[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
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
______
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.]