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Democrats probe US health chief's blame of middlemen for high drug prices

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Democrats probe US health chief's blame of middlemen for high drug prices

Democratic Sens. Elizabeth Warren of Massachusetts and Tina Smith of Minnesota are probing recent claims by U.S. Department of Health and Human Services Secretary Alex Azar that drugmakers want to make "substantial and material" price reductions but are being thwarted by middlemen seeking higher rebates.

If Azar's allegations are true that pharmacy benefit managers and wholesale distributors have been standing in biopharmaceutical companies' way of voluntarily lowering their prices, those accusations raise antitrust concerns, Warren and Smith said.

The two senators sent letters to UnitedHealth Group Inc.'s OptumRx, Blue Cross Blue Shield's Prime Therapeutics, Humana Inc., CVS Health Corp., Express Scripts Holding Co., Cardinal Health Inc., McKesson Corp., AmerisourceBergen Corp. and MedImpact Healthcare Systems Inc. asking for a response to a myriad of questions by July 13.

Azar has repeated his claims at least three times in the past month — twice on Capitol Hill and once at a Washington forum.

"We have had many major drug companies with major products who want to make substantial and material price decreases," Azar said during a June 26 Senate Finance Committee hearing.

But he said PBMs have threatened to drop those drugmakers' medicines from their formularies — the lists of products covered by payers — if prices are lowered.

"This has shown just how broken our system of drug pricing and drug distribution is in the United States, because the pharmacy benefit managers and the wholesalers are all dependent on getting a percent of list price," Azar said.

He noted that the PBMs extract rebates from drugmakers in exchange for putting the manufacturers' medicines on the formularies of plans covered by private insurance companies or the government's Medicare program for seniors and those with disabilities.

The rebates are calculated as a percentage of a manufacturer's list prices, which are set by the drugmaker. Drug plans and PBMs take a portion of the rebates they have negotiated with the biopharmaceutical manufacturers and keep it as profit.

Broken promises?

Azar urged lawmakers to inquire if PBMs have received suggestions or approaches for lowering drug list prices and what their reaction has been.

The U.S. health chief made similar remarks at a June 20 forum hosted by The Washington Post and at a June 12 hearing convened by the Senate Health, Education, Labor and Pensions Committee.

Azar, however, has not publicly identified the drugmakers he said are seeking to lower their prices.

On May 30, President Donald Trump vowed there would be "voluntary massive drops in prices" from big drug companies by mid-June as a result of his strategic plan to lower the costs of medicines in the U.S.

But no large manufacturers have lowered their prices, and in fact, some have hiked them — most notably Pfizer Inc., which upped Americans' costs for 100 of the company's medicines, many by more than 9%.

Azar, a former president of Eli Lilly and Co.'s U.S. division, warned last week that July 1 was the traditional date for when drugmakers raise their prices. He urged the manufacturers to exercise restraint.

In late May, Warren and Smith asked 10 of the largest drugmakers if they planned to lower their prices, and none of them said they had any plans to do so.

'Extremely disturbing allegations'

The two senators said they also wanted to hear directly from the PBMs and distributors on whether Azar was being truthful that those companies are playing a role in keeping drug list prices high or if the health secretary owed Capitol Hill an explanation for why he publicly and repeatedly raised the allegations in his testimony.

"These are extremely disturbing allegations by Secretary Azar," Warren and Smith wrote in their June 29 letters. "If they are true, these allegations suggest that PBMs and drug distributors are acting to maintain high list prices in order to maintain high profit margins, potentially raising antitrust concerns."

In addition, if PBMs were acting to keep drug prices high, it would contradict the public statements of representatives from those companies, the two lawmakers said.

The senators noted that Pharmaceutical Care Management Association, pr PCMA, a lobbying group representing PBMs, ran ads last week in two Washington political newspapers stating that the "most direct way to reduce costs and improve access to prescription drugs is for drugmakers to cut their prices."

Mark Merritt, the outgoing CEO of the PCMA, said in October 2017 that his member companies would be "happy if manufacturers would just go to lowering the actual price as opposed to rebating."

The lawmakers also cited reports in which CVS and Express Scripts, which is being acquired by Cigna Corp., had said they welcomed efforts to lower list prices.

The two Democrats asked the PBMs and distributors whether they had engaged in any discussions with drug companies seeking to reduce their prices since Trump unveiled his May 11 plan to lower drug prices and if the manufacturers had made any commitments.

They also asked if they had "pushed back" against any offers by drug companies to lower their list prices or if the PBMs and distributors ever stated or implied that if a manufacturer were to decrease their price they might be "harmed in terms of formulary status and patient access," versus their competitor, citing Azar's claims.