- The Washington Times - Friday, February 1, 2019

Health Secretary Alex Azar on Friday challenged Congress to prove it is serious about prescription prices by writing into law President Trump’s proposal to upend the Byzantine drug-rebate system, saying there is no need to wait for regulations to take hold by 2020.

Mr. Trump’s proposal threatens to treat billions in rebates that drug makers pass to middlemen as unlawful “kickbacks.”

He wants the rebates to be passed directly to patients at the pharmacy counter, so manufacturers are forced to compete, in full daylight, to decrease consumers’ out-of-pocket costs.

“Drug companies would actually compete to have the lowest price, rather than the biggest kickbacks,” Mr. Azar said in a speech at the Bipartisan Policy Center in downtown D.C.

Mr. Azar said the plan is the only way to ensure patients derive a direct benefit from today’s “shadowy system” of rebates to pharmacy benefit managers (PBMs), which drug makers use to negotiate a spot on health plans’ lists of covered drugs, increasing sales.

If Congress acts, Mr. Azar said, the proposal could become permanent law and be extended to the commercial market, beyond Medicare Part D for seniors and Medicaid managed-care for low-income Americans.

Lawmakers “can be faster about it all, and they can be more comprehensive,” the secretary said.

Mr. Azar declined to say whether Mr. Trump will issue such a challenge to Congress in his State of the Union Address, saying he doesn’t want to preempt the president.

The secretary said the agency will work through within the rulemaking process in the meantime.

Democrats and insurers have reacted warily to the proposal. They say plans use rebates under the current system to keep premiums down.

“Savings from rebates go directly to consumers, resulting in lower premiums and out-of-pocket costs for millions of hardworking Americans,” said Matt Eyles, president and CEO of America’s Health Insurance Plans, an insurers’ lobby.

The administration rebuked naysayers, arguing any premium increase will be overtaken by the full benefit of discounts at the pharmacy counter and that price-sensitive seniors will force Medicare plans to keep rates in check.

Mr. Trump is pushing the proposal as part of a broader blueprint designed to drive down the price of prescription drugs.

Rising costs are a major concern for voters, so the White House and members of both parties in Congress are devising ways to shake up the system.

Dan Mendelson, founder of the Avalere Health consultancy in D.C., said Mr. Trump should be able to sell the proposal to everyday folks, even though the policy wades into arcane legal protections.

“The way you explain this to your mom is that the president is reducing drug prices in Medicare for American consumers,” he said. “You don’t talk about the ‘anti-kickback statute and ‘safe harbors.’”

Mr. Azar said under the current rebate system, it’s unclear where rebate money goes, or how large of a cut the PBMs take.

Worse, he argued, higher and higher prices allow manufacturers to give larger “kickbacks” to the middlemen.

“They actually complain when list prices don’t go up as much as they need them to,” Mr. Azar said. “Really, I can’t make this stuff up.”

Mr. Azar said rebates moving around the Medicare Part D system, which totaled $29 billion in 2017, would “have to be passed directly to patients, right at the pharmacy counter.”

Seniors could see discounts of up to 30 percent off their out-of-pocket costs, according to HHS.

A pharmaceutical lobbying group is lauding the proposal, saying it will direct savings to those who need them.

“This proposal would also help to fix the misaligned incentives in the system that currently result in insurers and pharmacy benefit managers (PBMs) favoring medicines with high list prices,” said PhRMA President and CEO Stephen J. Ubl.

Lobbyists for PBMs said they’ve done a good job negotiating rebates, so the administration shouldn’t upend the system, while some Democrats said the proposal wouldn’t truly force drug companies to nudge down prices.

“Experience tells us that merely trusting Big Pharma to lower its drug prices for consumers is not a solution, it’s a prescription for more of the same,” said House Speaker Nancy Pelosi.

Mr. Mendelson said Democrats are right to point out that insurers would likely offset any loss in rebate payments by rising premiums.

“There’s always a flip side to any of these policies,” he said. “They’re going to pass on that cost one way or another, that’s what health insurance companies do.”

But he also thinks Democrats are letting the administration know they want to play a role in changes to the health care system — and share in the credit.

“They’re basically giving a shot across the bow and saying, ‘If you want to touch health policy you have to come talk to me,’” he said. 

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