sanofi — to ask how many had lowered their prices since the Trump blueprint was released. None had, she said.
"Zero out of 10 gave any indication that they planned to do so, and, in fact, one out of 10 said prices are going to go up later this year" in their responses, Warren said.
The one company that acknowledged plans to raise its prices was Novartis. The Swiss drugmaker also said that as of June 8 it had not been in any discussions with Trump administration officials about lowering prices.
"We're talking about the wholesale restructuring of the drug pricing system in this country," Azar said. "What the president has taken on is nothing short of comprehensive reform of how drugs are priced and done. That doesn't happen in a week or two."
Blame the pharmacy benefit managers
Azar said biopharmaceutical companies that would like to "execute substantial, material reductions in their drug prices" are running into hurdles from pharmacy benefit managers — often called middlemen — and distributors.
He added, however, that he thought those problems would "get worked out."
Azar said the complicated system in which PBMs extract rebates from drugmakers in exchange for putting the manufacturers' medicines on the insurance or Medicare plan's formulary should be questioned by employers and payer customers.
The rebates are calculated as a percentage of the manufacturer's list prices, which are set by the drugmaker.
Drug plans — whether commercial or the government's Medicare Part D program for seniors and the disabled — and PBMs take a portion of the rebates they have negotiated with the biopharmaceutical manufacturers and keep it as profit.
But Azar said some PBMs threaten drugmakers that if those manufacturers try to lower their list prices, the company's products would be removed from the formulary — the list of medicines covered by the payer.
"I find that unconscionable," Azar told the senators. "I would hope if that we were to find ourselves in that situation, the CEOs of those companies would find themselves sitting in this chair rather quickly to explain themselves."
Employers and other customers of PBMs should be asking those middlemen if they have received any commitments of lower list prices from drugmakers or if they are pushing back against any such moves, he said.
"I think the employers and the plans can do that," said Azar, a former president of Eli Lilly and Co.'s U.S. division.
If a couple of drug companies would reduce their list prices, "this whole system will flip on its head and have to be redone," the HHS secretary said.
"It's going to break," Azar added. "Somebody is going to do it. And if I were a drug company executive, I wouldn't want to be beaten by my competitor over that line because the first companies to do this are going to win."
Shifting Medicare drugs
But while Azar was condemning PBMs on one hand, he said "we need to unleash them" when it comes to Trump's plan to move some, if not all, of the Medicare Part B drugs to Part D, where he said those middlemen could negotiate better deals.
Drugs covered by Part B are medicines administered in a physician's office or outpatient clinic and typically are higher-priced injectables.
But Warren and other senators, including Sen. Patty Murray, D-Wash., questioned that proposal during the strictly held two-hour hearing, where senators were given only five minutes each to publicly vet the Trump plan because of another engagement Azar had scheduled.
Murray said Trump not only abandoned his commitment to pursue letting Medicare negotiate directly with drugmakers, but his proposal would give PBMs more power "without any data to suggest it will bring down prices for patients."
Warren also noted that the out-of-pocket copayments for Medicare Part B beneficiaries are capped at 20%, but in Part D, the copays could go as high as 40%.
"If a so-called negotiation ends up in raising Medicare drug prices, it's not a negotiation at all. It's just a bad deal for seniors," she said.
Warren pressed Azar on whether he could guarantee that no Medicare beneficiary would pay higher drug prices as a result of the Trump plan, but the secretary made no commitment.
