Azar Continues to Promote Administration Drug Pricing Policy, Plus RFI Published on Stark Law

On June 26, 2018, the Senate Finance Committee held a hearing to examine President Donald Trump’s plan to lower prescription drug prices. The hearing, “Prescription Drug Affordability and Innovation: Addressing Challenges in Today’s Market,” focused on increased competition and innovation, penalties against “bad actors,” and Medicare program reform, and featured witness testimony from Health and Human Services (HHS) Secretary Alex Azar.

In his testimony, Secretary Azar explained that the blueprint would provide a plan of action for the administration and Congress for how to bring down drug prices while keeping the U.S. as the world’s leader in biopharmaceutical innovation. As he has typically done while promoting the plan, the Azar highlighted the Administration’s four key areas of focus: (1) high list prices set by pharmaceutical manufacturers; (2) seniors and government programs overpaying for drugs due to lack of the latest negotiation tools; (3) rising out of pocket costs; and (4) foreign governments free-riding off of American investment in innovation.

As is almost to be expected in today’s hyper-partisan environment on Capital Hill, both sides of the aisle seemed to focus on their own motivations.

Republicans focused on common ground with the administration in their criticism of high list prices and doubts about the current rebate model. Chairman Orrin Hatch did express some skepticism, however, about the Administration’s proposal to adopt a “fixed-price” discount model — “the terms ‘fixed’ and ‘price’ in the same phrase does make me a little bit nervous,” he said. However, he went on to hone in on the potential for the policy to reduce incentives for high list prices. Likewise, Sens. John Thune and Bill Cassidy raised concern over list prices, while giving particular concern to the prices paid by consumers — not necessarily by the health care system at-large.

Democrats, on the other hand, largely focused on immigration and the treatment of children and families separated at the U.S. border, despite attempts from Chairman Orrin Hatch to get them to stay on the hearing topic of drug pricing. Although both parties agreed more must be done to bring down the price of prescription drugs, Democrats declared that the President’s fiscal year (FY) 2019 budget and drug pricing blueprint did not do enough to tackle the issue. Ranking Member Ron Wyden, for example, claimed that the blueprint was “nothing more than a collection of questions the American people have been asking about drug prices for the past decade,” and announced the release of a new report examining the entire drug supply chain.

In addition to discussing the “American Patients First” plan in detail and outlining the Administration’s plan and ability to enact the proposed policy changes, Azar also confirmed that the Trump Administration is rewriting safe harbor guidelines for anti-kickback restrictions to allow for value-based contracts that allow drug makers to base the price of their drugs on how well they work.

On June 25, 2018, the published in the Federal Register a request for information (RFI) seeking input from health care industry stakeholders on (i) whether and how the Stark Law imposes obstacles to implementing coordinated care arrangements and (ii) what types of exceptions might be needed to further the development of alternative payment models and protect them under the Stark Law.

The RFI also requests the industry’s thoughts on the following:

• Possible approaches to defining “commercial reasonableness” for Stark Law purposes.
• Possible approaches to modifying the definition of “fair market value” for Stark Law purposes.
• When compensation should be considered to “take into account the volume or value of referrals” by a physician or “take into account other business generated” between parties to an arrangement.
• The application and utility of the “remuneration unrelated to DHS” exception, including any suggestions on how CMS could “interpret this exception to cover a broader array of arrangements.”
• Any other provisions, definitions and/or exceptions for which additional clarification would be useful.