HHS Secretary Alex Azar talked a good game in a Rose Garden ceremony and subsequent press conference—held Friday, May 11—on Trump Administration efforts to lower prescription drug costs for American patients.
Azar is, of course, a former executive of Eli Lilly. Can he be trusted to champion the interests of everyday Americans?
We will soon find out. President Trump stated that Sec. Azar’s insider knowledge about the complex schemes to raise prices, perpetrated by industry middlemen, is exactly what makes him the right person for the job.
Watch the video of the Rose Garden Ceremony:
Although groups like Physicians Against Drug Shortages have been sounding the alarm for years, industry-led smoke and mirrors have, until recently, largely flown under the radar of the main-stream-media. Thankfully, respected outlets like the Wall Street Journal and Washington Times are now beginning to shine needed light on this malfeasance.
As these articles explain, a safe harbor to Medicare anti-kickback law is the major policy failure enabling the bad actors to line their pockets by driving up costs. The safe harbor legalizes kickbacks paid by manufacturers to Pharmacy Benefit Managers (PBMs) and their cousins-in-crime Group Purchasing Organizations (GPOs).
TownHall.com reports: Repealing the GPO/PBM safe harbor to Medicare anti-kickback law “would open the drug and medical supply segment of healthcare to free market competition and foster innovation. In addition, it would result in cost reductions estimated at $100 billion [actually more like $200 billion], including savings for the Medicare and Medicaid programs.”
Congress initially enacted the GPO safe harbor in 1986. Then in 1987 Congress reaffirmed the measure, instructed HHS to implant the the safe harbor into regulation, and granted HHS authority to create additional safe harbors. In 2003 HHS OIG issued guidance clearing the way for PBMs to piggyback on the GPO safe harbor. Such guidance could theoretically be revised or rescinded by the HHS Secretary, without needing action by Congress.
And in their remarks today, both Trump and Azar mentioned that they will be looking at reining in such abusive practices.
Later in the press room, Azar explained that there are perverse incentives at play: “These big price increases are actually a good deal for pharmacy benefit managers, who are supposed to keep prices down.”
Video of White House Press Conference With Sec. Azar:
What is HHS going to do? They put out a 44-page blueprint of their plan:
One step HHS announced it will implement immediately is a prohibition of Part D gag clauses, “preventing pharmacists’ telling patients when they could pay less out-of-pocket by not using insurance.”
Great words but let’s hope HHS doesn’t stop there. The blueprint is less clear about other action HHS will take related to PBMs, although it states HHS is considering: “Measures to restrict the use of rebates, including revisiting the safe harbor under the Anti-Kickback statute for drug rebate.”
Rebates? Why does CMS use that euphemism? They are not rebates, they are legalized kickbacks. Furthermore, rebates do not go to the patients, they flow to the PBM and insurance companies.
Unfortunately, HHS has a poor track record when it comes to using it’s existing authority to stop PBM abuse. The Government Accountability Office reports: “since 2004, [HHS] has not routinely exercised its authority to request and review disclosures” that PBMs are required to make available to comply with the safe harbor.
HHS promises there will be an opportunity for the public to comment through a “Request for Information.”
HHS appears to be asking the right questions, including:
“Do PBM rebates and fees based on the percentage of the list price create an incentive to favor higher list prices (and the potential for higher rebates) rather than lower prices?”
“Should PBMs be obligated to act solely in the interest of the entity for whom they are managing pharmaceutical benefits? Should PBMs be forbidden from receiving any payment or remuneration from manufacturers, and should PBM contracts be forbidden from including rebates or fees calculated as a percentage of list prices? What effect would imposing this fiduciary duty on PBMs on behalf of the ultimate payer (i.e.,
consumers) have on PBMs’ ability to negotiate drug prices?”
When details become available about the comment opportunity we will ask that all patients and doctors demand that HHS take strong action to stop the PBM and GPO kickbacks.
Ultimately, as Trump stated in his comments, Congress will need to do it’s part in concert with administration actions. One priority for Congress must be to repeal the GPO/PBM safe harbor and end legalized kickbacks.
In the meantime HHS can lead the way to educate Americans on how such repeal will save $200 billion dollars/year and prevent dangerous drug shortages.
Americans are depending on you to do the right thing, Secretary Azar.