Drug Pricing Dominates Senate Hearing on HHS Nominee Azar

If confirmed as the next secretary of the Department of Health and Human Services (HHS), Alex Azar says that a top priority is to make drugs more affordable. He agreed with members of the Senate Finance Committee at his confirmation hearing on Jan. 9, 2018 that “drug prices are too high,” but noted that the issue is complex and that “there is no silver bullet here.” And he said he would “work with anyone” to create incentives for bringing down list prices.

Azar disagreed, however, with calls from Democrats for government negotiation of prices for Medicare Part D, noting that private drug plans do very well obtaining discounts and that it would be a mistake to establish a national formulary that is needed for obtaining rebates and discounts. Instead Azar called for changes in Medicare Part B, which does not negotiate and purchases drugs at the set price. In response to a query, he agreed that it might be appropriate for HHS to negotiate purchases of drugs like Naloxone where the government is the direct purchaser.

Azar’s 10 years as a top executive at Eli Lilly is either valuable experience that would help him understand and deal with regulatory and legislative policies, according to Republicans, or presents a serious conflict of interest in overseeing regulatory and legal policies governing healthcare and pharmaceuticals, as Democrats insist. Finance Committee Chairman Orrin Hatch (R-Utah) said that, instead of automatically disqualifying the nominee, work in the pharmaceutical industry and also in HHS in previous Republican administrations should provide “important insights” in dealing with relevant policies.

However, Ron Wyden (D-Ore), ranking Democrat on the committee, attacked Azar’s history raising prices at Lilly. Wyden rolled out charts documenting how prices on leading drugs more than doubled in the five years that Azar was president of Lilly USA, and further complained that while Azar chaired the company’s pricing committee, he never lowered prices on any leading product.

CHIP and ACA reform

Hatch, who recently announced his retirement from the Senate, drew praise on all sides for stating his determination to gain reauthorization this month for the Children’s Health Insurance Program (CHIP), which has been struggling with short-term fixes that are about to expire. While Democrats support that effort, they voiced serious concerns about Trump administration proposals to undermine what remains of Obamacare through regulatory and administrative actions. Administration calls for welfare reform, opponents maintained, is really a strategy for making “draconian cuts” in budgets for Medicare, Medicaid, social security, and other public health and welfare programs.

Azar sidestepped specific queries on those issues, but his priority list includes the need to reform Medicare payment policies; to ensure access to quality, affordable healthcare; and to tackle the opioid epidemic. He agreed on the importance of addressing widespread drug misclassification for Medicaid rebate purposes, and supported more value-based contracting for Medicare and for prescription drugs. A goal, he said, is to drive value to ensure that Medicare remains sustainable over the long run. But he also noted that program changes such as Medicaid block grants or reduced eligibility are needed to help slow the rate of growth in public health programs “in the interest of sustainability.”

Sen. Claire McCaskill (D-Mo) urged Azar to examine last year’s report of the Senate Special Committee on Aging investigation into drug price increases and efforts to expand exclusivities, often involving industry manipulation of loopholes. McCaskill also railed against excessive drug advertising that benefits from taxpayer support through tax deductions. Azar agreed to work with FDA to examine whether its regulatory approach provides sufficient balance in consumer advertising.

Despite the opposition, Azar is expected to win Senate confirmation fairly quickly, as all parties desire capable leadership for the agency, which Azar is likely to provide. He has pledged to sell drug stocks and to avoid conflicts of interest, and it will be interesting to see if his insider experience leads to new approaches for tackling drug affordability issues.