HHS Secretary Azar outlines Trump administration’s drug pricing plan

Health as well as Human Services Secretary Alex Azar intensified the Trump administration’s attack on drug middlemen Tuesday, even suggesting the elimination of discounts of which critics say inflate pharmaceutical prices.

President Donald Trump unveiled his administration’s blueprint to lower drug prices last month. the idea includes rethinking rebates, or discounts of which firms called pharmacy benefit managers negotiate with manufacturers. Azar expanded on the idea in a hearing with the Senate Committee on Health, Education, Labor as well as Pensions.

Pharmaceutical companies set the advertised cost, known as the list cost. Pharmacy benefit managers, or PBMs, negotiate discounts, or rebates, down by This particular. Critics argue the practice inflates drug prices because the idea encourages manufacturers to set higher prices.

They’re a favorite target of the pharmaceutical industry, which says the idea’s a way for middlemen to profit by high drug prices. Azar, a former executive at drugmaker Eli Lilly, suggested possibly scrapping them in favor of a more straightforward pricing system.

“We may need to move toward a system without rebates, where PBMs as well as drug companies just negotiate fixed-cost contracts,” he said. “Such a system’s incentives, detached by these artificial list prices, could likely serve patients far better, as could a system where PBMs receive no compensation by the very pharma companies they’re supposed to be negotiating against,” Azar said.

Removing rebates within the Medicare Part D prescription drug program “will be something of which will be as well as should be on the table,” he said. The administration believes the idea has the regulatory authority to modify the statute of which allows rebates.

They’re currently exempt under the anti-kickback statute. Food as well as Drug Administration Commissioner Scott Gottlieb last month suggested the federal government should re-examine This particular.

Azar’s comments on Tuesday about moving toward a system where drug companies negotiate fixed-cost contracts echo those of which Gottlieb made in 2016 while he was a resident fellow at the American Enterprise Institute.

“The key will be can we detach the incentives of everybody inside the system by these artificial list prices,” Azar said Tuesday. “Rebates are a cut, a percent, of of which artificial list cost as well as they basically foment This particular game we have of list cost goes up, rebate goes up, where everybody’s winning except the patient, who ends up paying out of pocket.”

Health insurers, including Aetna as well as UnitedHealth Group, have recently commenced passing along rebates to some consumers amid growing demand for transparency. CVS Health, which operates a PBM, Caremark, says the idea shares 100 percent of rebates directly with patients.

Replacing the current rebate system with one using “fixed-cost contracts,” as Azar calls them, could have enormous implications. Of course, of which’s assuming the Trump administration could implement such a change.

“Eliminating rebates could be a ‘black swan event’ for drug channel companies,” Adam Fein, CEO of Pembroke Consulting’s Drug Channels Institute, told CNBC in an email. “Everyone inside the drug channel system could need to restructure as well as renegotiate their agreements. Revenues at wholesalers, pharmacies as well as PBMs could collapse. Their profits could become more visible as well as likely lower.”

Pharmaceutical Care Management Association, the PBM industry’s lobbying group, reiterated its stance of which drugmakers are the ones to blame for high drug prices because they’re the ones who set them inside the first place.

“The easiest way to lower costs could be for drug companies to lower their prices,” the group said in a statement. “Manufacturers have chosen to negotiate cost concessions with PBMs using rebates, which are calculated as well as paid months after a drug has been dispensed. Simply getting rid of rebates as well as some other cost concessions could leave patients as well as payers, including Medicaid as well as Medicare, at the mercy of drug supplier received a pricing strategies.”

Trump attacked middlemen last month in a Rose Garden speech unveiling his administration’s plan to lower drug prices last month. He said “they’re rich” as well as “they won’t be so rich anymore.”

Despite the tough talk, critics have said the plan might not do much to lower prices right away. However, the idea’s still early days, as well as the real risk could come later.

“Bottom line: This particular administration seems committed to long-term disruption,” Fein said.

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