In his January 15th remarks to the Price of Good Health Summit, Department of Health and Human Services (HHS) Secretary Alex Azar touted the strategies the Trump Administration is developing to bring down drug costs in Medicare, including the Blueprint, American Patients First. Mentioning the International Pricing Index (IPI) model and the Centers for Medicare and Medicaid Services’ (CMS) proposed exceptions to the “protected classes” of prescription drugs under Medicare Part D, Secretary Azar said that HHS is implementing President Trump’s drug pricing blueprint by increasing competition and giving the federal government more negotiation tools. Secretary Azar said that the Administration has already seen successes in its drug pricing agenda, characterizing the lower rate of drug price increases in 2018 as a victory for President Trump.
In his remarks, Secretary Azar mentioned what he described as the industry “denial” that bringing down list prices should be a priority. He pointed to mechanisms that determine out-of-pocket costs that rely on list prices as opposed to negotiated prices or post-rebate prices agreed upon by insurers and drug companies, saying that the benefits of such arrangements “aren’t accruing to the patients who need them the most.” Additionally, Azar floated HHS’s willingness to explore importing drugs from Canada when single-source drugs undergo “dramatic price hikes.”
Competition is an area of focus for HHS in the quest to bring down drug prices. Secretary Azar noted that the that the Food and Drug Administration (FDA) approved a record number of generic drugs in 2018, adding that the competition generated by generic drugs and biosimilars continue to be a priority of HHS and the FDA. According to Secretary Azar, biosimilar competition is a powerful factor in lower drug prices in Europe and we not only need more biosimilar approvals but also pharmacy-level interchangeability and reforms to the rebate system that would help to promote insurers and providers prescribing lower-cost biosimilars rather than name brands that offer big rebates.
With regard to the Medicare program, Secretary Azar touted two proposed policies that he says are designed to lower costs to Medicare and its beneficiaries. One of the policies, proposed in November 2018, would allow additional exceptions to Medicare Part D’s six protected classes of prescription drug. The protected classes were established at the same time as Part D as treating conditions for which patients need access to a broad spectrum of treatment possibilities. The proposal would allow Part D plans to refuse to cover drugs that do not meet certain price thresholds and would also allow Part D plans the ability to require prior authorizations and step therapy for treatment regimens on which patients are currently stabilized. Secretary Azar mentioned that it is the “sole goal” of the proposed rule to lower costs, boost competition, and give Medicare more powerful negotiation tools. As proof, he pointed to private plans using similar tactics to achieve price reductions.
The other proposed policy came from an advanced notice of proposed rulemaking in October 2018 that would create a reference pricing index based on other wealthy countries for drugs provided under Medicare Part B, the International Pricing Index (IPI) Model. A formal notice of proposed rulemaking is expected in the first quarter of this year. Secretary Azar said that the model would still result in the U.S. paying higher prices for Part B drugs than other countries pay, but that the prices would be reined in by an estimated 30 percent. Secretary Azar characterized the model as giving drug manufacturers a new reason to negotiate more aggressively abroad as prices elsewhere would have an impact on what Medicare is willing to pay.
Secretary Azar closed his speech by reiterating that no policy is off the table and that “we’ll continue taking action within the scope of the President’s blueprint. But if we need to go beyond its four corners to bring down list prices and out-of-pocket costs, we will.”