HHS secretary calls on drug companies to ‘stop the price hikes’

After President Donald Trump’s drug pricing speech last week was deemed a “non-event” by analysts, all eyes turned to the secretary of the U.S. Dept. of Health & Human Services, Alex Azar, to see what the former pharma executive viewed as the administration’s top concerns.

Azar called on the industry to “stop the price hikes” and cautioned that Trump would not hold back from calling out drug manufacturers by name – an effort echoed by FDA chief Dr. Scott Gottlieb who told STAT that the agency would publish the names of companies that are hindering generic drugs from reaching the market.

While Trump’s speech was light on the details, Azar dug into the administration’s priorities, focusing on their work regarding Medicare Part B and Part D plans.

On the campaign trail, Trump floated the idea of allowing Medicare to directly negotiate drug prices, arguing that the government is getting a bad deal on prices. But in his speech on Monday, Azar pointed to a study from the Congressional Budget Office that found that direct negotiation would “generate almost no savings.”

The HHS secretary said the president is instead interested in merging Medicare’s program for physician-administered drugs, Part B, with its program for prescription drugs, Part D. Under Medicare Part B, drugs that are cleared by the FDA are covered by Medicare without any negotiation.

“Medicare gets a bill for the drug, composed of the standard price plus a 6% markup and we pay it,” Azar said, according to his prepared remarks. “Compare that with the negotiation in Part D: Plans determine whether a drug should be covered or whether an alternative is superior. Plans negotiate discounts, rather than just paying full price.

“The President is also going to bring smart negotiation to billions of dollars’ worth of drugs in a part of Medicare where there is currently no negotiation at all,” Azar added.

Azar highlighted a number of other initiatives that Trump’s administration is considering, including eliminating “gag clauses” – rules that prevent pharmacists from telling patients if a cheaper drug is available to them – and re-examining the role of pharmacy benefit managers.

Azar, who formerly led Eli Lilly‘s (NYSE:LLY) U.S. division, struck an aggressive tone in addressing the industry, pointing towards his experience as an executive.

“I’ve been a drug company executive – I know the tired talking points: the idea that if one penny disappears from pharma profit margins, American innovation will grind to a halt,” he said. “I’m not interested in hearing those talking points anymore, and neither is the president.”

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