Senate Committee Holds Hearing on Drug Pricing with HHS Secretary
The US Senate Committee on Health, Education, Labor and Pensions (HELP) held a hearing this week (June 12, 2018) with Secretary of the Department of Health and Human Services (HHS) Alex Azar to examine President Donald Trump’s blueprint, announced last month (May 2018), to reduce the cost of prescription drugs. This follows President Trump’s announcement of a plan to address drug pricing by increasing drug competition.
“In May, building on the budget, the President released a blueprint to put American patients first by lowering drug prices and reducing out-of-pocket costs,” said Azar in his testimony. “This blueprint is a plan of action for how to bring prices down while keeping our country the world’s leader in biopharmaceutical innovation and lays out dozens of possible ways HHS and Congress can address this vital issue. Some of these proposals came out of Congress, and we look forward to working with you as we take action.”
President Trump’s plan highlighted several measures, including speeding up the approval process for over-the-counter products, requiring price disclosures in commercials, and addressing ways to combat the misuse of patent protection and other practices as a means to increase generic-drug competition. President Trump has also discussed banning the so-called “pharmacist gag rule,” which allows health insurance companies and pharmacy benefits managers (PBMs) to use their contracts to prevent pharmacists from telling their customers about less expensive ways to buy prescription drugs. In his plan, President Trump also discussed giving Medicare Part D plans new tools to negotiate lower prices for more drugs and making sure that Medicare Part D incentives encourage drug companies to keep prices low.
Azar explained that the President’s blueprint lays out four strategies for addressing what he called “significant” problems in the pharmaceutical market: (1) high list prices set by pharmaceutical manufacturers; (2) seniors and government programs overpaying for drugs due to the lack of the latest negotiation tools; (3) rising out-of-pocket costs; and (4) and an unequal sharing of the cost of innovation between the US and foreign governments due to different pricing practices aboard.
In his testimony, Azar outlined Trump’s blueprint and highlighted measures to address high list pricing by removing rebates. “We may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts,” Azar said during the June 12 hearing. “Such a system’s incentives, detached from these artificial list prices, would likely serve patients far better, as would a system where PBMs receive no compensation from the very pharma companies they’re supposed to be negotiating against,” Azar said.
Azar further discussed how the federal government can support value-based healthcare. “We also recognize that a real market for drugs requires improvements in open, responsible communication in drug companies and those who make drug-reimbursement decisions,” he said in his testimony
To that end, earlier this week, the US Food and Drug Administration (FDA) issued final guidances on medical-product communications, including for value-based contracts for drugs. The first guidance informs market participants developing contracts that include value-based arrangements how to communicate information about how a drug might impact outcomes that are important to purchasers, such as a health plan or hospital, but which is not an endpoint that is expressly described in a drug’s FDA-approved labeling.
The second guidance provides the FDA’s views on manufacturers’ communication of information that is not contained in FDA-required labeling for their products, but that is consistent with that labeling. The FDA-required labeling is the primary tool that communicates the essential information needed for the safe and effective use of a medical product and as such, the labeling is subject to content requirements and limitations to help ensure that it effectively communicates information.
“We want to encourage competitive contracting based on measures that matter most to purchasers and patients and this guidance[s] will help advance that,” Azar said in his testimony.
When further asked about how the administration plans to enact value-based healthcare, Azar communicated that additional guidance will be released. “One of the big barriers is our government price-reporting requirements, so we want to work with the CMS [Centers for Medicare & Medicaid Services] on how we can effectively make it easy for these contracts to happen,” Azar said in his testimony. “They’re quite burdensome to put into place…[T]he cost of implementing can be quite high. So we can probably reduce those compliance costs but…that is part of our agenda, we’re working on that as we speak – how we can put out rules and guidance that would enable more value-based contracting there.”
The June 12 hearing of the Senate HELP Committee is the committee’s fourth in a series of hearings that the committee has held on drug pricing. The first hearing in June 2017 examined the path a prescription drug approved by the FDA takes from the manufacturer to patients and how this path affects what the patient pays. At a second hearing in October 2017, the committee heard from industry experts on what goes into the price of a drug. The committee held a third hearing in December 2017 to hear from the National Academies of Sciences, Engineering, and Medicine on a report it published on making medicine more affordable.