Trump's Pick to Head HHS Sees PBMs as Tool to Lower Drug Costs

Alex Azar, President Donald Trump’s nominee to be the next secretary of HHS following the resignation of Tom Price, MD, in September 2017, testified before the Senate Finance Committee this week. In his testimony, Azar decried high pharmaceutical prices and assured the committee that he has the extensive knowledge of insurance, manufacturing, pharmacy, and government necessary to address the problem of high-cost drugs.

Democratic lawmakers took aim at Azar’s commitment to lowering the cost of drugs, pointing out, as Kaiser Health News reports, that when Azar was president of pharma company Eli Lilly, he did not authorize a decrease in the price of any drug. (In fact, during Azar’s decade-long tenure at Eli Lilly, the company’s insulin prices tripled.)

Azar responded that the US pharmaceutical system incentivizes increases to drug prices: “I don’t know that there is any drug price of a brand-new product that has ever gone down from any company on any drug in the United States, because every incentive in this system is towards higher prices, and that is where we can do things together, working as the government to get at this,” said Azar. “No one company is going to fix that system,” he added.

Azar is not in favor, however, of allowing the government to negotiate prices for drugs covered under Medicare as a way to fix the system. “For the government to negotiate there, we would have to have a single national formulary that restricted access to all seniors for medicines,” said Azar, The New York Times reported. “I don’t believe we want to go there in restricting patient access.”

Instead, Azar suggested that pharmacy benefit managers (PBMs) would be the most effective tool to negotiate for lower drug costs, and said that PBMs should negotiate physician-administered drugs covered under Medicare Part B.

Azar’s leveraging of PBMs to control prices could raise eyebrows among some senators; the Senate’s Health, Education, Labor and Pensions (HELP) Committee has recently heard testimony from stakeholders who question the value of PBMs to the US healthcare landscape, and who have questioned the lack of competition among and transparency of PBMs.

Despite his belief in the ability of PBMs to affect change in drug pricing under Medicare Part B, Azar did seem to share some stakeholders’ skepticism about the rebates PBMs secure from drug manufacturers; speaking to Senator Debbie Stabenow, D-Michigan, about price increases at Eli Lilly, Azar reportedly said, “This is what is so bizarre about the way the system is organized. Those price increases happen—and my former employer has said this publicly—during that same period, the net realized price by the company stayed flat…just to cover for increased rebates,” he said. “The patient who walks into the pharmacy, whose insurance may not be paying for that, is absorbing that cost, and that’s what I want to work with you to solve.”

Though he faced robust questioning from Democratic senators, Azar and his nomination are expected to be advanced to the Senate floor next week, reports Modern Healthcare, citing information from committee aids.