[Senate Hearing 115-820]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 115-820
 
                    THE COST OF PRESCRIPTION DRUGS:
                  EXAMINING THE PRESIDENT'S BLUEPRINT
                  `AMERICAN PATIENTS FIRST' TO LOWER 
                              DRUG PRICES

=======================================================================

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                                   ON

  EXAMINING THE COST OF PRESCRIPTION DRUGS, FOCUSING ON EXAMINING THE 
  PRESIDENT'S BLUEPRINT `AMERICAN PATIENTS FIRST' TO LOWER DRUG PRICES

                               __________

                             JUNE 12, 2018

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and Pensions
                                
                                
                                
                                
                                
                                
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              U.S. GOVERNMENT PUBLISHING OFFICE 
 30-486 PDF            WASHINGTON : 2020         
        
        
        
        
          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                  LAMAR ALEXANDER, Tennessee, Chairman
MICHAEL B. ENZI, Wyoming                    PATTY MURRAY, Washington
RICHARD BURR, North Carolina                BERNARD SANDERS (I), Vermont
JOHNNY ISAKSON, Georgia                     ROBERT P. CASEY, JR., Pennsylvania
RAND PAUL, Kentucky                         MICHAEL F. BENNET, Colorado
SUSAN M. COLLINS, Maine                     TAMMY BALDWIN, Wisconsin
BILL CASSIDY, M.D., Louisiana               CHRISTOPHER S. MURPHY, Connecticut
TODD YOUNG, Indiana                         ELIZABETH WARREN, Massachusetts
ORRIN G. HATCH, Utah                        TIM KAINE, Virginia
PAT ROBERTS, Kansas                         MAGGIE HASSAN, New Hampshire
LISA MURKOWSKI, Alaska                      TINA SMITH, Minnesota
TIM SCOTT, South Carolina                   DOUG JONES, Alabama

               
                                     
               David P. Cleary, Republican Staff Director
         Lindsey Ward Seidman, Republican Deputy Staff Director
                 Evan Schatz, Democratic Staff Director
             John Righter, Democratic Deputy Staff Director
             
                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                         TUESDAY, JUNE 12, 2018

                                                                   Page

                           Committee Members

Alexander, Hon. Lamar, Chairman, Committee on Health, Education, 
  Labor, and Pensions, Opening statement.........................     1
Murray, Hon. Patty, Ranking Member, a U.S. Senator from the State 
  of Washington, Opening statement...............................     3

                                Witness

Azar II, Hon. Alex M., Secretary, Department of Health and Human 
  Services, Washington, DC.......................................     5
    Prepared statement...........................................     7


                    THE COST OF PRESCRIPTION DRUGS:

                  EXAMINING THE PRESIDENT'S BLUEPRINT

             `AMERICAN PATIENTS FIRST' TO LOWER DRUG PRICES

                              ----------                              


                         Tuesday, June 12, 2018

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 a.m., in 
room SD-430, Dirksen Senate Office Building, Hon. Lamar 
Alexander, Chairman of the Committee, presiding.
    Present: Senators Alexander [presiding], Enzi, Burr, 
Isakson, Paul, Collins, Cassidy, Young, Murray, Sanders, Casey, 
Bennet, Baldwin, Murphy, Warren, Kaine, Hassan, Smith, and 
Jones.

                 OPENING STATEMENT OF SENATOR ALEXANDER

    The Chairman. The Senate Committee on Health, Education, 
Labor, and Pensions will please come to order.
    Today, we're holding our fourth hearing this Congress on 
drug pricing, and we'll hear from Health and Human Services 
Secretary Alex Azar on President Trump's Blueprint to reduce 
the cost of prescription drugs. This is the first hearing on 
the Administration's Blueprint. Senator Murray and I will each 
have an opening statement. Then I'll introduce the Secretary.
    I welcome him. I encourage him to take the time he needs. 
He's the only witness today, so if he needs a few extra minutes 
to explain the Blueprint, he's welcome to do that. Then each 
Senator will have 5 minutes to ask questions. The Secretary 
must leave at noon, so I'm going to be a little strict on the 
5-minute limit, and if Senators ask their questions with 2 
seconds remaining, I'll ask the Secretary to provide the answer 
in writing so every Senator can have a chance to ask questions.
    On May 11, President Trump announced a comprehensive 
Blueprint to reduce the cost Americans pay for their 
prescription drugs, and today we're pleased to hear from 
Secretary Azar to help us understand that Blueprint, what the 
Administration itself can do to implement it, and what 
legislation might be necessary to help you implement it.
    Hearing Secretary Perdue talk about farm issues is helpful, 
I think, because of his background as a family farmer and as a 
veterinarian, and most of us think Dr. Scott Gottlieb's 
background in business and service in the Bush administration 
has made him a more effective head of the Food and Drug 
Administration. In the same way, I believe it's helpful that 
Secretary Azar also knows these issues well. He was Deputy 
Secretary and General Counsel at the Department of Human 
Services in the Bush administration, and he was an executive 
with significant responsibilities at a pharmaceutical company.
    One of the things we've learned during our first three 
hearings on drug prices is that the amount we spend on 
prescription drugs can vary widely from year to year. Sometimes 
the amount we spend on drugs grows by as little as 1.3 percent 
over the previous year, as in 2016, and in other years by as 
much as 12.4 percent, as in 2014, according to the Centers for 
Medicare and Medicaid Services.
    But we also know that according to CMS, spending on 
prescription drugs is expected to grow at an average of 6.3 
percent a year between 2017 and 2026, faster than hospital 
stays, doctor visits, or any other healthcare sector.
    In our hearings, we've also learned it's difficult to track 
the billions of dollars Americans spend each year on 
prescription drugs, which in 2015 was $457 billion according to 
the Assistant Secretary for Planning and Evaluation at the 
Department of Health and Human Services.
    We learned that one of the reasons tracking where the money 
goes is difficult is the use of rebates to reduce list prices, 
which is when a pharmacy benefit manager negotiates a discount 
on a drug with the manufacturer.
    We also learned that while the $457 billion we spent on 
drugs in 2015 is a big dollar amount, drug spending is only 
about 6.7 percent of what we spend overall on healthcare in 
America, according to the Assistant Secretary for Planning and 
Evaluation, and that number includes not only drugs purchased 
at the pharmacy but also drugs given in hospital settings.
    The Administration is taking action for the same reason we 
held our hearings. We all know many Americans struggle to 
afford their prescriptions. According to Kaiser Family 
Foundation, about half of Americans, 160 million people, take a 
prescription drug, and about one in eight say it's difficult to 
afford those prescriptions.
    But when we talk about the cost of prescription drugs, we 
have to keep in mind what we've learned in other of our 
hearings, which is we're living in a time of remarkable 
biomedical research that's leading to new and lifesaving drugs. 
These miracle drugs may take billions of dollars and several 
years to develop, and so they may be very expensive. For 
example, we now have drugs that can cure Hepatitis C. These are 
expensive drugs up front, but curing a patient with a one-time 
treatment can be significantly less expensive than treating 
someone with Hepatitis C over the course of his or her life.
    In addition to our three hearings, this Committee has taken 
some steps already to reduce drug prices. In the 21st Century 
Cures Act, we included provisions to cut the red tape at the 
Food and Drug Administration to increase competition as a way 
to bring down drug prices. And in the FDA User Fee Agreements 
that this Committee worked on and the President signed in 
August was a provision from Senators Collins, McCaskill, and 
Cotton to improve generic drug competition.
    In the Blueprint, there are some steps the Administration 
has started to take already or is intending to take. For 
example, FDA is going to start going after bad actors gaming 
the system to delay generics from going to market. This is a 
place where Secretary Azar can use the bully pulpit. Dr. 
Gottlieb has already released a list of companies blocking 
access to their drugs and delaying generics coming to market, 
shining light on the questionable behavior of these companies.
    Another action FDA is considering is requiring drug 
manufacturers to include the list price of a drug in television 
commercials or other advertising materials. The Blueprint also 
proposes ending the so-called gag rule that prevents a 
pharmacist from telling a patient a drug would be cheaper if 
paid out of pocket instead of with insurance. The 
Administration has proposed ending this rule on Federal plans 
such as Medicare Part D. Senators Collins, Cassidy, Smith, and 
others have a bill to end the rule on all insurance plans that 
this Committee hopes to consider later this year.
    I also want to hear specifically how Congress can help 
reduce drug prices. At our previous hearings, I questioned the 
need for rebates, because they make it difficult to track where 
the money goes, and I understand the Administration may need 
some additional authority to modify or end the use of rebates 
to increase transparency.
    These are a few of the proposals in the Blueprint, and I 
look forward to hearing from Secretary Azar about others.
    Senator Murray.

                  OPENING STATEMENT OF SENATOR MURRAY

    Senator Murray. Well, thank you, Mr. Chairman.
    Thank you for joining us, Secretary Azar.
    As a candidate, President Trump talked a big game on 
lowering drug prices. But after 500 days, the only healthcare 
price he has dropped is his former secretary. So while the 
Administration hyped its drug pricing plan as a big step 
forward to address this broken promise, it is very clearly not. 
In fact, when President Trump finally announced his big plan to 
bring drug companies' prices down, their stocks actually went 
up.
    Meanwhile, too many families in my home State of Washington 
and across the country are struggling to make ends meet because 
of skyrocketing drug prices. Meanwhile, about one in four 
people report that someone in their family didn't get a 
prescription filled because of cost. Meanwhile, about one in 
four cancer patients avoided filling a prescription for the 
same reason. And instead of giving these families a clear plan 
to address the issue, President Trump gave us a Blueprint that 
has more questions than answers.
    In fact, the Blueprint has 135 questions. That's not a 
plan. That's a questionnaire, and it left me asking some 
questions, too. For example, where are all the big bold ideas, 
ideas like negotiating drug prices through Medicare, something 
Democrats and some Republicans have been pushing to make happen 
for years and could actually have a meaningful impact. As a 
candidate, President Trump constantly brought up that idea. He 
told the crowds he would negotiate like crazy. He said he could 
save hundreds of billions of dollars. He said drug companies 
were getting away with murder, and yet this plan doesn't 
include that idea or any ideas that would really change the 
situation for patients struggling to afford the drugs they 
need.
    As with so many other issues, President Trump talked a big 
game in the campaign, and then instead of backing it up, he 
backed away. And not only did President Trump abandon the idea 
of having the government negotiate prices through Medicare, but 
he proposed steps that gave pharmacy benefit managers more 
negotiating power instead. Now, that's not just a 180 from what 
President Trump said during the campaign. Despite his claim 
that he was, quote, ``very much eliminating the middle man,'' 
this proposal to shift payments from Medicare Part B to Part D 
would have the opposite effect, empowering the companies he 
calls middle men without any data to suggest it will bring down 
prices for our families.
    While the big takeaway from this proposal is how little the 
Trump Administration intends to do to address drug prices, in 
some ways, it also reveals how much the Administration has not 
done. For example, I was surprised by the misleading decision 
to list updating Medicare's drug pricing dashboard as an 
immediate action. Since the dashboard was actually something 
the Obama administration actually started, the update to the 
dashboard released last month actually should have been 
released many months ago, and the Trump Administration's 
version actually is missing information that was in the 
previous one.
    I've got to tell you, as a former preschool teacher, I can 
tell you even our youngest students know you can't simply turn 
in someone else's work months late, incomplete, and expect to 
get extra credit for it.
    I was surprised reading the section on so-called 
accomplishments, in which the Administration brags about the 
proposals it included in its latest budget, despite the fact 
that that budget was an absolute partisan nonstarter, despite 
the fact that many of the policies won't actually do anything 
for patients, and despite the fact that the budget is only a 
proposal, not a policy that's been enacted. That's like saying 
you've served dinner when you've only written a grocery list, 
and in this case, most of the ingredients on the list are a big 
nothing burger.
    The few exceptions are actually ideas that Democrats have 
been fighting for and congressional Republicans have been 
fighting against. For example, the idea of requiring drug ads 
to include prices. Senator Durbin actually introduced a bill 
with Senator Hassan and others to do this last year, a bill no 
Republican yet has signed on to co-sponsor. Or the idea of 
requiring pharmacy benefit managers to pass rebates along to 
patients. Senator Wyden introduced a bill to do that last year, 
also without a Republican co-sponsor. Or the idea of preventing 
generic drug manufacturers from gaming the Food and Drug 
Administration's regulatory incentives to keep other affordable 
products off the market. Fifteen Democrats introduced a bill 
last year to push for these changes without any Republican co-
sponsors.
    I'm particularly curious about what our Republican 
colleagues think about our ideas now and whether they're now 
ready to join us at the table. There are policies in the 
Blueprint with which Democrats agree. But make no mistake. 
Those are targeted changes that come nowhere close to solving 
this very large problem. We need an ambitious plan to drive 
drug prices down, not one so small that it sends pharmaceutical 
stocks soaring in relief.
    I've heard from families across my state about how 
desperately they need us to address this, and I know many 
families across the country are in the same boat. In fact, two 
out of every five families can't afford a $400 emergency. That 
means they can't afford drug prices that keep creeping up. The 
price for Nitrostat, a drug for chest pain, has gone up 29 
percent. Advair for asthma has gone up 15 percent, and NovoLog, 
an insulin injection, has gone up 10 percent. Families cannot 
afford for us to keep waiting for a real plan, which is why 
Democrats are going to keep fighting for commonsense solutions 
that would actually make a difference, like negotiating lower 
prices through Medicare.
    I also want to take a moment to note that accountability 
for drug companies isn't just about drug prices. Senator 
Sanders and several other Members of this Committee have 
requested that we hold a hearing with pharmaceutical executives 
about their role in the opioid crisis, and I think that is an 
excellent idea. I hope the Chairman will work with us on that. 
I think it's critically important.
    Finally, Mr. Secretary, while you're here, I do want to 
express my personal alarm and outrage at the Trump 
Administration's effort to separate families at the border. 
That's just unacceptable. It is morally reprehensible, and it 
shouldn't be happening, and I'm deeply concerned about the 
children impacted by these separations and the crisis that this 
is actually creating in your department. So I want to be clear. 
I will have questions about that today as well.
    The Chairman. Thank you, Senator Murray.
    I'm pleased to welcome Secretary Azar, the Secretary of 
Health and Human Services. He leads a $1.1 trillion 
organization which oversees many agencies, including the 
Centers for Medicare and Medicaid Services, the Substance Abuse 
and Mental Health Services, the National Institutes of Health, 
the Food and Drug Administration.
    He served the Department as General Counsel for 4 years and 
Deputy Secretary for 2 years in the George W. Bush 
administration. He spent a decade in a leadership position at 
one of the country's major pharmaceutical companies. He has the 
experience to know the system. Many committees have invited him 
to appear before them, and we welcome him today as the first 
opportunity to discuss the President's Blueprint.
    Welcome, Secretary Azar.

