Azar Appears Before Senate Committee on Finance to Discuss Drug Innovation, Affordability

HHS Secretary Alex Azar appeared before the Senate Committee on Finance today to discuss the Trump administration’s efforts to drive drug innovation and affordability, answering a slew of questions revolving around the “American Patients First” blueprint, increasing generic and biosimilar competition, and value-based pricing.

Chairman Orrin Hatch, R-Utah, opened up the session by calling the hearing a “golden opportunity” to discuss the drug pricing blueprint and its policy opportunities.

As he mentioned last week when appearing before the Senate Committee on Health, Education, Labor, and Pensions, Azar pointed out 4 significant problems the healthcare system faces: high list prices set by manufacturers, seniors and government programs overpaying for drugs due to a lack of negotiation tools, rising out-of-pocket costs, and foreign government “free riding.”

From this, Azar outlined 4 strategies being taken to address these issues, starting with high list prices. Currently, everyone in today’s system, besides the patient, makes money as a percentage of high list prices, he said.

“We have had many major drug companies with major products who want to make price decreases. This shows just how broken the system of drug pricing is, because the pharmacy benefit managers and wholesalers are dependent on getting a percent of list price,” he added. According to Azar, some drug companies have been told that if they decrease their list price, they will be harmed in formulary status and patient access versus a competitor who has a higher price.

As mentioned in the blueprint, the administration is working on requiring list prices in advertisements and exploring the possibility of moving to a system without rebates and instead having fixed-price contracts, Azar said.

For better negotiation for drugs in Medicare, Azar said HHS will work to provide private plans with market-based tools they need to negotiate better deals with drug companies, as well as to bring negotiation into Part B and look at ways to merge Part B into Part D, as the administration has previously indicated.

To foster a more competitive pharmaceutical marketplace, Azar cited the FDA’s calling out of 39 pharmaceutical companies blocking generic and biosimilar competition. He finished off by echoing prior calls to end the so-called “gag clauses” preventing pharmacists from working with patients to find lower-cost drug options.

Following his opening statement, Azar faced a range of questions surrounding generic and biosimilar competition, rebates, and drug prices.

When asked by Hatch how the administration plans to increase the use of biosimilars, Azar said they hope to do for biosimilars what was done in the generic market, creating a robust and competitive sector that competes against branded products. He reiterated the need to get rid of abuses by drug companies to prevent access to the samples that biosimilar companies need for trials.

In response to Senator Bob Menendez, D-New Jersey, about the administration’s support of the proposed Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, which promotes price competition to lower costs of drugs, Azar said there is no formal administration support, but the act resonates with what HHS has been saying and what the FDA has been doing to prevent blocked competition.

In regard to value-based contracting for prescription drugs, Azar said the administration is already moving forward, noting that both the FDA and HHS are working on creating a better pathway for sharing information between pharmaceutical manufacturers and insurers around health economic information and the plan on new product launches so they can collaborate and build value-based arrangements.

“We believe it’s the future of how we need to pay for drugs, pay for outcomes, pay for healthcare,” said Azar. “Frankly, I would love to see it if they could be more incorporated into the overall holistic health of the patient.”

While Azar said the administration supports the Graham-Cassidy bill that he said “would allow states to have alternative mechanisms to, say, an individual mandate as a means of protecting pre-existing conditions,” senators expressed concern and frustration over the administration’s failure to “take uncertainty off the table” by asserting that it will ensure that patients with pre-existing conditions have protections.

During the hearing, Senator Ron Wyden, D-Oregon, voiced that patients are "getting mugged by their prescription drug bills" and highlighted his report released today that outlines the causes and consequences of high drug prices in Medicare and explores the entities and financial relationships pushing drug prices higher.