U.S. health secretary says agency has
power to eliminate drug rebates
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[August 20, 2018]
By Yasmeen Abutaleb
WASHINGTON (Reuters) - U.S. Health and
Human Services Secretary Alex Azar said it was within his agency's power
to eliminate rebates on prescription drug purchases, a key element of
the Trump administration's plan to lower prescription medicine costs.
Such rebates are negotiated in the United States by pharmacy benefits
managers (PBMs) to lower the cost of medicines for their clients,
including large employers and health plans that cover tens of millions
Drugmakers say they are under pressure to provide rebates to the few
PBMs that dominate the market and that those payers do not pass on
enough of those savings to patients - a contention the PBMs dispute. The
drugmakers say the rebates force them to raise the price of their
therapies over time to preserve their business.
The Trump administration has been receptive to that argument. Azar, in
an interview with Reuters on Friday, said rebates created a perverse
incentive to continuously raise drug prices.
Azar, a former top executive at drugmaker Eli Lilly & Co, is trying to
deliver on President Donald Trump's promises to lower the cost of
prescription drugs for Americans, which Trump made a major priority
during his 2016 presidential campaign.
The Department of Health and Human Services last month proposed
regulations that would scale back protections for rebates that might
otherwise be illegal under a federal anti-kickback law.
The PBM industry has challenged that move, saying HHS cannot eliminate
rebates on its own and would need Congress to change the federal
statute. The ultimate responsibility for high drug prices, those
companies say, lies with the manufacturers who set those prices.
Azar contends that the current rebates are a product of previous HHS
regulation. "What one has created by regulation, one could address by
regulation,” he added.
He did not say when such new regulations, which are being reviewed by
the Office of Management and Budget, might take effect. "The question of
rebates may very well be fundamental to the issue of how you reverse
these constant incentives to higher list prices (for medicines)."
The cost of healthcare, and prescription drugs specifically, is expected
to be a major campaign issue ahead of November elections, in which
Democrats are seeking to take control of the U.S. House of
Representatives and Senate from Trump's Republicans.
In May, Trump unveiled a "blueprint" comprising dozens of proposed
policies to give the government greater leverage over drug prices, but
did not support changes to give the federal government's Medicare health
plan for seniors direct negotiating power with drugmakers. Critics say
that has spared the pharmaceutical industry any real challenge to its
[to top of second column]
U.S. Health and Human Services Secretary Alex Azar listens to U.S.
White House Press Secretary Sarah Huckabee Sanders introduce him
during the daily briefing at the White House in Washington, U.S.,
May 11, 2018. REUTERS/Leah Millis
Azar defended the administration's actions, noting that more than a
dozen leading drugmakers, including Pfizer Inc, Merck & Co and
Celgene Corp, had pledged to hold off on further price increases
"They are seeing where this is going, they are seeing that we are
ticking off the blueprint items one by one," Azar said. "We are not
dependent on the voluntary action of pharmaceutical companies. We
are not counting on their goodwill or their altruism. ... They're
just changing because they see that's the future."
Critics say the drug price pledges by major drugmakers are largely
Since May, HHS has given Medicare Advantage health plans, which are
administered by private-sector health insurers, new tools to lower
prescription drug costs.
The agency's Food and Drug Administration has unveiled a plan to
boost the use of biosimilars, which are cheaper versions of
expensive biotech medicines. Azar has directed the FDA to establish
a working group to study how to import drugs safely from other
countries if a drugmaker dramatically raises prices.
The actions have already sparked concerns. Last week, a leading
group of rheumatologists met with Azar to discuss changes to
Medicare Advantage that could force some patients to try a less
effective, cheaper medication for a period of time before their
health plan would cover a more expensive therapy.
HHS said Azar emphasized the agency's interest in lowering drug
prices but expressed openness to alleviating burdens that could be
placed on physicians as a result of the new rule.
Azar said he spoke with Trump every few days, either in person or
over the phone and that in every conversation, the president wanted
to hear about progress on lowering prescription medicine costs.
"I have never once had a meeting or phone call with the president
where we have not talked about drug pricing," Azar said.
(Reporting by Yasmeen Abutaleb; Editing by Michele Gershberg and
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