  STATEMENT OF HON. ALEX M. AZAR II, SECRETARY, DEPARTMENT OF 
           HEALTH AND HUMAN SERVICES, WASHINGTON, DC

    Secretary Azar. Mr. Chairman and Ranking Member Murray and 
Members of the Committee, thank you very much for the 
opportunity to appear before you today to discuss a very 
important issue, which is why prescription drug prices are too 
high and what we're going to do about it.
    I know all of you care deeply about this challenge, and 
I've appreciated the opportunity to speak with many of you 
about it. It's one of the very first topics that I mentioned 
when I appeared before this Committee during my confirmation 
process earlier this year, and I applaud the effort of the HELP 
Committee to illuminate and address this issue.
    From day one of his administration, President Trump has 
directed HHS to make drug pricing a top priority. Earlier this 
year, the President's 2019 budget laid out a range of proposals 
for lowering drug prices, including through reforms to Medicare 
and Medicaid. In May, building on that budget, the President 
released a Blueprint to put American patients first, a plan of 
action for how to bring prices down while keeping our country 
the world's leader in biopharmaceutical innovation.
    Over the last decade, four significant problems have arisen 
in the pharmaceutical market: high list prices, seniors in 
government programs overpaying for drugs due to the lack of the 
latest negotiating tools, rising out-of-pocket costs, and 
foreign governments freeriding off of American investment and 
innovation. The President's Blueprint lays out four strategies 
for tackling these problems, and we've begun taking action on 
each of them already.
    First, we need to create the right incentives for lowering 
list prices. I know firsthand how serious the problem is with 
today's complex system of drug pricing. Right now, everybody in 
the system makes their money off of a percentage of list 
prices, both drug companies and pharmacy benefit managers as 
well as the distributors. Everybody wins when list prices rise 
except for the patient, whose out-of-pocket cost is typically 
calculated based on that price.
    One of HHS's initial actions is working to require drug 
companies to include their list price in their television ads. 
For example, I believe Americans deserve to know the price of a 
wonderful new drug they hear about on TV before going to ask 
their doctor about a product that they may find to be 
unaffordable.
    But, more fundamentally, we may need to move toward a 
system without rebates, where PBMs and drug companies just 
negotiate fixed price contracts. 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 that they're 
supposed to be negotiating against.
    We also recognize that a real market for drugs requires 
improvements in open, responsible communication between drug 
companies and those who make drug reimbursement decisions. That 
is why this morning, the FDA issued guidance to advance that 
goal, providing clarifying recommendations for how drug 
companies can share certain information with insurers and 
payers about drug effectiveness and other matters. We want to 
encourage competitive contracting based on measures of value 
that matter most to purchasers and patients, and this guidance 
will help advance that.
    Our second strategy for lower prices is better negotiation 
within Medicare. That is what President Trump has promised, and 
it's what we're going to deliver. In Medicare Part D--that's 
the prescription drug program for seniors when they go to the 
pharmacy to pick up their drugs--HHS will work to give private 
plans the market-based tools they need to negotiate better 
deals with drug companies.
    Part D is a tremendously successful program, but it has 
just not kept pace with innovations in the private marketplace. 
Well intended patient protections may be preventing 
prescription drug programs from appropriately managing 
utilization, even in accordance with the formulary created by 
doctors and pharmacists and approved by CMS. While everybody 
agrees on the importance of drugs in the Part D's protected 
class list, manufacturers often use that list as protection 
from paying rebates, providing discounts, or reducing list 
prices.
    President Trump also wants to bring negotiation for the 
first time ever to Medicare Part B. These are the physician 
administered drugs like infusion products. Right now, HHS just 
pays the bill. That's it. The system may actually be driving 
doctors to prescribe more expensive drugs while potentially 
tempting drug companies to develop drugs that fit into Part B 
rather than Part D. We're going to look at ways to merge Part B 
drugs into Part D to create competition where savings can be 
safely obtained, leverage existing private sector options 
within Part B, but ensure that the patient remains at the 
center.
    Third, we need a more competitive pharmaceutical 
marketplace. Thanks to the reforms that Congress passed in the 
1980's, America has the strongest generic drug market of any 
country in the world. But there are still too many ways in 
which drug companies are unfairly blocking competition. Since 
the rollout of the Trump Administration Blueprint, FDA has 
already publicized the names of companies who may be using 
safety programs to block competition, and we've issued two new 
guidances to help lessen the effects these actions may have on 
generic approvals. This work follows many FDA accomplishments 
under Commissioner Scott Gottlieb, including record-setting 
generic drug approvals in 2017 and measures to build on 
Congress' work to build a genuine competitive market for 
biosimilars.
    Finally, we need to bring down out-of-pocket costs for 
American patients. Patients should not be dropping their drug 
regimen because of high cost. Since the Blueprint rollout, CMS 
has reminded Medicare Part D plans that it is unacceptable to 
bar pharmacists from working with patients to identify lower 
cost options. More broadly, you ought to know how much a drug 
costs, how much it's going to cost you, and whether there are 
any cheaper options long before you get to the pharmacy 
counter. We look forward to working with Congress and 
stakeholders to understand how best to deliver this level of 
transparency.
    What I've laid out are just some elements of an aggressive, 
comprehensive, long-term plan to solve the problem we all care 
deeply about. Thank you for having me here today, and I look 
forward to taking your questions and having a productive 
discussion.
    [The prepared statement of Secretary Azar follows:]
                 prepared statement of alex m. azar ii
    Mr. Chairman, Ranking Member Murray, and Members of the Committee, 
thank you for the opportunity to appear before you to discuss an 
important issue: why prescription drug prices are too high, and what we 
are doing about it. I know all of you care deeply about this challenge, 
and I have enjoyed the opportunity to speak with many of you about it.

    It was one of the very first topics I mentioned when I appeared 
before this Committee during my confirmation process earlier this year, 
and I applaud the effort of the HELP Committee to illuminate and 
address this issue.

    From Day One of his administration, President Trump has directed 
HHS to make drug pricing a top priority. Too many of our family 
members, neighbors, and friends have worked hard their entire lives 
only to see their savings wiped out just to afford drugs they need to 
live.

    Earlier this year, the President's 2019 Budget laid out a range of 
proposals for lowering drug prices, including through reforms to 
Medicare and Medicaid.

    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. 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.

    Over the last decade, four significant problems have arisen in the 
pharmaceutical market: high list prices set by pharmaceutical 
manufacturers; seniors and government programs overpaying for drugs due 
to lack of the latest negotiation tools; rising out-of-pocket costs; 
and foreign governments free-riding off of American investment in 
innovation.

    The President's blueprint lays out four strategies for tackling 
these problems, and we have begun to take action on each of them 
already.

    First, we need to create the right incentives for list prices. I 
know firsthand the serious problems with today's complex system of drug 
pricing. Right now, everyone in the system makes their money off of a 
percentage of list prices: both drug companies and pharmacy benefit 
managers, who are supposed to keep prices down. Everybody wins when 
list prices rise--except for the patient, whose out-of-pocket cost is 
typically calculated based on that price.

    One of HHS's initial actions is working to require drug companies 
to include their list price on their television commercials. For 
example, Americans deserve to know the price of a wonderful new drug 
they hear about on TV--before going to ask their doctor about a product 
they may find unaffordable. But more fundamentally, we may need to move 
toward a system without rebates, where PBMs and drug companies just 
negotiate fixed-price contracts. Such a system's incentives, detached 
from artificial list prices, would likely serve patients far better.

    Second, we need better negotiation for drugs within Medicare--that 
is what President Trump has promised, and it's what we're going to 
deliver.

    In Medicare Part D, HHS will work to give private plans the market-
based tools they need to negotiate better deals with drug companies. 
Part D is a tremendously successful program, but it has just not kept 
pace with innovations in the private marketplace, leading seniors and 
taxpayers to lose out. Well-intended patient protections may be 
preventing prescription drug plans from appropriately managing 
utilization, even in accordance with the formulary created by doctors 
and pharmacists and approved by CMS. And while everyone agrees on the 
importance of the drugs in Part D's protected class list, manufacturers 
often use that list as protection from paying rebates.

    We also want to bring negotiation to Medicare Part B, physician-
administered drugs. Right now, HHS just gets the bill, and we pay it. 
This system may actually be driving doctors to prescribe more expensive 
drugs, while potentially tempting drug companies to develop drugs that 
fit into Part B rather than D. We are going to look at ways to merge 
Part B drugs into Part D, to create competition where savings can be 
safely obtained, and leverage existing private-sector options within 
Part B.

    Third, we need a more competitive pharmaceutical marketplace. 
Thanks to the reforms Congress passed in the 1980's, America has the 
strongest generic drug market of any country in the world.

    But there are still too many ways that drug companies are unfairly 
blocking competition. Since the rollout of the Trump Administration 
blueprint, FDA has publicized the names of companies who may be using 
safety programs to block competition, and issued two new guidances to 
help lessen the effects these actions may have on generic approvals. 
This work follows many FDA accomplishments under Commissioner Scott 
Gottlieb, including record-setting generic drug approvals in 2017 and 
measures to build on Congress's work to build a market for biosimilars.

    Finally, we need to bring down out-of-pocket costs for American 
patients. Patients should not be dropping their drug regimen because of 
high costs. Since the blueprint rollout, CMS has reminded Medicare Part 
D plans of its existing policy which requires plan sponsors to ensure 
enrollees pay the lesser of the Part D negotiated price or copay, or be 
subject to CMS compliance actions making it unacceptable to bar 
pharmacists from working with patients to identify lower cost options. 
More broadly, you ought to know how much a drug costs, how much it's 
going to cost you, and whether there are any cheaper options, long 
before you get to the pharmacy counter. We look forward to working with 
Congress and stakeholders to understand how best to deliver this level 
of transparency.

    Thank you again for having me here today. What I have laid out are 
just some elements of an aggressive, long-term plan to solve the 
problem we all care deeply about. I look forward to taking your 
questions and discussing ways we can work together to bring down 
prescription drug prices and help American patients.
                                 ______
                                 
