Policy Update: Senate Hearings on Administration Drug Pricing Plan

Next Tuesday, June 26, HHS Secretary Alex Azar returns to Capitol Hill to testify on the administration’s proposed drug pricing plan. Only a week ago, Azar appeared before the Senate Health, Education, Labor, and Pensions (HELP) Committee on June 12, answering questions on the administration’s blueprint, released in May, that aims to tackle rising drug costs in the United States.

Within the blueprint, the administration lays out potential regulatory and congressional actions. With more questions than answers in the official document, Secretary Azar is traveling to Capitol Hill to address potential next steps.

Azar opened his June 12 testimony by focusing on four problems plaguing drug pricing reform:

• high list prices,
• seniors with Medicare coverage overpaying due to lack of negotiation tools,
• skyrocketing out-of-pocket costs for Medicare beneficiaries, and
• the role of foreign governments in negotiations.

To tackle these issues, Azar highlighted the following proposals the administration is considering implementing through regulatory action or with the help of Congress:

• disclosure of list prices from drug companies in advertisements,
• ban of pharmacy gag clauses in Medicare and Medicaid,
• identification and shift of some Medicare Part B drugs into Medicare Part D, and
• potential elimination of rebates in Medicare.

Addressing the issue of high list prices, Azar noted that the system as it currently exists does not incentivize drug manufacturers to lower list prices. Questioning from Committee Chairman Senator Lamar Alexander (R-TN) raised the issue of which tenets of the blueprint can be achieved through regulatory action versus which proposed policies would require congressional action. While Azar stated that the administration currently has the authority to force drug manufacturers to disclose drug list prices in advertisements, the Secretary also stated that he welcomes and would like to see congressional action on the following pieces of the drug pricing blueprint:

• removal of 100 percent cap on rebates,
• end of the 180-day exclusivity period for generics,
• legislation to ban gag clauses and increase pricing transparency at the pharmacy, and
• legislation supporting site-neutral payments.

When speaking to rising out-of-pocket costs for Medicare beneficiaries and associated “lack of negotiations tools,” Azar confronted one of the more controversial pieces of the administration’s drug pricing blueprint – a proposal to identify certain drugs and drug classes to move from Medicare Part B to Medicare Part D. Senator Patti Murray (D-WA), Senator Elizabeth Warren (D-MA) and Senator Michael Bennet (D-CO) voiced concern over access issues this would pose for many Medicare beneficiaries, especially cancer patients. Senator Bennet directly referenced a May 2018 study from Avalere that found out-of-pocket costs are 33 percent higher for drugs covered under Medicare Part D versus the same drugs paid through Medicare Part B. Secretary Azar stated that these concerns have been noted, and that the key to this proposal is to “tread lightly,” citing a potential need for a demonstration project so that Congress can legislate appropriately.

The Senate HELP Committee also grilled Azar on rising out-of-pocket costs for drugs, and Azar pointed to the role of Pharmacy Benefit Managers (PBMs) in drug pricing reform. There was unanimous agreement among Azar and members of the committee that there is a need to address current legislation supporting the banning of “pharmacy gag clauses.” These clauses, inserted in pharmacy contracts with some PBMs, prohibit pharmacists from being transparent with consumers about prescription drugs costs. The Patient Right to Know Drug Prices Act, from Senator Susan Collins (R-ME) was introduced in April 2018 and would prohibit an insurer or PBM from restricting a pharmacist from providing drug price information when there is a difference between the cost of the drug under an insurance plan and the cost of the drug when purchased without insurance. The Know the Lowest Price Act seeks to provide this same protection to patients covered under Medicare Advantage and Medicare Part D plans.

When the drug pricing blueprint was released, the administration also issued a request for information (RFI) that seeks to receive feedback on many key policy proposals laid out within the blueprint. ACCC will be responding to this RFI and is committed to ensuring any drug pricing reform policy changes serve our members and their patients.

The ACCC policy team will be following this closely within the coming weeks. Look for more updates from us soon.