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 Azar's comments provided more details on the plan to lower
prescription drug costs for Americans announced on Friday by
President Donald Trump.
While Trump assailed "middlemen," an apparent reference to health
insurers and pharmacy benefit managers (PBMs), for pocketing
negotiated rebates on drugs rather than passing savings to
consumers, the proposal discussed on Monday appears to see them as
part of the solution to high prices.
Shares of leading PBMs and insurers rose on Monday. CVS Health Corp
<CVS.N> shares climbed 3.7 percent with Express Scripts Holding <EXRX.O>
up 1.2 percent, while Humana Inc <HUM.N> shares rose 1.7 percent and
Cigna Corp <CI.N> closed up 2.2 percent.
"On the one hand we are talking about banning rebates, but on the
other we are talking about how great the private market is at
controlling costs," said Craig Garthwaite, director of the
healthcare program at Northwestern University's Kellogg School of
Management. "Where exactly do we think those price reductions come
from?"
Trump has vowed to tackle rising drug prices since running for
office, but his plan spared the pharmaceutical industry from direct
government negotiations to control costs, a proposal he endorsed
during the 2016 presidential campaign. Shares of drugmakers rose for
a second day on Monday as Wall Street analysts said the new policies
were unlikely to hurt industry profits.
Medicare is the national health insurance plan run by the federal
government for Americans over the age of 65 and the disabled.
Azar, a former pharmaceutical company executive, said Trump views
tougher negotiation as key to the plan. Azar said his agency will
consider an alternative system for buying Medicare Part B drugs,
which are administered by a healthcare provider and covered directly
by the government, such as many cancer treatments and infused
biotech drugs.
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The administration would seek to allow private payers to negotiate
the price of those medicines, as health insurers and PBMs already do
in Medicare Part D, which covers drugs patients get at the pharmacy.
"We believe there are more private sector entities equipped to
negotiate these better deals in Part B, and we want to let them do
it," Azar said. "More broadly, the President has called for me to
merge Medicare Part B drug payments into Part D, where negotiation
has been so successful."
Health and Human Services senior officials said at a briefing with
reporters on Monday that they could experiment with moving some
drugs from Medicare Part B to Part D in a pilot program, but did not
say when that might begin.
HHS likely has authority to pilot or experiment with limited
programs, health policy experts said. But Joe Antos, of the
conservative American Enterprise Institute, said the bulk of
expensive drugs will likely remain in Part B, limiting the
proposal's ability to significantly lower drug prices.
"These are sophisticated drugs for complicated diseases," Antos
said. "It's a relatively small part of the Medicare population, but
it's a big chunk of spending."
Under the current system, drugmakers and physicians are incentivized
to keep prices high in Medicare Part B, Leerink analyst Ana Gupte
said.
She said companies best positioned to participate in the new
proposal would be insurers that have their own PBMs, Part D plans
and Medicare Advantage business, such as UnitedHealth Group <UNH.N>,
Humana, Anthem Inc <ANTM.N> and Cigna if the Trump administration
approves its merger with Express Scripts.
(Reporting by Yasmeen Abutaleb in Washington and Michael Erman in
New York; Editing by Michele Gershberg, Dan Grebler and Bill Berkrot)
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