    The Chairman. Thank you, Mr. Secretary, for being here.
    As I said earlier, when the Secretary agreed to come, he 
said he had to leave at noon. We're going to respect that. That 
should allow every Senator a chance to ask questions. I'm going 
to enforce the 5-minute time limit, though.
    Mr. Secretary, my view is that a blueprint is a helpful 
approach. It gives us a chance to have a back-and-forth 
discussion, which you're doing today. It includes some things 
that you can do on your own, the executive branch, and some 
things that we need to do in order for you to do them.
    Could you succinctly give us two or three examples of some 
things that you can do on your own and some things that you 
need our help to do?
    Secretary Azar. You bet. Thank you, Mr. Chairman. So some 
of the things that we believe we can do on our own--we do 
believe we have the authority to require list price disclosure 
in FDA's TV ads. But we would also welcome Congress acting 
there to ensure that our statutory authority is shored up as 
big pharma will most certainly challenge us in that effort and 
that work.
    We also believe that Congress could act to remove the 100 
percent cap on rebates that drug companies have to pay--that's 
the inflation penalty that was part of the Affordable Care 
Act--that cap of 100 percent on rebates that could actually 
bring in billions of dollars for taxpayers and create a 
significant disincentive to list price increases if Congress 
were to act there. We also think Congress could act to end the 
gaming by generic companies of this 180-day exclusivity period 
where one company may sit on their exclusivity and prevent the 
entry of additional generics, driving down prices and creating 
more competition.
    As you mentioned in your opening, I believe that Congress 
could act to ban these gag clauses on pharmacists that prevent 
pharmacists from telling patients about lower cost options. 
We'd ask Congress to support site neutral payments. The 
payments should be based on the quality of the product and the 
service, not based on where it's administered or where the drug 
is received.
    We also believe that Congress could make clear that we will 
not tolerate PBMs penalizing drug companies that actually lower 
their list prices for patients and that there should be 
transparency to their downstream customers when they receive 
offers to lower list prices and actually act against that.
    The Chairman. Mr. Secretary, I mentioned, you mentioned 
rebates transparency. We've heard about them in our hearing. 
Eighty percent of Americans get their drugs through pharmacy 
benefit managers who negotiate a rebate from the list price 
with a pharmaceutical company. Should we eliminate rebates as a 
way of making it clearer where the money goes and that the 
benefit goes to customers? If we should eliminate or change 
those rebates, do you have the authority to do that, or does 
Congress need to act?
    Secretary Azar. We believe that discussing the removal of 
rebates, certainly within Part D, the prescription drug 
program, is something that is and should be on the table. So 
we, for the first time ever, have provoked that discussion as a 
regulatory matter. We do believe we have the regulatory 
authority.
    Rebates are allowed under an exception to the anti-kickback 
statute, and that's an exception that we believe by regulation 
we could modify. But, of course, if Congress were to take 
action, that would obviously shore up our authority and allow 
thoughtful consideration by Congress about what would be fairly 
far-reaching impacts of moving to a different system of using 
instead fixed price discounts.
    The key is can we detach the incentives of everybody in the 
system from these artificial list prices. Rebates are a cut, a 
percent of that artificial list price, and they basically 
foment this game we have of list price goes up, rebate goes up, 
list price goes up, rebate goes up, where everybody is winning 
except the patient who ends up paying out of pocket.
    The Chairman. Well, build on that just a minute. Would 
eliminating the rebates eliminate or reduce the condition that 
as list price goes up, everybody wins except the patient?
    Secretary Azar. It would absolutely create--it would remove 
one of the major incentives to list price increases that we 
have today. What happens now--if you have a $100 drug and offer 
a 30 percent rebate to the PBM for your formulary coverage of 
that drug, the next day, you may turn around and increase the 
price by 20 percent. The rebate goes up, the PBM pockets that 
difference that they don't pass down necessarily to their 
customers, depending on their contracts. They win, the drug 
company wins. They keep a cut, and even the employer may win by 
higher payments. The patient loses there.
    If instead the contract said on that $100 drug, ``We'll get 
70 bucks. It doesn't matter what your list price is--70 
bucks,'' you take all that incentive for the list price 
increase away.
    The Chairman. Thank you, Mr. Secretary.
    Senator Murray.
    Senator Murray. Thank you, Secretary Azar. I do want to 
focus mostly on drug pricing, but as I mentioned, I'm very 
concerned about what's happening with children of refugees. 
This administration, I believe, is tearing families apart at 
the border unnecessarily. But they're sending the children to 
ORR while the families are shipped off to Federal prosecution. 
That is causing a crisis for your department, because ORR 
shelter beds are nearing capacity.
    What is being done to make sure that the parents know where 
their children are, whether they're safe, and when they will 
see them again?
    Secretary Azar. Thank you, Senator Murray, for asking that 
question. We take our obligation to take care of these minor 
children very seriously. Actually, 50 percent of the 
outplacements from the Office of Refugee Resettlement of these 
minor children that we receive who are separated only because 
their parents have crossed the border illegally and have been 
arrested, as any American who gets arrested, your child is 
taken away----
    Senator Murray. I have very little time, so----
    Secretary Azar. We do keep in touch with the parents, 
because if they are released from detention, 50 percent of the 
children do end up with their parents as sponsors.
    Senator Murray. Well, I am asking you, specifically, 
because the ORR shelter beds are nearing capacity. There is 
nowhere to put these. What is the plan? And I don't have time 
for you to answer that, but I want an answer----
    Secretary Azar. I'll be happy to respond in writing, 
absolutely.
    Senator Murray. All right. So let me focus on prescription 
drug prices. Since the inception of Medicare Part D, Democrats 
and some Republicans have supported using the government's 
buying power to negotiate lower drug prices for seniors. A 
bipartisan majority of people in this country also support 
that, along with many experts. However, a majority of my 
colleagues on the other side and drug companies do not. So I 
was actually pleasantly surprised when President Trump 
campaigned on allowing negotiations.
    Does the President's Blueprint include a recommendation to 
allow you to negotiate the price of drugs?
    Secretary Azar. The proposal actually has, for the first 
time ever, negotiation of drug prices in Part B, where we get 
no discounts, and enhancing the negotiation that's already done 
for us in Part D to make us ever more effective in Part D. So, 
yes, it fulfills the President's promise completely to bring 
negotiation and negotiate hard to Medicare.
    Senator Murray. Well, that was not how I or anybody else 
who heard it understood it. It was Medicare Part D, allowing us 
to negotiate drug prices under that part that will allow the 
drugs to come down. So I am concerned that that doesn't fulfill 
the promise of how people heard it and how I expect it would 
have a much bigger impact.
    There's a number of proposals that, as I said, Democrats 
already proposed, putting list prices in direct-to-consumer 
advertisements, keeping companies from gaming FDA regulatory 
incentives--a number. I hope that you'll push Senator McConnell 
to bring those up, as they've already been introduced, and we 
can get some of those steps done. So I just wanted to reiterate 
that.
    Secretary Azar. I think most of what's in our Blueprint we 
will agree on. You all may have different views about some 
additional things you'd like to see, but most of what we have 
in the Blueprint, I think there's significant bipartisan 
consensus to drive forward on, and we'd love to work with you 
and others on that.
    Senator Murray. Well, as we saw in a recent report from our 
colleagues on the Homeland Security and Government Affairs 
Committee, of the 20 most prescribed drugs in Medicare Part D, 
most of their prices are increasing much faster than inflation 
since President Trump took office. So I'd like to know when you 
think this Blueprint will pay off for patients, for patients, 
and reverse those price increases, not of cost sharing or some 
measure other than list price. Is it next year, 5 years from 
now, 10 years? What do you think that----
    Secretary Azar. Well, we're talking about the wholesale 
restructuring of the drug pricing and drug distribution system 
in this country, and what the President has taken on in this 
Blueprint is nothing short of comprehensive reform of how drugs 
are priced and done. That doesn't happen in just a week or two. 
This is comprehensive reform. The issue I talked with the 
Chairman about of eliminating rebates, the issue of stopping 
any compensation from big pharma to these PBMs who negotiate--
across the board change will take time. But we are committed to 
delivering lower list prices and better negotiation, so lower 
out-of-pocket costs for our patients.
    Senator Murray. I know you agree that competition between 
brand drugs and generics or biosimilars is one way to bring 
prices down. I do as well. But drug companies are doing 
everything they can now to delay competition in order to get 
the longest market monopoly as possible and pad their bottom 
line.
    Last year, AbbVie settled in court to extend the market 
monopoly for Humira to 20 years. Biogen extended its monopoly 
on its MS drug to 15 years by getting additional patents that 
cover only the drug's dosage amount, and Allergan tried to 
protect its more than 15-year monopoly on Restasis by selling 
it to the Mohawk Indian tribe and later settled with the 
generic challenger to keep it off the market for another 7 
years.
    Does your Blueprint address that type of gaming of our 
patent system?
    The Chairman. Mr. Secretary, I'm going to ask you to 
provide that in writing since the 5-minutes is up, and we've 
got all these Senators.
    Secretary Azar. Certainly.
    The Chairman. Thank you, Senator Murray.
    Senator Enzi.
    Senator Enzi. Thank you, Mr. Chairman.
    Mr. Secretary, I want to thank you for appearing here today 
and also for putting out the list of potential things that can 
be done--improving competition, doing the better negotiation, 
lowering the list prices, and lowering the out-of-pocket 
costs--so that we can review them and so that people can 
comment on it. I appreciate you soliciting the comments before 
anything is finalized.
    Value-based purchasing arrangements can provide an 
opportunity to leverage the health outcome data to ensure that 
what we pay for drugs reflects their value. One example is 
indication-based pricing which may allow different payments to 
be charged depending on the indication a drug is used to treat. 
We usually don't track indication data in public programs, 
certainly not in standardized or precise fashion.
    Can you talk about the scope of data infrastructure that 
would be needed to support indication-based pricing and whether 
your health information technology systems might need to be 
modernized to support those efforts?
    Secretary Azar. Senator, thank you for raising the 
important question of indication-based pricing for drugs. We 
actually, right now, stand in the way of indication-based 
pricing, and I look forward to the opportunity to work with 
Congress on statutory modifications that could open the door to 
that. In Part B--those are those physician-administered drugs, 
for instance--there's a single unified price. So we're not able 
to permit, as far as I know right now, a drug to be priced at a 
higher price, say, for a limited population where it has a 
really huge impact and at a lower price in perhaps a larger 
population where it might have a lesser impact.
    On Part D, the retail program, we basically prevent 
indication-based utilization management. So if you're a really 
big drug that, say, has five indications, you can actually 
bundle those effectively, because we require that you cover all 
indications the same way. So you may treat this one disease 
state and this other disease state, and you can't have 
differential rebates, you can't have differential utilization 
pathways for those. That's something that, working with 
Congress, we could remove those barriers and let more value-
based, outcome-based contracting happen and reduce the leverage 
of big drugs that have multiple indications like that.
    Senator Enzi. Thank you. The Blueprint also asks what 
effect would imposing a fiduciary duty on pharmacy benefit 
managers on behalf of the ultimate pair have on the PBM's 
ability to negotiate drug prices. Many states have considered 
imposing a fiduciary duty on the PBMs, but many abandoned the 
idea after debating it.
    Can you explain what challenges might be needed to be 
addressed in order for the fiduciary duty to be realized and 
whether the factors you're considering are any different than 
the PBM is negotiating for drugs that are paid for in the 
traditional manner?
    Secretary Azar. I'm glad that with your banking expertise 
you raise this question. The word, fiduciary, was meant more 
directionally than any type of incorporation or suggestion of 
state law type financial fiduciary obligations. It was meant to 
get at, as I said in my opening, just the receipt of 
compensation.
    Our view is that pharmacy benefit manager that has been 
hired by either employers or individuals or insurance plans to 
negotiate the best deal possible against the drug company ought 
not be getting any compensation from those drug companies. They 
shouldn't be getting a hold-back of rebates, they shouldn't be 
getting administrative fees that are based as a percent of list 
price, and they shouldn't be getting other types of fees from 
big pharma. They ought to be looking only out for the interest 
of their clients. That's the proposal that we want to get 
comment on.
    Senator Enzi. Appreciate it. If done right, value-based 
purchasing agreements bring the patient experience into drug 
pricing decisions because they align incentives to increase 
patient access to drugs that are appropriate and effective for 
them. What ideas are you considering to ensure that these types 
of entities are designed to benefit the patient?
    Secretary Azar. We do want to open the door to more value-
based and outcome-based contracting. One of the big barriers is 
our government price reporting requirements, and so we want to 
work with CMS to see how can we effectively make it easy for 
these contracts to happen. They're quite burdensome to put in 
place. I tried to do this.
    Most drug companies would like to do outcome-based 
contracting, put their money where their mouth is, but the cost 
of implementing can be quite high. So we can probably reduce 
those compliance costs, but we do, of course, have to ensure 
that whatever we do protects the public best as we go through 
that. But that is part of our agenda. We're working on that as 
we speak, how we could put out rules and guidance that would 
enable more value-based contracting there.
    Senator Enzi. Thank you, and I'll have several questions on 
340B drug pricing, too, but I'll submit those in writing to 
stay in the time limit.
    The Chairman. Thank you, Senator Enzi.
    Senator Bennet.
    Senator Bennet. Thank you, Mr. Chairman. Thanks for holding 
this hearing.
    Mr. Secretary, it's nice to see you. There is no issue that 
I hear more about in my town hall meetings than drug prices, 
and it is a mystery to everybody in America why the government 
can't negotiate these prices in Medicare, and I know there's 
some proposals in the Blueprint around that.
    During your hearing in the Finance Committee when you were 
asked about whether the government should negotiate prices for 
naloxone, the opioid overdose antidote, you were open to the 
idea, and you said there's nothing at all wrong with the 
government directly negotiating when we're the purchaser for 
value. I completely agree with that sentiment and just wonder 
why that shouldn't be the line of thought that we apply to all 
drugs, particularly with respect to Medicare negotiations.
    Why not go all the way to fulfill the President's promise 
on this subject?
