WASHINGTON — Alex Azar defended the drug pricing proposals in the Trump administration’s latest budget request Thursday, pushing back on criticism that none of the ideas would lower the list prices for prescription drugs.

The new health and human services secretary, when pressed on the matter by both a Democratic and a Republican senator at a budget hearing, pointed to two concrete proposals by the administration. Both take aim at Medicare’s prescription drug benefit. One would put insurers, rather than the federal government, on the hook for more of the cost; another aims to encourage insurance companies to push cheaper generic drugs instead of costly brand drugs to their patients.

It’s unclear whether those policies, which were among a raft of other ideas that take aim at pharmacy benefit managers and hospital prices, among other facets of the health system, would actually bring down list prices. Indeed, even the senators who asked Azar about the policies — Sens. Bill Cassidy (R-La.) and Sherrod Brown (D-Ohio) — expressed skepticism after hearing his response.


Azar’s defense comes as patient advocates and interest groups representing other health care players have argued that the proposals will do little do bring down the list prices of prescription drugs, despite Azar’s repeated promises to do so.

With just two weeks behind him at HHS, Azar escaped largely unscathed from the first two of three hearings this week, at which he was tasked with defending his agency’s budget proposal. Only a handful of lawmakers asked the former Eli Lilly executive about the administration’s long list of drug pricing proposals.

Many focused instead on niche Medicare or Medicaid issues, or a separate controversy about an Idaho insurer’s decision to flaunt some of the rules of the Affordable Care Act.

Azar gets into the weeds

Asked about the drug pricing proposals, Azar dove quickly into the details.

He said that, under the proposal, Medicare Part D recipients who have reached the “catastrophic coverage” phase (meaning they have already spent $5,000 out-of-pocket), would have more of the cost of their prescription drugs paid for by private insurance and less by the federal government.

That change, Azar said, would ensure that the private insurers that administer Medicare Part D plans “have even more incentive to fight against the branded drug companies to keep those list prices down.”

Those Part D plans negotiate drug prices through pharmacy benefit managers. This negotiation process does not clearly lower the list price of drugs.

Azar also pointed out the administration has proposed changing the way in which out-of-pocket costs are calculated. Currently, brand drugs have government-mandated discounts that lower the cost to the patient. Those government-mandated discounts are included in the out-of-pocket cost — even though the patient doesn’t pay them out of pocket.

Under Azar’s proposal, the required discounts would no longer count as out-of-pocket costs. This means that insurance companies wouldn’t benefit as much from brand drugs having high list prices, but it’s not clear if it would encourage the drug companies themselves to lower the list prices.

At a Wednesday hearing at the Ways and Means Committee, Azar faced little scrutiny of his drug pricing proposals.

The most specific question came from Tom Reed (R-NY), who wanted to know why prices for insulin produced by Eli Lilly, where Azar used to work, went up, and what the secretary would do to “get those insulin prices under control.” The line echoed similar questioning during Azar’s Senate confirmation hearing.

Azar said that he couldn’t speak specifically about his former company, but pointed to the Food and Drug Administration’s high number of generic drug approvals as a way to increase competition and lower prices, and expressed his desire to “develop a very robust biosimilar market” so that complicated drugs that are grown in biological tissues, as opposed to chemically synthesized, also face competition.

Rep. Brian Higgins (D-N.Y.) pointed out that the Department of Veterans Affairs receives extra discounts on drug because of the high volume of its purchases. “Why in God’s name are we not allowing Medicare to negotiate volume discounts to achieve those savings?” Higgins said, pounding the table.

Azar responded by saying that drugs currently covered by Medicare Part B, which are often administered in hospitals, could benefit from the negotiations currently conducted in Medicare Part D. (Often, private pharmacy benefit managers negotiate for prices in Part D on behalf of the individual plan sponsors.)

Erin Mershon contributed reporting.

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