Trump Health Pick Has Blamed Health Plans, PBMs for Drug Costs

Trump once accused the drug companies of 'getting away with murder'

(Photo: Allison Bell/TA) (Photo: Allison Bell/TA)

(Bloomberg) -- The drug executive President Donald Trump has picked to lead the U.S. Department Health and Human Services (HHS) isn’t likely to shy away from the topic of sky-high medication prices -- but it may be insurers and drug plans that feel the heat as much as his former industry.

Trump’s pick, former Eli Lilly & Co. executive Alex Azar has talked about drug prices during interviews, speeches and panel appearances before leaving Lilly in January and in the months after. His remarks have paralleled a common industry argument, that it’s other parts of the pharmaceutical supply chain that bear a large share of the blame for U.S. outrage over drug costs.

“Why did things erupt? They erupted because we have seen a complete and fundamental restructuring of health insurance in the United States over the last three to five years,” Azar said at a conference in May hosted by a medical software company.

(Related: Drug Industry Lunacy: Who's to Blame?)

Trump has made the cost of drugs a major part of his message. Saying that drugmakers are “getting away with murder,” he has suggested using the government’s buying power to restrain prices. He’s also said other countries -- which in general pay less for brand-name medicines than the U.S. -- should pay more.

The choice of Azar will likely set up a vigorous discussion about the issue when his nomination eventually comes before the Senate.

“It is not the pick you would expect from someone who is going around calling the pharmaceutical industry a bunch of murderers,” Walid Gellad, who heads the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, said in a phone interview, referring to Trump’s comment about the industry.

Azar didn’t respond to a request for comment on Monday.

Little Action

Trump’s deeds haven’t matched his rhetoric. The administration has taken few actions that directly impact brand-name drug costs. Azar, likewise, has in the past opposed government intervention on drug prices.

“When the government gets involved it is more likely than not to create perverse incentives and unintended consequences than when the market players can work together to figure that out,” Azar said at a drug costs panel hosted a year ago by the Manhattan Institute, a free-market think tank.

Amid the U.S. debate over costs, the drug industry has consistently pointed a finger at health insurers and pharmacy benefit mangers, the companies that negotiate drug coverage on behalf of health insurers and employers. The plans, also known as PBMs, make agreements with drugmakers to cover certain treatments, working to lower overall costs for their clients.

Those discounts are often passed along in the form of rebates to insurers or benefit managers. The result has been rising list prices, and rebates that rise in turn. While many patients don’t feel the effect, those that have to buy drugs out of pocket can be surprised.

Payment System

“We’re trying to usher in a golden age of medicines with a payment system that is in its golden years,” Azar said at the Manhattan Institute event. “That system needs to be retired and replaced. The only way to do that is for every private health care institution, drug companies, insurers, employers, PBMs, hospitals, to work together to create a better way to pay for medicines.”

The Washington lobby group for drugmakers, Pharmaceutical Research and Manufacturers of America, has made insurers and pharmacy benefit managers its target for blame, saying rebates have driven the complex pricing system and increasing costs for some.

“High rebates are things that both the pharmacy benefit managers and the insurance companies like because they get a big check at the end of the day,” Lori Reilly, executive vice president of policy research at PhRMA, said at a Senate hearing last month.

There is already a sense that the complex web of companies between a drug’s manufacturer and a patient’s medicine cabinet may be in the midst of change. Amazon.com Inc. has reportedly looked at the drug sector, and CVS Health Corp. and Aetna Inc. are said to be in talks about a deal that would house an insurer, drug plan and pharmacy under a single company.

Other Approaches

Instead of direct price controls, so far the administration has favored moves such as those Food and Drug Administration Commissioner Scott Gottlieb has taken at the agency to increase competition from low-cost generic drugs.

Azar hasn’t been an absolutist. After leaving Lilly in January, he said it was his preference for industry members to work together to solve the issue, but if the government ends up taking action, “then so be it.”

Azar’s view has been echoed by some lawmakers, like Republican Sen. Lamar Alexander of Tennessee, who heads the Senate’s Health, Education, Labor and Pensions Committee.

“Where the money goes in prescription drugs is more complicated. I have yet to figure out exactly where it goes,” Alexander said at a hearing on drug costs.

He could face a tougher reception from the other side of the aisle, where Democrats likely to use Azar’s nomination as a proxy fight over the Trump administration’s efforts to dismantle Obamacare, and to talk about drug prices.

“The last thing we need is to put a pharmaceutical executive in charge of the Department of Health and Human Services,” said Sen. Bernie Sanders of Vermont, an independent who caucuses with the Democrats.

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