    Secretary Azar. Again, the President has fulfilled his 
promise by introducing for the first time ever negotiation to 
Part B and actually fixing and improving negotiation in D. But 
the issue you raise is should I sit there and actually directly 
be the one to negotiate rather than using these pharmacy 
benefit managers that currently do that work and actually 
enhancing that work for them to do better.
    As Peter Orszag said when he was the Congressional Budget 
Office head and President Obama's OMB Director, there's only 
one way that that could possibly lead to better discounts, and 
that would be if for all of our seniors, we had a single 
formulary with uniform national decision of covering this drug 
and not covering that drug. No choice, no opt out, no options 
for seniors. So if I decided that I didn't like to be on this 
drug or that drug, and you needed that drug, you know where you 
go? The UK, France, Germany, somewhere else, but not America. 
We would take away that choice.
    We believe we can get the same type of rebates, the same 
type of discounts by better negotiation using these private 
sector entities. That is their job. They do this. We need to 
unleash them, and what happens then is the patient is at the 
center. The patient can pick. This plan has negotiated this 
formulary. This plan has negotiated that formulary. Which one 
works best for me? I, the senior, am in the driver's seat 
instead of the government making those one-size-fits-all 
choices for me. So that's why we've chosen that approach for 
now.
    Senator Bennet. One thing about those one-size-fits-all 
places is that drugs are a lot cheaper there than they are 
here.
    Secretary Azar. Well, that's because they have no choice. 
God help you if you get cancer in the United Kingdom. You don't 
have choice or access to the most modern oncology and cancer 
therapies. You'll be coming to America to get your treatment if 
you have the money to be able to get here.
    Senator Bennet. The Blueprint also proposes moving some 
drugs that are currently part of Medicare Part B to Medicare 
Part D, as you've testified. And just for people who are 
listening, Medicare Part B covers drugs that are administered 
in a doctor's office or other outpatient setting, many of which 
are infusion drugs related to cancer treatments.
    Last month, Avalere Health released a study that I'm sure 
you saw on the difference in out-of-pocket costs under Part D 
versus Part B. They found that in 2016, the out-of-pocket costs 
for beneficiaries who received new cancer therapy infusion 
drugs were an average of 33 percent higher for beneficiaries 
who had the drugs covered under Part D compared to those who 
had them covered under Part B.
    I guess my question is are you aware of that, and what's 
the plan to not have this, either inadvertently or in some 
other way, end up with people charged more as a result of the 
transition.
    Secretary Azar. You raise an important point, and that's 
exactly why we want to tread very carefully here on the move of 
drugs from B to D or introducing tactics from D into B. The key 
is we need to get negotiation. Right now, we're paying a 
stiffer price for these drugs, no discounting. We ought to be 
able to get 20 percent to 40 percent discounting, as we do in 
Part D, on those drugs. That's $30 billion of spend.
    If we took all the savings we'd get from that kind of 
negotiating in Part B, that would leave money that we could 
figure out any out-of-pocket, cost sharing, Medigap coverage, 
et cetera, issues. That's why we want to try this through a 
demonstration, figure out how to make this work, make it work 
for patients, make it work for the Treasury, work with you on 
that, and, hopefully, figure this out so Congress could then 
effectively legislate in the space of how we can get the best 
deals and negotiate in Part B.
    A valid concern, and we want to work with you on making 
sure that our seniors are protected and that it works.
    Senator Bennet. Okay. Well, we look forward to working with 
you on that.
    I would, just by way of closing, Mr. Chairman, say that I 
think one of the roots of all this, however one wants to look 
at it, whatever the policy choices are one wants to make--there 
is a complete lack of transparency in this industry, and it's 
not just drugs but everything in healthcare, and unless people 
can actually understand what stuff costs, not just what they're 
charged, not the list price, not what they had to fight with 
their insurance company about, but what stuff actually costs, 
we're going to have a hard time making progress.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Bennet.
    I thank the Senators for being succinct.
    Senator Collins.
    Senator Collins. Thank you, Mr. Chairman.
    Mr. Secretary, just to build on what my colleague just 
said, this system is opaque, and the incentives are frequently 
perverse in drug pricing. Pharmacy benefit managers, for 
example, are often hired by insurers to negotiate on their 
behalf with pharmaceutical companies. But the fact is that the 
PBMs make more money if they are paid a percentage of a higher 
list price.
    The problem is that the pharmaceutical companies know that 
the PBMs are going to control whether or not their drug is 
listed on the formulary of the health insurance plan. So 
doesn't that give PBMs enormous leverage and create an 
incentive for higher list prices?
    Secretary Azar. Senator, thank you for that, and that is 
exactly, I think, what this Committee saw when you had the 
heads of the pharmacy benefit managers, distributors, everyone 
in the channel, and they all were here pointing fingers at each 
other. Now, let's start first--the drug companies have their 
list prices. So, first, they're accountable for setting their 
prices. But there are very important financial incentives that 
make that work, and one of them is the PBMs benefit from higher 
list prices because of how these arrangements work. It's rather 
a startling and perverse system that has evolved over time, and 
that's why this Blueprint suggests the comprehensive tackling 
and restructuring of the drug channel, nothing short of that.
    Senator Collins. I was very pleased this morning to hear 
you endorse the prohibition on gag clauses on pharmacists, 
which actually prevent them from telling a consumer, unless the 
consumer asks, of whether or not they'd be better off not using 
their insurance and paying for a prescription drug out-of-
pocket. I was behind a couple at the pharmacy counter recently 
who found out that their co-pay was $111 and said, ``We can't 
afford that,'' and walked away.
    I asked the pharmacist, ``Does this happen often?'' And he 
told me every single day, and that really troubles me.
    It was pharmacists who brought to my attention the fact 
that these gag clauses exist. I know that CMS Administrator 
Verma has issued a letter telling plans that the agency will no 
longer tolerate gag clauses in Medicare drug plans. But that 
leaves out the plans on the exchanges and other health plans.
    Are you planning to take similar action? And don't you 
think we really ought to pass legislation that Senator Casey 
and I have introduced to apply to the Affordable Healthcare 
plans and that Senator Stabenow and I have introduced to apply 
to Medicare and Medicaid so that we can put this in law?
    Secretary Azar. We agree with you. I appreciate--you were 
the one who raised this to my attention during the confirmation 
process, and we find this unconscionable. So we will look 
forward to working with you and other Senators on legislation 
that would across the spectrum deal with the issue of these gag 
clauses and getting it to stop, because we think the patient 
should have the right to know what their out-of-pockets are and 
what their lower cost alternatives are.
    Senator Collins. Most patients are not going to assume that 
if they don't use their insurance, they'll get a better price.
    Secretary Azar. Right. So it would seem--to the average 
person, it's not intuitive.
    Senator Collins. Right. I'm also very concerned about the 
problems of gaming the patent system through strategies such as 
patent thickets and evergreening. When we talked on the 
telephone recently, you mentioned that our country's annual 
spending on just one drug, Humira, is the equivalent to the 
cost of an aircraft carrier. And we found, particularly with 
rheumatoid arthritis drugs, that evergreening is going on, and 
that, in fact, there's been payments so that biosimilars that 
are much less expensive generics are available in Europe come 
this October, but they're not available to our citizens.
    How can we solve this problem? Is legislation needed?
    Secretary Azar. Certainly, legislation to stop that 180-day 
swatting----
    The Chairman. Mr. Secretary, to be fair, I'm going to have 
to ask you to do that in writing.
    Secretary Azar. Of course.
    The Chairman. Thank you, Senator Collins. I'm sorry to cut 
everyone off, but I want to----
    Senator Collins. Thank you. I understand.
    The Chairman. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    Secretary Azar, I'll get right to the point. You and 
President Trump say that you want to get tough on drug 
companies. So do I. Let's start with the President's promise. 
On May 30th, the President said that in reaction to the release 
of the Drug Pricing Blueprint, drug companies would be, quote, 
``announcing voluntary massive drops in prices within 2 
weeks.'' That was 2 weeks ago tomorrow.
    Now, the same day that the President made that statement, 
Senator Smith and I sent letters to the top 10 drug 
manufacturers to see how many had lowered prices in response to 
the Blueprint, and all 10 of them have now responded. Zero out 
of 10 said that they had lowered any prices, zero out of 10 
gave any indication that they plan to do so, and, in fact, one 
out of 10 said prices are going to go up later this year.
    Maybe you can clear this up for us.
    Secretary Azar, which drug companies will be voluntarily 
lowering their prices massively, for which drugs, and how much 
money will the American people save as a result?
    Secretary Azar. There are actually several drug companies 
that are looking at substantial and material decreases of drug 
prices in competitive classes and actually competing with each 
other and looking to do that, and, frankly, at this point, the 
biggest challenge is working----
    Senator Warren. Let me stop you here. Let me just ask you 
there--you said they're looking at it.
    Secretary Azar. Well, the reason is they're working right 
now with the pharmacy benefit managers and distributors. The 
challenge--this is the perversion of the system we're talking 
about.
    Senator Warren. In other words, the President's promise 
that we would see massive decreases in 2 weeks hasn't happened 
and there's no--you don't have anyone lined up who's actually 
going to decrease drug prices.
    Secretary Azar. What they're trying to do is work to ensure 
they're not discriminated against. Oddly, the fear is that they 
would be discriminated against for decreasing their price.
    Senator Warren. Was that true when the President made the 
promise?
    Secretary Azar. They're working to ensure they're not 
discriminated against for lowering their prices. You should 
focus, if I would suggest, on the PBMs and distributors who 
might say to these do not decrease your price.
    Senator Warren. Mr. Azar, I'm simply focusing exactly where 
the President told us to focus. He said there would be massive 
decreases in prices within 2 weeks. It's been 2 weeks, and 
there have been no decreases and an indication of increases. 
Mr. Secretary, you said you wanted to get tough on drug 
companies, but under your approach, it seems that the drug 
companies can just keep charging people more and more. The only 
thing you've done is set it up so maybe if a drug company 
reduces a price, you can give them a cheap PR moment and then 
let them jack up prices later.
    But let me look, since we're under time pressure, at the 
President's other big promise, the one he made over and over 
during the campaign that several of my colleagues on both sides 
have referred to, and that is that he was going to, quote, 
``negotiate like crazy over drug prices.'' I don't see that in 
this plan. Instead, the President proposes moving patients from 
getting their drugs through Medicare Part B, where co-pays are 
capped at 20 percent, to getting their drugs through Part D, 
where co-pays can go as high as 40 percent.
    Secretary Azar, if a so-called negotiation ends up in 
raising Medicare drug prices, it's not a negotiation at all. 
It's just a bad deal for seniors. So here's my question about 
this negotiation. Can you guarantee that no Medicare 
beneficiary will pay higher drug prices as a result of your 
plan to change drug coverage under Medicare?
    Secretary Azar. It seems to me that your perspective is we 
should be happy with the status quo with Part B where we pay 
$30 billion for drugs and pay the list price with no discount 
whatsoever.
    Senator Warren. No, it's not. I'm asking--Secretary Azar, 
it's a pretty straightforward question, a yes or no.
    Secretary Azar. We're challenging the status quo and you're 
not.
    Senator Warren. I just need a yes or no. Can you guarantee 
that no Medicare beneficiary will pay higher drug prices as a 
result of your plan to change coverage under Medicare?
    Secretary Azar. As I said to Senator Bennet, the whole 
point of our working with Congress on looking at how we might 
introduce competition and negotiation to Part B is to deal with 
these very complex questions, and, of course, we want the 
beneficiary at the center. We want to make sure that they have 
choice. We want to make sure that their medical needs are met 
by introducing modern techniques of formulary management and 
pathways for them.
    Senator Warren. That sounds like a runaround to the yes or 
no question. Can you----
    Secretary Azar. It's we're going to work on it, and at 
some----
    Senator Warren. Then you're going to work on it, and maybe 
some beneficiaries will end up paying more? Is that what you're 
saying, Secretary Azar? That's not going to be good for those--
--
    Secretary Azar. As I said to Senator Bennet, if we can 
bring 20 percent to 40 percent reduction in Part B, that would 
be so much money in savings that we should be able to figure 
out how to ensure the protection of beneficiaries through this 
process.
    Senator Warren. Secretary Azar, what we're talking about is 
moving people to a plan that has a higher co-pay, and I've 
asked the question now three times, and you've given me no 
answer at all. You cannot guarantee that there will not be 
Medicare beneficiaries who will be paying more.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Warren.
    Senator Cassidy.
    Senator Cassidy. Actually, Secretary Azar, what I heard is 
that if you effectively work with Congress, we can keep 
Medicare beneficiaries from paying more, but we save taxpayers 
$30 billion and make the system more sustainable. So that's 
what I heard from you. I'm not going to--I have 5 minutes. So I 
agree totally with Senator Bennet. He and I and others are 
working on a price transparency initiative. Clearly, you're 
after transparency.
    Now, one thing, when you spoke about rebates, and you 
pointedly said you may have the authority within Part D--what 
about the commercial system?
    Secretary Azar. Within rebates, we actually have the anti-
kickback statute, which is where the rebate safe harbor exists 
that allows this--that created this whole rebate system to 
start with. How far that reaches beyond government programs and 
whether that could apply in purely commercial private pay 
systems would be--we need to study that----
    Senator Cassidy. If you can let us know, because that's 
where Congress would want to step in.
    Secretary Azar. Yes, and that's why I told the Chairman we 
would welcome Congress in this important area.
    Senator Cassidy. Next, you had mentioned as well--and 
people have been concerned how quickly will consumers begin to 
see lower drug costs. It seems that that is predicated on how 
quickly you can get out a rule forbidding gag clauses. That 
will be when we begin to see lower costs at the counter.
    Secretary Azar. That's certainly one element.
    Senator Cassidy. When do you think you'll have out that 
rule?
    Secretary Azar. We've already sent a notice out to the Part 
D drug plans telling them that we do not expect to see any drug 
clauses. We find them intolerable in the Part D drug programs. 
So, frankly, that should be taking place immediately, already. 
If anyone is being subject to a gag clause, if there's a 
pharmacist being subject, I ask you to please let CMS know 
immediately.
    Senator Cassidy. You also mentioned that you want folks to 
know the cost of a drug before they go to the pharmacy. There's 
a recent consumer report about the cash price of drugs, not 
Medicare, but the cash price, varying in one case for a generic 
from $44 to $700, but you only found out when you knocked on 
the door of the pharmacy.
    By what means are you suggesting that they will push--will 
this publicizing of drug prices by the pharmacy include the 
cash price, and by what means will you do that, and do you need 
our help to execute?
    Secretary Azar. On this type of transparency at both the 
point of sale at the pharmacy as well as--I would like to see 
this at the point of prescribing so that when the doctor 
actually decides, they could advise you, the patient, for this 
drug you'll pay this much out-of-pocket when you go to this 
pharmacy, but there are these alternative drugs that I could 
write if that----
    Senator Cassidy. But what about the cash price?
    Secretary Azar. I think we need Congress--that is that out-
of-pocket cash price. That should be knowable, and that is an 
area where we really could----
    Senator Cassidy. But, theoretically, cash price, though, 
would not be under the legislation of an insurance company. 
That would be someone uninsured.
    Secretary Azar. For the folks who are just paying without 
insurance on that. Well, that one, I'd want to work with you 
on. I've been most focused on those who are insured and knowing 
what your out-of-pocket expenses are under your plan. That's an 
area we'd love to work with Congress on. It would be a huge 
benefit to patients in the system if we could design a system 
where the doctor knows when writing that prescription----
    Senator Cassidy. Let me stop--my office has just recently 
posted a bill, a white paper on how to lower costs. One thing 
as we think of--and my colleague, Senator Collins, did such 
good work on this--the Martin Shkrelis of the world, who get a 
single drug and then they raise the price dramatically. Now, 
you could go to Great Britain and get the same drug and bring 
it back, but that's currently not allowed except under 
exceptional circumstances.
    One proposal that we proposed in our white paper is that 
since the FDA has a memorandum of understanding with their EU 
equivalent, that if one certifies a plant in India as having 
good manufacturing practices, the other agency will agree with 
it. What if we extend that to if both agencies have a secure 
supply chain, that a wholesaler could go to Great Britain and 
buy a generic drug if we're down to one producer here who, 
using monopoly power, is jacking up the price? What would you 
think about that?
    Secretary Azar. That should be on the table, and I'd love 
to work with Commissioner Gottlieb and the Congress on that. If 
we could wire the systems together to allow a generic drug that 
expedited approval through FDA in those kinds of 
circumstances----
    Senator Cassidy. Well, this is not an expedited approval--
--
    Secretary Azar. We might actually--with a generic, we might 
actually be able to construct an expedited approval so we don't 
even do any violence to our approval system and get that in. 
That's one issue Commissioner Gottlieb could focus on.
    Senator Cassidy. Well, I'm speaking of, say, doxycycline, a 
pill which I'm told now costs $13.50. It's out there for 50 
years. It should cost 50 cents.
    Secretary Azar. Exactly.
    Senator Cassidy. If we know it's being produced in India, 
coming to the U.S. and Great Britain, why can't a wholesaler 
just go to Great Britain, if there's only one importer--this is 
not re-importation. This is importation.
    Secretary Azar. I'm happy to work and be open minded here 
on coming up with a solution.
    Senator Cassidy. I'm out of time. Lots of questions I will 
submit for the record. Thank you.
    The Chairman. Thank you, Senator Cassidy.
    Senator Kaine.
    Senator Kaine. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary. Like all my colleagues, I hear 
from my families across the Commonwealth about how high prices 
affect their lives. One in four Americans who take prescription 
drugs have difficulty affording them. Let me read a letter that 
I got from a guy named Andrew Ventnor who lives in Great Falls. 
He wanted to share his story.
    Quote, ``In the United States, Gleevec, a drug that 
effectively cures several forms of leukemia, costs 
approximately $159 to manufacture for a year's dose. In the 
United States, there's no available generic, and the brand name 
drug's market cost is $146,000 a year, $159 to make it, 
$146,000 a year. This is not a drug that consumers can simply 
choose not to take. To be blunt, they will quite literally die 
of cancer.
    ``My father is being treated for CML, one of the leukemias 
that is effectively curable by Gleevec. The cost of this drug 
is a major financial burden on our family. Many who are not as 
fortunate as my family have been forced to choose between 
having Gleevec and keeping their homes. This is, to me, an 
absolutely unacceptable exploitation of extremely vulnerable 
Americans who have quite literally no other options to get this 
lifesaving treatment without searching for loopholes in the law 
or outright breaking it.
    ``Preventing this exploitation is something every American 
can agree on, an issue that has lives in the balance. I know 
these are trying divided times, but this issue is one that I 
hope all in Congress and the Nation as a whole may come 
together on.''
    Studies that indicated that the cost of manufacturing 
Gleevec costs $159 a year also pointed out that the cost of 
Gleevec, the price charged to those in the UK, is $31,000, and 
the price for a generic to Gleevec in Brazil is $8,000.
    I read President Trump's announcement, your own interviews 
about his announcement, and your testimony today, and here's 
something that fascinates me. The Administration has been 
blaming high drug prices on other nations, many of which have 
the ability to negotiate lower drug prices. In his speech 
announcing the Blueprint, President Trump said it's time to end 
the global freeloading once and for all. Americans will not be 
cheated any longer and especially not be cheated by foreign 
countries.
    In an interview, you said foreign countries should be 
paying more of their fair share, and you indicated the same 
thing in your written testimony today. I'm just going to assert 
this. I think blaming our allies for Americans paying those 
kinds of prices is ridiculous. I'm going to call this the blame 
Canada argument. And to your question to us earlier about 
whether we would want you to have negotiated pricing ability, 
I'm going to say, Mr. Secretary, I would love for you to have 
that power. You know this industry very well.
    There's a very standard form of contracting in commercial 
settings of best price contract, where you enter into a 
contract and you say with somebody, ``I'm going to buy, and I 
want your best price. I have a big market. You will want to do 
business with me, and I want your best price.''
    In commercial settings, people do best price contracts all 
the time.
    I would like to give you, if you do not already have it, 
the ability to go to the manufacturer of Gleevec and say, ``I 
have the biggest and the most important market in the world, 
and I will pay you your best price.'' If the best price that 
they have is the $31,000 that they're charging UK citizens, 
well, we want $31,000 here, not $146,000.
    Why should I not be able to give you that instruction, and 
why should you not be able to go out and negotiate on those 
terms just like people in commercial settings negotiate in that 
way every day?
    Secretary Azar. I've actually looked a lot and thought a 
lot about this issue of best price, slash, most favored nation 
status where we would say, ``Give us the best price you give to 
developed countries.'' So it's on the table. I've looked at it.
    I don't think it would be effective, to be very honest, 
because what would happen is we would say that. They make most 
of their profit, the bulk of it, here in the United States, the 
drug companies, and what they would do is they'd pull out of 
the countries that are setting that reference price.
    We see that even within Europe, with parallel trade and 
reference pricing within Europe. That's why drugs are often not 
launched in certain countries like the UK or Germany, and those 
people just don't ever get those drugs----
    Senator Kaine. I'm just going to put a parenthetical--they 
make most of their profit here in this country.
    Secretary Azar. They do, indeed. They do, indeed.
    Senator Kaine. Right. So now can we----
    Secretary Azar. We pay too much, and they pay too little.
    Senator Kaine. Here's an idea.
    Secretary Azar. But it's superficially appealing, but I 
don't know that it really would work, and we might end up 
paying more for the drug.
    Senator Kaine. Here's an idea. You have thought about it. 
You're not sure it would work to ask companies to treat the 
U.S. the same way they treat UK citizens. How about a pilot 
project? How about pick Gleevec and about five cancer drugs and 
say, ``Well, I don't think it'll work, but we haven't tried 
it.'' Why don't we try it? Why don't we pick a couple of drugs 
and try it, give you that power, get a most favored nation or a 
best price contract, and let's test whether it works or not, 
and help a lot of Americans who are suffering through high drug 
costs as we try?
    The Chairman. Could you please answer that in writing, Mr. 
Secretary?
    Secretary Azar. Certainly.
    The Chairman. Thank you, Senator Kaine.
    Senator Burr.
    Senator Burr. Thank you, Mr. Chairman.
    Mr. Secretary, welcome. Mr. Secretary, would you agree with 
this statement, that the policy challenge that we have in this 
Committee and in this country is how to balance competition, 
price, with innovation, cures?
    Secretary Azar. I would completely agree, and I would just 
add and with the patient sitting at the center.
    Senator Burr. We have on the Committee passed numerous 
fast-track initiatives, drugs, devices, so that we could 
introduce these into the marketplace quicker. Do you agree that 
the length of patent life divided by the cost of R and D is 
sort of a starting point for a company to determine a price?
    Secretary Azar. It is that, absolutely. The shorter the 
patent life, the shorter the exclusivity, the higher the price 
will end up being to recover cost as well as to make a profit 
and a return on investment.
    Senator Burr. If under our intellectual property laws, 
which we're not debating today, we give a company a longer 
period of exclusivity, you're saying the price comes down.
    Secretary Azar. I wish it would. I wish it would. It will 
certainly go up the shorter it is. I wish it would go down the 
longer it is. It's some of the perversions, as Senator Collins 
raised in our discussion, about the system favoring higher list 
prices but greater rebate and discounting.
    Senator Burr. But you would agree if you begin to address--
and I've said to you in the past--when you talk about list 
price, I've said, ``What is that?'' It's a made up number, and 
if you were here 20 years ago when we were debating this same 
issue, it was AWP plus six, and this plus that and this minus 
that.
    Would you agree that accelerating the approval time 
presents us with the opportunity to put downward pressure on 
drug pricing?
    Secretary Azar. Oh, that's absolutely and demonstrable. 
Even the highest profile drug, Sovaldi, which is the Hep-C drug 
that cost billions to the system, there was a competitor to 
that within a year that drove discounting to over 50 percent to 
where we pay less in the U.S. than Europeans pay for those 
drugs, the Hep-C drugs. Competition works. The faster we can 
approve drugs and get more drugs on the market, the lower the 
prices we're going to pay here in the U.S., absolutely.
    Senator Burr. When can the American people expect an 
architectural change at FDA that really gets out of a 20th 
century model and gets into a 21st century model that meets the 
expectations of what technology provides us to innovate today?
    Secretary Azar. It's an important challenge. I don't know 
if you've seen the announcement Commissioner Gottlieb made very 
recently about reorganizing the Office of New Drugs and how we 
can streamline the review of drugs procedures as well as the 
expectations on sponsors, but very happy to work with you on 
that. I agree that we need to keep holding FDA to be up to date 
with the most recent science and statistics and methodologies 
to get drugs out there for patients and increase competition 
and reduce costs. I totally agree with you.
    Senator Burr. When the clinical treatment is off of a 
technological platform, which is the future--it may be 
tomorrow, it may be next year. It's certainly going to be 5 
years down the road--is there any value from the debate we're 
currently having as to how you apply that to that type of world 
where you've got a technology platform and you're treating a 
genetic imperfection and five different cancers off of the same 
platform? Or are we just having this debate for today and not 
for the future?
    Secretary Azar. We're trying to have it for tomorrow. 
Fortunately, the future is now in many respects, the 
regenerative medicine, for instance, cell-based therapies, cell 
manipulation and actual cell splicing. We're in that era right 
now and working on that, and that is the future the next 
decades ahead.
    Senator Burr. Mr. Secretary, how do you put a value? How do 
you value fairly something that didn't exist?
    Secretary Azar. Well, that's where I count on the 
marketplace, the patient in the center, with major insurance 
companies negotiating on their behalf and competing to create 
as powerful a competitive market as possible. That, for me, 
is----
    Senator Burr. But that doesn't exist today, does it?
    Secretary Azar. That's what our Blueprint is aiming to 
create, is a more competitive system around drug pricing and 
drug availability with the patient at the center.
    Senator Burr. Well, I'm grateful for the President's 
proposal. I'm skeptical as to whether we can accomplish all of 
it, because I think in part of it, it's policy, and this 
Committee has always tackled it. We tackle it vigorously.
    Part of it's culture. Part of it's culture within 
government. I don't believe there's an architecture of 
government today, whether it's in HHS or anywhere else, that 
can handle technology with the speed that it's going to come at 
us. And if we believe that that's the case in DOD, let me say 
to my colleagues it's going to be 10 times the pace in 
healthcare, and we've got to get ready for it and set that 
architecture.
    Thank you.
    The Chairman. Thank you, Senator Burr.
    Senator Hassan.
    Senator Hassan. Well, thank you, Mr. Chairman and Ranking 
Member Murray.
    Mr. Secretary, thank you so much for being here today.
    I'd like to ask, Mr. Chairman, for unanimous consent for 
the entry into the record of a copy that 19 of us Senators 
wrote to the President in October 2017, asking that the 
President follow the recommendation of his opioid commission to 
give the Secretary of Health and Human Services the authority 
to negotiate the price of naloxone.
    I don't need a response to it now, Mr. Secretary, but I 
would appreciate a response for the record on what steps the 
Department has taken to investigate this recommendation by the 
President's own commission, because, as you know, naloxone 
prices have been skyrocketing, and it is definitely hampering 
our first responders with regard to the opioid crisis.
    The Chairman. So ordered.
    Senator Hassan. Thank you.
    Senator Hassan. Mr. Secretary, in November, Senator Durbin 
and I introduced a bill with a number of others in the 
Democratic Caucus called the Drug Price Transparency and 
Communication Act to require under the FDA's authority that 
direct-to-consumer drug advertisements disclose the cost of the 
drug. In my view, this represents an important step toward 
transparency, and despite this Administration's silence when 
the bill was introduced, I'm really glad you are now looking 
into this idea.
    But what authority do you think HHS and FDA have to require 
drug companies to disclose prices in direct-to-consumer ads? 
Don't you need Congress to give you this authority?
    Secretary Azar. It would certainly--I would always 
appreciate congressional authority to back me up on that, 
because I undoubtedly will be sued. But I believe as part of 
the fair balance in ads, it's an important piece of information 
that consumers are entitled to. Along with cost benefit, I 
think it's part of the cost.
    Senator Hassan. If your working group at the Department 
determines that you can't do this administratively, will you 
commit to requesting such authority from Congress?
    Secretary Azar. Absolutely, and, in fact, I'm happy even 
concurrently to be working with Congress if Congress wanted to 
move forward on that now.
    Senator Hassan. All right. Excellent. So while disclosing 
prices in ads is important, in my view, there's also a much 
larger problem--and we talked a little bit about this last week 
when we had a phone call--the fact that we have direct-to-
consumer drug ads to begin with, and that we give drug 
companies a big tax break for them, even though they increase 
costs that patients have to pay.
    To me, this is a basic fairness issue. We shouldn't be 
giving drug companies tax breaks on the billions of dollars 
they spend on advertising, advertising that hikes up costs for 
consumers while Americans struggle to afford the rising cost of 
lifesaving medications.
    If this Administration is actually serious about addressing 
drug pricing, I'd encourage you and the whole Administration to 
go even further on the direct-to-consumer issue and work with 
Congress on ending these outrageous tax breaks and, frankly, 
getting rid of these ads all together. So I'd appreciate the 
chance to continue to discuss these issues with you. I will 
tell you that when I suggest to constituents that we don't have 
these drug ads to begin with, they are overwhelmingly in favor 
of it.
    I want to turn to a different topic now. This 
Administration has released its Blueprint, and it says it wants 
to lower prescription drug costs. As you and I have discussed, 
I don't think the Blueprint accomplishes what it sets out to 
do. But not even a month after releasing the Blueprint, the 
Trump Administration told a Federal court that it would not 
defend the provision in the Affordable Care Act that protects 
people with preexisting conditions. This Administration is, 
frankly, talking out of both sides of its mouth.
    If the ACA's preexisting conditions protections disappear 
because the Trump Administration is putting politics over 
people and refusing to defend these very popular provisions in 
the ACA, then many Americans who need health insurance won't be 
able to get it, meaning they won't have insurance to help them 
afford their medications. This, Mr. Secretary, is like some 
kind of sick joke. The Administration is trying to pull the 
wool over the American people's eyes by paying lip service to 
affordable prescription drugs in their do-little Blueprint, all 
while gutting protections for preexisting conditions which will 
obviously make drugs less affordable for patients who lose 
their coverage.
    Given that the ACA's preexisting conditions protections are 
critical for consumers' access to affordable prescription 
drugs, yes or no, will you encourage the Trump Administration 
to change its position and defend the preexisting conditions 
protections in the Affordable Care Act?
    Secretary Azar. The position articulated by the Attorney 
General is a constitutional and legal position, not a policy 
position. But we share the view of working to ensure that 
individuals with preexisting conditions can have access to 
affordable health insurance. The President has always shared 
that. We look forward to working with Congress under all 
circumstances toward achieving that.
    Senator Hassan. Excuse me. Then the President should 
instruct his Attorney General and the Department of Justice to 
do what they are obligated to do, which is to defend the 
Affordable Care Act, by the way, provisions of which, such as 
this one, the American people overwhelmingly support.
    Finally, I will just add my concerns to those that Senator 
Murray expressed about the separation of children from their 
parents at our border. First of all, some of the folks whose 
children are being taken away from them are coming to our 
country to seek asylum. So your characterization of them all 
being here illegally is inaccurate, to say the least. I also--
--
    Secretary Azar. It's actually not. If you present at a 
legal border crossing with an asylum claim, you will not be 
arrested and you will not have your child taken from you. These 
are individuals crossing illegally into our country and being 
arrested. That's a fact.
    Senator Hassan. Well, that is different from what some of 
us are understanding from firsthand reports on the border.
    Second, as a member of the Homeland Security Committee, I 
had the opportunity to talk to your Department members, and I'm 
very concerned that they don't have any protocols for reaching 
out to states when they are sending these children who have 
been separated from their parents or arrive here without 
parents to different states. States have an entire child 
welfare organization set up. They have procedures, and they 
should be partners with all of you. It is very concerning that 
the Department has not prioritized the welfare of these 
children the way it should, and we will continue to ask you to 
take much more aggressive action to ensure that that happens.
    Thank you, and I'm sorry for going over, Mr. Chairman.
    The Chairman. Thank you, Senator Hassan.
    Senator Isakson.
    Senator Isakson. Thank you, Chairman Alexander.
    Welcome, Secretary Azar. I appreciate you being here today. 
In fact, at the end of last year, I asked you in your 
confirmation hearing if you'd come back after 6 months and 
report to us on this issue of drug pricing, and I'm happy to 
see that you've done so. I appreciate what you've said about 
it, and I also appreciate the points that have been raised by 
many of the Members.
    I think that Senator Bennet was right on target in talking 
about the confusion in the pricing of pharmaceutical services 
and, in fact, all healthcare services. I still to this day 
can't understand an insurance statement on my healthcare to 
beat the band. I can't understand half the things that are 
going on, and I think there is an absence of transparency in 
the whole process that's almost transactional in its absence so 
that you go from one to another trying to find something else, 
and then you've got to go back and start all over again at the 
beginning.
    With that said, I appreciate you coming here. I'm glad the 
President has spoken out on the issue of drug pricing. It's not 
going to go away, because it's entirely too expensive, and 
there are some big problems. One of them I want to talk about 
right now is a personal experience I recently had.
    Do you know what Batten disease is?
    Secretary Azar. I'm afraid I don't, Senator.
    Senator Isakson. It's a very rare disease that only occurs 
in children. It's 100 percent fatal. Usually, the individual 
will live from six to 12 years, and, basically, all the basic 
bodily functions disappear. I mean, they generally waste away. 
It's a horrible disease.
    My daughter's best friend, who married a number of years 
ago when my daughter did--their second child ended up having 
Batten disease, and she has dedicated her life to trying to 
find a cure, like all of us do when we get some dreaded disease 
or incurable disease. But she did so well. She found two 
doctors at Boston Children's Hospital. They were working on a 
gene therapy concept where they would be able to use gene 
therapy to get the part of the brain that needed attention--and 
I'm not using the right medical terms--to respond and had 
gotten approval from the agency to have a field trial if they 
could raise the money, and she volunteered for her child to go 
through the field test, so her child is going to be the first 
person ever tested with this technique of gene therapy at 
Boston Medical and is under testing now.
    The cost to do that is $1.7 million, and that's with a lot 
of charitable support and help to get that done. It raises the 
question that I think begs all of us that rising costs of 
designer drugs, biologics, the new techniques like gene therapy 
is making the new products that come out to treat maybe only a 
select few diseases but are potential cures for some of those 
future incurable diseases are totally unaffordable.
    Is there any work being done anywhere in the depths of your 
agency to come up with a mechanism where we can incentivize the 
development of new drugs and find a way to ameliorate the 
impact of the dramatic cost at the beginning so we can spread 
it enough to where the cost is somewhat affordable for the 
average American family? Is anybody in your agency actually 
thinking about that?
    Secretary Azar. We are, but I actually think this is an 
issue we need to work with Congress on. This is a broader issue 
of curative therapies and lifetime therapies that can be for a 
very small population and quite expensive, and our insurance 
system, which is really meant for small molecule pills, is not 
built for these types of therapies, and it challenges our 
system greatly and hurts individuals. So we need to work 
together to try to find solutions for these lifetime therapies 
and how those are financed and handled.
    Senator Isakson. I certainly don't have the answer, but I 
know the problem is desperate, and we need to do whatever we 
can to start developing, and then we need to encourage it.
    One other thing I want to say, too, is that I was pleased 
that President Trump mentioned speeding up the approval process 
for over-the-counter drugs in his Rose Garden statement on 
pharmaceutical costs. I was pleased with Bob Casey to sponsor 
the Monograph Reform bill, which we passed in this Committee a 
couple of months ago, which I think is going to be a 
contributor to lowering costs. Would you agree with that, and 
do you support that getting to the President?
    Secretary Azar. I very much support the OTC process and 
reform and enhancing the number of cheaper OTC drugs for 
consumers, absolutely.
    Senator Isakson. Thank you, Mr. Secretary.
    The Chairman. Thank you, Senator Isakson.
    Senator Smith.
    Senator Smith. Thank you, Chairman Alexander and Ranking 
Member Murray, and thank you very much for being here today.
    Secretary Azar, you previously served as Deputy Secretary 
of HHS when the agency was implementing Medicare Part D. I 
believe that is when the express prohibition against 
negotiating lower prices was put into place. And then, also, I 
know you served in the private sector, Eli Lilly. I also come 
out of the private sector myself--one of the biggest drug 
companies in the world.
    One thing that I've noticed is that in the time that you 
were at Eli Lilly, insulin prices increased dramatically. I 
think, in fact, one of your insulin products saw a price 
increase of about 325 percent between 2010 and 2015. Is that 
right?
    Secretary Azar. I don't have the data on that. But drug 
prices, insulin prices and all drug prices, have gone up quite 
substantially. That's the problem we're dealing with today, to 
try to reverse the----
    Senator Smith. I'll make sure that we send you that data, 
because I think it's really relevant here and relevant to my 
constituents.
    After coming out of the pharmaceutical industry--and also, 
as I understand it, the lead White House staffer on this also 
came out of the pharmaceutical industry--we have this proposal 
here which we are being asked to believe is a bold plan to 
lower drug costs. But I'm skeptical about this for a lot of 
reasons.
    One, in particular, is that right after the President's 
speech and the release of the drug plan, pharmaceutical stocks 
soared. The Wall Street Journal posted an article saying 
Trump's plan to cut drug prices leaves the industry relieved. 
The Investor's Business Daily wrote ``biopharma stocks fly as 
Trump's speech seen as more bark than bite.''
    Secretary Azar, can you explain that? Why would stock 
prices go up if this plan was going to take a meaningful bite--
meaningful reform?
    Secretary Azar. If I could predict the stock market, I 
would be Warren Buffet. All 11 S&P sectors went up that day. So 
it's unclear what happened that day in terms of the stock 
market.
    But let me be really clear. If you're a drug company, a 
PBM, or a distributor, or anyone else in this channel, and you 
think you're untouched, not going to be touched, and aren't 
going to have to completely change your business model, you 
cannot read, you cannot listen. This will change. We are 
tackling this, and we have a firm commitment to do so.
    Senator Smith. Well, you know, I have an MBA. I don't think 
you have to have an MBA to know that when stock prices go up, 
it's usually because investors think that their profits are 
going to go up, and it just causes me real concern.
    Another question--and this is getting to something that I'm 
very concerned about. Do you know how much the pharmaceutical 
industry has spent on lobbying just since the Trump 
Administration took office in January?
    Secretary Azar. Well, they spend hundreds of millions of 
dollars a year, every year, whether President Obama is 
president or any other president. That is what they do, and I 
say save your money, because I'm being really clear publicly--
--
    Senator Smith. Three hundred and sixty million dollars.
    Secretary Azar. What we're going to do is really clear. 
Save your money on lobbyists, because there's no secret what 
we're about.
    Senator Smith. The challenge that I have, Secretary, is 
that my constituents look at this. They look at stock prices 
going up, they look at lobbying costs, and they feel like the 
drug companies and not people are at the center of this problem 
that we have and at the center also of what's been proposed. I 
feel like we need significant accountability right now.
    I want to just tell you one story, Mr. Secretary, about a 
Minnesotan named Nicole. Her son named Alec passed away last 
year because he couldn't afford his insulin. He went off of his 
parents' insurance, and he rationed his insulin. Nobody 
realized he was doing it until it was too late. The price of 
insulin was going to be roughly, according to his mom, 80 
percent of his take home salary.
    In the 1960's, insulin was cheaper than shampoo, but that's 
not the case now. I mean, I say this because I feel so strongly 
that we need immediate action to address this, and my 
colleagues and I have been working on solutions to do this, 
including, as Senator Kaine and others have talked about, 
allowing negotiations, allowing Medicare to negotiate prices, 
more price competition for generics and biosimilars--end some 
of this anti-competitive behavior that allows for collusion 
around pricing and pated delay.
    I know there's some mention of this in the President's 
proposal, and I have a bill with others to advance that. I'd 
love to have some Republican support for this bill--and better 
information for consumers and providers so they know about 
effectiveness and price. I want to work with you on this, but I 
am deeply concerned about the lack of accountability in the 
system as a whole and also in the President's proposals, and I 
think we really need more.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Smith.
    Senator Paul.
    Senator Paul. Thank you for coming today, and I appreciate 
your enthusiasm toward trying to fix these problems that are 
admittedly very complicated and longstanding. I think both 
sides have talked some about the rebate system and it being 
opaque and nobody quite understands it and nobody can figure 
out the thousands of different prices that we have out there, 
and some have talked about maybe legislatively should we just 
ban rebates or should we do it through the anti-kickback 
statutes.
    I guess my question is that some of this--Dr. Gottlieb 
wrote many years ago and other folks have written and said that 
the 1996 lawsuit by the pharmacies against big pharma got rid 
of the discount system, and so a way of getting around the 
rebate system is not a natural occurrence in the marketplace. 
It's getting around a court case that prevented discounts, 
which are a market phenomenon.
    My question is: If we either ban rebates and don't allow 
discounts, could we be worse off? And I guess that's a question 
of whether we do it regulatory or through legislation. Could we 
be worse off by banning rebates if we don't allow discounts?
    Secretary Azar. What we would do is allow fixed price 
discounting so that the contracts--and they're actually in Part 
D. There's at least one PBM that does this, where they frame 
them not as a percent of list price but just here's what we'll 
pay for your drug, and having that be a fixed price. So I think 
we need to----
    Senator Paul. Based on volume, people can still----
    Secretary Azar. Absolutely, because otherwise it'll cost 
more money for patients in the system. We have to allow that 
negotiation and discounting, absolutely, Senator. You're right.
    Senator Paul. I guess the question--since big pharma was 
involved with a settlement, and they're still, I guess, bound 
by that settlement, you could look at the anti-kickback 
statutes in a regulatory fashion for either Part D or for 
everyone. But can you, through regulation, actually change a 
legal settlement?
    Secretary Azar. I don't mean to differ with Commissioner 
Gottlieb's former statements, but the genesis of the rebate 
system is the rebate safe harbor, and I don't believe that 
anything in that gets in our way.
    Senator Paul. Just legislation or regulation.
    Secretary Azar. I believe by regulation we could get at it, 
but we would welcome working with Congress for greater clarity 
and a thoughtful democratic process also.
    Senator Paul. There's another piece of legislation--there's 
a lot floating around on how to try to fix bits and pieces of 
all this--called the CREATES Act, and this addresses the issue 
where big pharma is using a system called the risk evaluation 
and mitigation strategies to sort of not turn over samples. We 
could fix that legislatively. Is there also a regulatory way 
that you could look at that as well?
    Secretary Azar. There is, and that's exactly the kind of 
gaming that we've been talking about getting after. So we've 
already announced--Commissioner Gottlieb announced that 
companies that have been accused of gaming the REMS system by 
generic companies to block that. We've put out--I think it was 
last week--two guidances making clear how these REMS, the risk 
management programs, cannot and should not be interpreted to 
stand in the way of sample availability to generic and 
biosimilar companies. So very supportive there.
    Senator Paul. Because in some ways, the regulatory way, if 
you're allowed to do it, might be better. You know, big pharma 
complains, oh, we're just going to have all these lawsuits, and 
they've got lots of lawyers. They may well resist the CREATES 
Act, even if it were to pass. The regulatory way might even be 
better if we just prevent big pharma from gaming the system 
through the REMS, which I don't think it was intended to be 
used that way----
    Secretary Azar. No, it wasn't.
    Senator Paul.----and it's being used that way, and, really, 
most people are saying it doesn't have anything to do with 
safety. So I'd appreciate it if you'll look at that, and, also, 
I'm with you on the anti-kickback. I'm just not--I still think 
some of that comes from that settlement, and we have to 
decide--people want discounts for Medicare. We want to use our 
bulk purchasing somehow to get discounts, but we have to 
acknowledge that discounts are a function of the marketplace. 
So if we were to allow association health plans and--I work at 
McDonald's, but my McDonald's is now part of 15 million people 
that are a group, I'm going to get a discount.
    Secretary Azar. Get a better deal.
    Senator Paul. Yes, and so what it does is it drives people 
to join groups. Right now, you get those discounts if you work 
for a large corporation. Your health insurance is good stuff 
and a cheaper price, and your drugs typically are, too. If we 
can individuals into that, we go a long way toward fixing the 
problem of a guy who--or a woman who works for themselves and 
the prices are going through the roof.
    I think there are ways to do that, and the Trump 
Administration is coming out with a rule very soon on 
association health plans, so I'm hoping that will also help not 
only with insurance for individuals, but also help with drug 
pricing.
    Thank you.
    The Chairman. Thank you, Senator Paul.
    Senator Jones.
    Senator Jones. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary for being here and also for the 
call the other day. I know it was not the topic of this 
conversation today, but I appreciate your discussion with me on 
the wage index, which is just drastically affecting Alabama and 
is one of my top priorities, and I look forward to continuing 
to work with you on that.
    Mr. Secretary, one of the advantages of kind of being last 
or close to it in these is you get to hear some really great 
questions, but don't always get to the answers. I'd like to go 
back real quick to what Senator Kaine was talking about, about 
the best pricing and the fact that we've got European countries 
that are lower. We're paying a lot more. And the question which 
he asked at the end, which you didn't get a chance to answer, 
is why not do a pilot program? There's a lot of this in this 
plan, which I agree.
    One of the things I've seen in my short time here is just 
the inertia, that it takes so long for anything to happen in 
Congress or the Federal Government. Why not during this time 
when we're talking about rebates and all of these things--why 
not do a pilot program on the drug that Senator Kaine asked you 
about so that we can see the actual instead of just listening 
to stakeholders, wring their hands about it. Let's get out 
there and do some work and see what we can do. How would that 
work?
    Secretary Azar. I'm happy to look at that idea. The issue 
that I didn't get to talk fully with Senator Kaine about there 
is if the companies pull out--let's take a drug, and if they 
pull out of Europe and Canada, say, as a result, because then 
there's no reference price to set it with, they'll lose the 
profit they do make there, and they'll continue to jack up 
their price here. So perversely, we can end up paying more for 
the drug, and then the Europeans could try to use tools like 
socialist compulsory licensing to actually expropriate the 
product and get the product even cheaper.
    Oddly, we could move to a world where they pay even less 
than they're currently underpaying, and we end up getting stuck 
with paying even more for patient access. But I'm happy to talk 
with you all about that and think if there's solutions there.
    Senator Jones. I mean, the operative word there is could. 
The opposite is also true. This all could work really well for 
the United States. So I guess the point is why don't we give it 
a real-world trial instead of talking theoretical and listening 
to the academics and the bureaucrats in the department talk 
about the theoretically possible. Take one or two and let's see 
what in the real world works and what doesn't. Why can't we do 
that?
    Secretary Azar. I'm happy to talk with you about that. The 
big issue is if we were to try something there, does it 
actually create a problem for patients here in the United 
States in terms of access or create a precedent that in the 
international community we would have hung over our head for 
the rest of time. That's the worry.
    Senator Jones. Of course, if it does, we can always stop it 
and say it didn't work. I know a lot of times, we're reluctant 
to admit we're wrong, but we could just stop it. Right?
    Secretary Azar. If it hasn't done irreparable harm. That's 
one of the issues I'd want to work with you on.
    Senator Jones. Fair enough. Senator Murray was also talking 
about the companies that game the system and trying to file 
lawsuits and getting changed, and we didn't get a chance to 
talk about that. It was a minute and a half long question that 
I won't repeat. But I would like to talk about what can be done 
right now to stop the gaming of the system by these companies 
so that we can get these generic drugs to market faster. What 
can you do? What would you like to see us do really quickly?
    Secretary Azar. One of the things Congress could do right 
away would be to pass the proposal in the budget on ending the 
180-day gaming that generic companies, often in collusion with 
big pharma on the branded side--they sit on their right to have 
the first 6 months as a generic exclusive to them. If they 
don't launch, the clock never starts, and so we want the 
authority to, once another generic is available to be approved, 
let that clock start running and roll. That would take 
legislation, but I'd love to work with you on that.
    For us, we're going after the REMS programs, as I just told 
Senator Paul, these risk management programs that are used as a 
phony shield by drug companies to keep away from access to 
samples. We're administratively going after that, and if--open 
door. If there are examples of branded companies evergreening 
patents and practices--I'm not--we are not the head of IP, but 
I want to know about those, know your diagnosis, and be able to 
work with the folks in Congress or in the Administration around 
this to see if we can tackle any instances of gaming that you 
all are aware of that we can work together on. We want to 
tackle those together.
    Senator Jones. Right. A lot of these prescription drug 
plans--your plan asks a lot of questions, and you're seeking 
feedback. What's going to happen after the 60-day period? How 
soon can we expect you to start, after a study, implementing 
some of these proposals?
    Secretary Azar. We're actually working on several already 
even while we ask for input. We want to get that input. We want 
to make sure that--listen, I think that there's a healthy 
benefit to us having an open dialog when impacting such a major 
segment of our economy and patients at the center. It is very 
complex. As much as I know, I don't want to make missteps here 
that could harm patients or patient access.
    That's why I want to be--my style--I hope you've seen it in 
our interactions--is to try to be open-minded, thoughtful, and 
get as much input as possible. So, frankly, the asking of 
questions reflects my personal style of approaching this, but 
then we are going to be moving as quickly, as humanly--and from 
the legal perspective, regulatory--possible to drive ahead on 
any of these agenda items.
    Senator Jones. Thank you, Mr. Secretary. I would say real 
quickly I've also had an opportunity to meet with Dr. Gottlieb 
and appreciate that he is also being very aggressive in this, 
and I appreciate that.
    The Chairman. Thank you, Senator Jones.
    Senator Young.
    Senator Young. Thank you, Secretary Azar. I appreciate your 
presence here today and your thoughtfulness as you've responded 
to so many wide-ranging questions. There's been quite a bit of 
emphasis here today, and I think appropriately, on how the U.S. 
spends more for prescription drugs than other industrialized 
countries. I'd like to ask you a series of questions. My 
expectation is they'll require short responses, and then I have 
another topic I'd like to turn to, and I'm just going to give 
you the floor on that.
    With respect to the first question on foreign pricing 
versus U.S. pricing, Europe and other wealthy countries--they 
set their drug prices by governments as opposed to 
pharmaceutical companies. Is that correct?
    Secretary Azar. That's correct, and then there's no choice 
for the patient. They're not at all at the center of that 
decision making. That's correct.
    Senator Young. Do you agree that every time one country 
demands a lower benchmark or reference price, it leads to a 
lower reference price used by other countries?
    Secretary Azar. It does, and that's why pharma companies 
are very careful about which countries they will launch their 
drugs in or not launch in because of those systems.
    Senator Young. Are U.S. patients and innovators, Mr. 
Secretary, shouldering the burden for financing medical 
advances around the world?
    Secretary Azar. We pay too much and they pay too little, 
absolutely.
    Senator Young. Do you think we could or should use trade 
agreements to help level the playing field with foreign 
countries?
    Secretary Azar. We absolutely believe we should be using 
our trade agreements to get them to pay more, even as we have 
our job to pay less.
    Senator Young. Okay. Now the broad question. Mr. Secretary, 
what can payers and employers be doing now to lower drug 
prices?
    Secretary Azar. I mentioned to Senator Warren, we've had 
several drug companies come in who want to execute substantial, 
material reductions in their drug prices. They are finding 
hurdles from pharmacy benefit managers and distributors that I 
think will get worked out--I really do--but they're based on 
list price, where they might say, well, if you decrease your 
list price, I will take you off formulary, compared to your 
competitor who will have a higher list price where I will make 
more money. I find that unconscionable. I would hope that if 
that were to--if we were to find ourselves in that situation 
that the CEOs of those companies would find themselves sitting 
in this chair rather quickly to explain themselves.
    I think employers and payer customers of PBMs, those 
pharmacy benefit managers, should be asking their PBMs right 
now, ``Have you received any commitments of lower list prices, 
and what have you done? Why have you not passed those on to us, 
and are you pushing back on drug companies, saying that you 
would actually prefer higher list drug prices?'' I think the 
employers and the plans can do that.
    There's a player in this market that's these benefit 
consultants. The way this works is they pitch on the big 
employers, the big companies, these health benefit plans that 
guarantee a flow of rebates. It's not based on the lowest net 
price. It's based on a cash-flow of rebates. And I think that 
system will work its way out. I think that the first couple of 
drug companies that reduce price, this whole system will flip 
on its head and have to be redone. I think as adults, they'll 
figure that out.
    But right now, that's the biggest hurdle holding things 
back. It's going to break. Somebody's going to do it, and if I 
were a drug company executive, I wouldn't want to be beaten by 
my competitor over that line, because the first to do--the 
first companies to do this are going to win.
    Senator Young. Continuing with the topic of rebates, 
there's been a lot of discussion about the role rebates play in 
drug pricing in this hearing. I understand some manufacturers 
engage in a contracting practice called the rebate wall. A 
rebate wall occurs when an established manufacturer with 
significant market share uses rebates and discounts to block 
formulary access to competitor products. In the most egregious 
cases, a manufacturer with established product volume across 
multiple therapeutic areas will threaten to cut discounts and 
rebates to a PBM if its product is not the preferred agent 
within a class.
    Mr. Azar, is HHS aware of rebate walls, and if yes, what 
types of actions would HHS consider to limit the use of rebate 
walls?
    Secretary Azar. We are and I am very much aware of these 
rebate walls that can prevent competition and new entrance into 
the system. That is yet again a reason why I think we need to 
get at this question of rebates in the PBM world. These are 
drug companies. I don't like that practice. I think it's using 
their market power in a way that is not appropriate. So I want 
to make sure we're looking at that. I think Congress certainly 
could look at that question as part of this whole initiative.
    That's where Senator Isakson's question about indication-
based pricing can be helpful, because sometimes that's a 
company that has a drug with many indications, and they use it 
as leverage over drugs that have a single indication.
    Senator Young. Thank you.
    The Chairman. Thank you, Senator Young.
    Senator Casey.
    Senator Casey. Thank you, Mr. Chairman and Ranking Member.
    Thank you, Mr. Secretary. I know you've been through a 
number of these issues in the course of the hearing, but I want 
to raise one that I'm not sure we talked about directly, the 
question of price clarity. As you know--and I believe this is 
not addressed in the Blueprint--when someone goes to fill a 
prescription for the first time, they often don't have a sense 
of their own cost, their out-of-pocket cost, and often the 
physician has no easy way to check when they're writing the 
prescription. The consumer obviously doesn't know the price of 
the drug and whether it's subject to any kind of co-insurance 
or co-pay.
    Without this information, providers might write a 
prescription for a particular drug that the patient can't 
afford, even if there's a cheaper alternative. That may lead to 
the patient not, in fact, getting the prescription they need. 
So my question is: Outside of the context of Medicare, 
Medicaid, what specific proposal in the Administration's 
Blueprint would have the most immediate impact on out-of-pocket 
cost transparency for consumers in the commercial market?
    Secretary Azar. I'm so glad you raised that. We 100 percent 
agree about the need for patient transparency on out-of-pocket 
expense both at the point of prescribing and when you go to the 
pharmacy. One of the things we raised in the Blueprint is we'd 
like to get to a system where when you're with your doctor, you 
actually have the right to be told what your out-of-pocket 
would be for the drug that that doctor is writing as well as 
for competing products.
    That comes into play--for me, it's--I run HHS. This is 
Medicare where I have that power to regulate more. I'm happy to 
work with Congress more broadly on anything that would impact 
the commercial sector here in terms of the patient's right to 
transparency and knowledge at the point of sale.
    You can have a doctor who's writing a Part B drug, which is 
an infusion drug, and have an infusion clinic in their office 
and, obviously, making money from that. But the patient would 
pay less out-of-pocket if they wrote a Part D drug that they 
got at the pharmacy and self-administered, and the patient 
doesn't know that. I think that's fundamentally unfair, and the 
patient ought to be in the driver's seat and have that 
information.
    I think you've raised a very important issue. It's in the 
Blueprint. We want to work--it's very complex to solve. We want 
to work with you on that.
    Senator Casey. Is it your belief that that would require 
specific statutory change?
    Secretary Azar. I think that a more broad solution here 
would, in fact, benefit from Congress acting, certainly 
anything that would reach the private sector and not 
interactions with the Medicare program, yes.
    Senator Casey. Certainly we'd look forward to working with 
you and the Administration on that.
    Secretary Azar. Thank you.
    Senator Casey. I think it's so fundamental to people's 
lives now when they get hammered by a cost that they had no 
notice about or no information on.
    The last thing--I know we're wrapping up, but I'll just 
conclude with this, more in the form of a statement than a 
question. I hope that you and the Administration would rethink 
what the position was in litigation last week with regard to 
preexisting conditions. I don't know of any American who wants 
to go back to those days when you could be denied coverage or 
treatment because of a preexisting condition.
    I hope it's your position that we're going to ensure that 
going forward, no matter what, no matter who's in power, no 
matter who is in charge of HHS, or no matter who is in the 
Administration, that we can have that guarantee that any 
American with a preexisting condition will be given the 
protections that they have in the Affordable Care Act. I think 
if that's not the position of the Administration, I think the 
opposition from people like me will be unyielding, and I think 
that's true of folks in both parties.
    I hope you take that back to the Administration if they 
don't--have not heard that message already, and I hope that 
would be your position and that of the Administration.
    Secretary Azar. We do believe in finding solutions on the 
issue of preexisting conditions and affordable insurance for 
individuals with it. So we look forward to working with you 
regardless of the litigation, but if there are any legislative 
packages that would say alternatives to the Affordable Care 
Act, modifications to the Affordable Care Act--we share the 
goal of affordable access to insurance for individuals with 
preexisting conditions.
    Senator Casey. Well, I know we're done, but I just hope you 
take it off the table and say you're going to guarantee it.
    Thank you.
    The Chairman. Thank you, Senator Casey.
    Senator Baldwin.
    Senator Baldwin. Thank you, Mr. Chairman and Ranking 
Member.
    I want to talk about real transparency. I think the 
evidence is pretty clear that brand name drug corporations 
continue to jack up the cost of prescription drug prices. In 
fact, HHS's own inspector general recently found that even 
though seniors used fewer brand name drugs over 5 years, 
Medicare spending using taxpayer dollars on branded drugs 
increased by more than 62 percent because of increasing 
manufacturer prices.
    Your recent prescription drug pricing plan promises to 
lower prices and even says the word, transparency, frequently 
throughout the Blueprint. At a recent hearing, you promised me 
that this plan would hold drug makers accountable for these 
price increases, but I haven't been able to find where your 
plan actually does this, where it holds drug corporations 
accountable to explain why they continue to raise drug prices. 
As you know, this is exactly what my bipartisan Fair Drug 
Pricing Act would do.
    I'm puzzled why you failed to include the Fair Drug Pricing 
Act within this Blueprint going forward, because it would 
require companies to disclose and explain price hikes. Do you 
support the Fair Drug Pricing Act?
    Secretary Azar. We don't have an Administration position on 
that particular piece of legislation but are working with you. 
I just, in fact, responded to a request today, as the hearing 
was about to start, around that to your office.
    We actually--on the issue of drug pricing and list pricing 
and holding them accountable, that's exactly why we want to in 
Part B put an inflation penalty on increases of drug pricing in 
Part B that would actually create for the first time ever a 
penalty for increasing your price in Part B for drugs, and we 
want to remove the cap that was put in the Affordable Care Act 
on the inflation penalty for drugs in Part D--so real financial 
penalties on price increases.
    We actually are committed around this, and on transparency, 
we're happy to keep working with you on efforts to bring 
greater transparency. We've done the CMS dashboard, which for 
the first time ever had increases in it.
    Senator Baldwin. We've talked about this in this hearing so 
far, the Medicare dashboard and the prices being revealed in 
direct-to-consumer advertising, but those do nothing to require 
companies to show or explain why they are increasing their 
prices.
    I want to ask an additional question. Before I do, I want 
to just associate myself with the many Senators who have raised 
the issue of the Trump position on litigation regarding 
coverage for people with preexisting conditions. I can think of 
nothing more anxiety provoking and harmful to the people that I 
represent.
    I also want to associate myself with Senators who requested 
additional information of why there's no focus on naloxone and 
Trump's own opioid commission recommending that you have the 
authority to negotiate over that. This is costing taxpayers in 
my state through the roof because we want to make sure that 
every first responder has opioid overdose reversal drugs.
    But the question I want to ask in my remaining time relates 
to this transparency issue and a topic that we haven't talked 
about really yet. Over the last decade, the number of 
pharmaceutical company executives among the top 500 highest 
paid in the United States has steadily increased, as has the 
portion of their total compensation received in the form of 
stock, now at 84 percent. Drug corporations have announced more 
than $50 billion in stock buy-backs since partisan tax 
legislation became law last year, enriching executives as 
prescription drug prices continue to rise.
    I have legislation, the Reward Work Act, that would put a 
stop to this by banning these corporate stock buy-backs in most 
contexts and giving workers a voice in how corporate profits 
are spent. I would note that recently, the S&P 500 
pharmaceutical corporations have spent 99 percent of net 
profits on dividends or stock buy-backs.
    Do you think it is wrong that pharmaceutical corporations 
are using money from the corporate tax breaks to buy back their 
own stock and enrich their executives and wealthy stockholders 
while families in Wisconsin----
    The Chairman. Thank you, Senator----
    Senator Baldwin. I'll finish the question--in Wisconsin 
continue to face increasing prescription drug prices?
    The Chairman. Mr. Secretary, as we have with other 
Senators, if you could reply to the Senator in writing, we 
would appreciate that.
    The Chairman. Thank you, Senator Baldwin.
    Senator Sanders.
    Senator Sanders. Thank you, Mr. Chairman, and my apologies 
for being here late. I had to be on the floor.
    Thanks, Mr. Azar, for being with us. Mr. Azar, as I 
understand it, about one out of five people in this country, 
unbelievably, cannot afford the medicine their doctors 
prescribe to them. Have you guys done a study yet as to how 
many thousands of people die each year because we pay by far 
the highest prices in the world for prescription drugs? Would 
you guess 5,000, 10,000 people die?
    Secretary Azar. I haven't seen a study on that question, 
but we all agree that drug prices are too high and out-of-
pocket expenses are too high.
    Senator Sanders. If you do a study for me, and if--my guess 
would be that if we get letters--and I'm sure every Senator 
does--from people who are struggling with cancer among other 
life threatening diseases, they can't afford the medicine. I 
would guess that thousands of people die each year. Do you 
think that's something you might want to look at?
    Secretary Azar. I don't think it would change our 
commitment to fix this issue. We are firmly----
    Senator Sanders. It wouldn't? Thousands of people are----
    Secretary Azar. Because we----
    Senator Sanders. You are firmly--Okay.
    Secretary Azar. Because we are firmly committed to do 
something about pricing----
    Senator Sanders. Oh, I know you are.
    Secretary Azar.----and out-of-pocket costs----
    Senator Sanders. Oh, I know you are firmly----
    Secretary Azar.----and nothing will change the firmness of 
that commitment.
    Senator Sanders. I know how firmly convinced you are to 
lower prices, and maybe you could tell us why it is that major 
drug after major drug in the United States is a fraction of the 
cost in Canada or in Europe. Do you really think, as the 
President does, that raising prices on people abroad is going 
to help working people in this country afford the medicine they 
desperately need?
    Secretary Azar. Actually, that would be a misstatement of 
the President's proposal, which is that we need to decrease 
what we pay here and they need to increase their share of what 
they pay. They're not necessarily directly tied--we have our 
own obligation to change our programs and our work to ensure we 
pay less----
    Senator Sanders. Why would the people of Canada, who pay 
the second highest prices in the world for drugs, or the people 
of Europe, want to pay more? My guess is that they would want 
to pay less, especially when in the last 5 years, the five most 
successful drug companies in the world made $50 billion in 
profit, and, as Senator Baldwin said, they pay their CEOs 
exorbitant prices. So I would ask you that maybe we should 
learn something from countries around the world that are 
negotiating drug prices and lowering prices rather than 
demanding that countries around the world pay higher prices, 
which, by the way, I don't think they would.
    I don't have a lot of time, so let me just ask you another 
question. During his campaign for president, President Trump, 
now President Trump, made a lot of statements to the American 
people which turned out to be lies. He didn't keep his word on 
those promises. He told the American people during his campaign 
that he would allow consumers access to, quote, ``imported, 
safe, and dependable drugs from overseas,'' end of quote. This 
is an issue that has had bipartisan support for a whole lot of 
years right here.
    You have Canada 50 miles away from where I live. We have 
free trade all over the world. Trump, during the campaign, said 
he wanted to support importation of safe FDA-approved drugs 
from abroad. Why has he changed his mind on that, do you think?
    Secretary Azar. He hasn't changed his mind at all, and as 
you even said, he supports--we support, if it could be done 
safely. We will never jeopardize American patients' safety----
    Senator Sanders. Well, that's what every administration 
has--of course, we all----
    Secretary Azar. Democrat and Republican have----
    Senator Sanders. You're absolutely correct, and maybe that 
has something to do with the fact that over the last 20 years, 
the pharmaceutical industry has put $4 billion into lobbying 
and campaign contributions, which, as you indicate, has hit 
both political parties. The bottom line is you do not believe--
tell me that you do not believe that we can import safe, lower 
cost prescription drugs from Canada.
    Secretary Azar. One would have to actually wire the safe--
and the Canadian system has a safe Canadian drug distribution 
system internally for Canadians. You would have to wire that 
system into the American safe drug distribution system without 
any leakage or opportunity for invasion into that. I've 
actually even addressed this with the Canadian health minister. 
The Canadians and others would have very little interest to do 
that, because the minute you do that and we import, the supply 
would get cutoff and Canadians will be without drugs because 
we'll suck up all their drugs.
    Senator Sanders. Well, I just have a hard time--you're 
going to go out to lunch, and I guess you can have some salad, 
and maybe the lettuce comes from Mexico. I always have a hard 
time understanding how we can ``safely,'' quote, unquote, 
import fish, poultry from all over the world, yet somehow from 
a highly developed country on our border, we cannot figure out 
a way to bring those products back into this country.
    The President also told us during his campaign that he 
would have Medicare, not the private sector, negotiate for 
lower drug prices. As you know, the Veterans Administration 
pays the lowest prices in the country for prescription drugs. 
Medicare pays a lot more. Why did the President go back on that 
promise as well to negotiate--have the Federal Government--
Medicare negotiate drug prices?
    Secretary Azar. The VA is a very unique system. In fact, 74 
percent of our veterans have supplemental drug coverage. So it 
really requires looking at that imbalance. It's quite a unique 
system that's not necessarily applicable to our seniors.
    Senator Sanders. Thank you.
    The Chairman. Thank you, Senator Sanders.
    Senator Murray, would you have any closing comments or 
questions?
    Senator Murray. Well, I recognize, Mr. Secretary, that you 
need to go. But I just want to thank you for being here today 
to talk about this.
    I do have to say again, reviewing this Blueprint, I am 
disappointed. President Trump abandoned his campaign promise to 
negotiate lower prices through Medicare. That idea would have a 
real impact to lower drug prices for patients, and I'm going to 
keep pushing it. I know many others will.
    But at the end of the day, we need a really serious plan. 
It has to bring drug prices lower that our patients and 
families actually see. I know you're now seeking comments from 
stakeholders. I'm interested to hear what they have to say, but 
it is time for action. We know what the major problems are: 
companies setting high list prices, no negotiating authority in 
Medicare Part D, and patents taken out solely to build legal 
fortresses around products to thwart competition for decades.
    I want you to know Democrats are at the table. We take this 
issue extremely serious. We have a lot of ideas. We're going to 
keep talking about them, and I hope the Administration is 
serious about listening to our ideas and incorporating them.
    Finally, I do want to add my voice to those who expressed 
their concerns about defending critical protections for women 
and patients with preexisting conditions in Federal court. I 
was astonished that the Administration is not doing that. 
Millions of Americans are counting on their ability to buy 
insurance when they have a preexisting condition. This is about 
cost. It's about access. It's about family security. Millions 
of Americans stood up over the last year and a half and said, 
``Don't take this away.'' So I just add my voice and say I'm 
appalled that the Administration has decided not to defend 
this, and I hope that they reconsider, and I hope you take that 
message back.
    The Chairman. Thank you, Senator Murray.
    Mr. Secretary, I thank you for coming. I think the Senators 
have been vigorous and succinct, which is unusual for--the 
latter part is unusual for Senators, and I thank Senator Murray 
for helping do that.
    You are, in my opinion, a very knowledgeable secretary of a 
very complex and difficult department. I think it helps to have 
a secretary who is so thoroughly versed on the issues. I 
believe your Blueprint is promising, even though you heard from 
our Committee that we're a Committee with many different points 
of view and sometimes very different points of view among 
ourselves.
    There are a number of items in your Blueprint that 
Democratic Members of this Committee have advanced and a number 
that Republican Members have advanced. Senator Enzi likes to 
say that sometimes we can focus on the 80 percent we agree on 
and leave the 20 percent for another day, and I think Senator 
Murray and I have shown we're able to do that, even on 
difficult issues. So we'll continue our discussion on drug 
prices with you.
    You've talked about gag clauses. The issue of rebates could 
be very important, blocking generic drugs, how list prices seem 
to benefit everybody but the consumer, more negotiating in some 
cases. Perhaps there are some areas that we can agree on in the 
Committee, which would get us off to a first-step fast start on 
helping to deal with reducing drug prices. I'll talk with 
Senator Murray about that, and we'll see if that's possible. In 
the meantime, we'll work with you and the Department toward the 
goal of making drug prices lower for American consumers.
    The hearing record will remain open for 10 days. Members 
may submit additional information for the record within that 
time if they would like. The HELP Committee will meet again on 
Tuesday, June 19, at 10 a.m. on the 340 drug pricing program.
    Thank you for being here today. The Committee will stand 
adjourned.
    [Whereupon, at 12:01 p.m., the hearing was adjourned.]

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