Press Briefing by Press Secretary Sarah Sanders and HHS Secretary Alex Azar | Eastern North Carolina Now

Press Release:

    James S. Brady Press Briefing Room  •  Issued on: May 11, 2018  •  2:58 P.M. EDT

    MS. SANDERS: Good afternoon. The President just finished rolling out new actions and proposals to drive down prescription drug prices for all Americans. The current situation is unacceptable, and fixing high drug prices is a top priority for the President.

    The blueprint will seek to encourage innovation, while also promoting better competition and reform. The Department of Health and Human Services will take a range of immediate actions to implement the President's plan.

    I'd like to welcome Secretary Alex Azar to the podium to speak about this and take a few questions on this topic. And as always, I'll be back up to take questions on other news of the day.

    Mr. Secretary.

    SECRETARY AZAR: Thank you, Sarah. Good afternoon, everyone. Well, as the President said earlier, we need a system for prescription drug prices that puts American patients first, and one that takes care of America's patients and doesn't take advantage of them.

    What I wanted to do was try to just put a frame together for the actions that you'll see in the blueprint and what the President and I talked about today so you just have a sense where we're going here.

    There are four major problems that we face. The first is high list prices for drugs. The second is government rules that get in the way of plans getting good deals for our senior citizens in our Medicare program. The third is foreign countries freeriding off of American innovation. And the fourth is high out-of-pocket costs, especially for our seniors.

    So as you heard from the President today, this administration has already made a lot of progress in this regard. So in the first year and a half in office, the FDA has approved more generic drugs than ever before in history, saving $8.8 billion in the first year. We also changed Medicare's reimbursement rules to bring down the out-of-pocket spending for senior citizens, saving them $320 million out of pocket on the drugs that they buy each year.

    That work, and the work that we're laying out now in the President's blueprint, it's focused on four strategies to help fix this very complex problem that we face. First, increase competition. Second, increased and better negotiation. Third, incentives to actually lower list prices. And fourth, lowering out-of-pocket costs.

    So first, it's crucial that we have more competition in the prescription drug markets. That means we need a vital and vibrant generic drug industry and generic drug market. We need to foster and nurture a new, competitive biosimilar generic drug market. Those are the generics, essentially, for those really complex, expensive biologic medicines. We need to foster and nurture that.

    We also have to get after pharma companies who engage in anticompetitive practices and try to block the entry of generics or biosimilar products to market by, for instance, blocking access to their products so they can't do the studies they need to do in order to get approval of an affordable generic or biosimilar market. So we're going to go after all of these kinds of abuses.

    Second, we've got to bring more private sector negotiation and better tools to our Medicare program so we get the best deals. The Part D Drug Discount Program for senior citizens is now 15 years old. I was there when we created it and helped to launch it. And when we did it, it was - it's still a great program, but it had the best tools, it was the best at negotiating great deals for our senior citizens, and really was able to drive tight formularies that were very efficient. And that's what's helped keep the cost of that Part D drug plan down below forecast and constantly low premiums throughout its time.

    But over 15 years, as so often happens with government programs, it got frozen in place. And the private sector kept adapting and learning, especially after the economic crisis in 2007, how to control drug spend even better. Okay? Part D stayed more static. We need now to bring the same tools that are available to the private sector to those Part D drug plans so they can negotiate better. We need to unleash them so they can drive great deals for our seniors.

    We also have another part of our program, a major part, which is called Part B. These are the drugs the physician administers. I mentioned those in the Rose Garden. These right now are paid, basically, on a list price plus a markup. They send us a bill; we write a check. There's no negotiation involved in that at all.

    And the President has proposed in his budget, and we are reemphasizing, we've got to figure out ways to move those drugs, especially the high-cost ones, into the private Part D drug plan negotiations so that we can get a deal and start getting bargains on that for our seniors and for taxpayers. We need to look at other mechanisms - and you'll see that in the blueprint, some other ones - that also help us negotiate better deals there for those plans.

    Third, and this is a very complex area right now, we have to bring incentives to lower list drug prices. Okay? Right now, every incentive in the system is to increase and have high list drug prices. Because everybody in the system, except the patient and the taxpayer, is wetting their beak along the way. They're getting a percent of that list price. List price goes up, list price higher, everybody makes more money along the way. So it's just - the math just works that way. We need to try to flip the incentives backwards so that financially it makes less sense to increase prices.

    So one of the things we're going to do - I talked about this in the Rose Garden - is that we are having the FDA look at how we can require in direct-to-consumer TV ads that you have to disclose the list price of your drug. We believe it's an important part of fair balance that if you're telling a patient, activating a patient to have a discussion with their doctor about a drug, telling them all the good things that drug can do for them, it's material and relevant to know if it's a $50,000-drug or a $100-drug, because often that patient is going to have to bear a lot of that cost.

    In addition, we have, in Medicaid and Medicare, some key incentives that we can turn around on list prices. As part of Obamacare, one of the deals with the pharma industry was capping the statutory rebates on drugs in the Medicaid program at 100 percent. We're going to work with Congress to look at overturning that cap on rebates. That, again, will make the math work so that when you increase your list price, it's going to cost you more money if you're a pharma executive thinking about raising prices.

    We're also proposing - we want to think about some really creative ideas in our programs of reversing those incentives. So, right now, in our drug discount program, if you have a drug that fits into one of these protected classes, it's almost impossible for the drug plan to negotiate and get any kind of discount from you. Well, everybody gets that. What if instead we say, you only get to be in that protected class if you haven't raised your list price in the previous 18 months? What if we say, you can be exempt from these specialty tiers where the patient has to pay a lot out of pocket, but only if you haven't increased your list price in the previous months? So a lot of tools like that.

    The other big area we have to look at is the entire system of rebates that we have with pharmacy benefit managers. We are calling into question, today, the entire structure of using rebates as the method of negotiating discounts in the pharmacy channel. Because, right now, every incentive is for the drug company to have a very high list price and to negotiate rebates down, often in a very non-transparent way. What if instead we said, no rebates; flat price; fixed price in the contracts; take away this whole, what's called the gross-to-net spread that removes that and makes people indifferent to what the list price is in that system and takes away the incentives where even the pharmacy benefit manager makes money from higher list prices.

    We also have a real issue that we've got to look at, which is the role of compensation for pharmacy benefit managers. They're taking it now from both sides. They're getting compensated by their customers - the insurance companies - but they're also getting compensated by the drug companies they're supposed to be negotiating against. They're getting rebates and keeping some of the rebates. They're getting administrative fees. Should we move to a fiduciary model where the pharmacy benefit manager works for the insurance company or the individual, and only is compensated by the insurance company or individual? Forbid remuneration from the pharmaceutical company so that it's all completely on one side there, complete alignment of interest.

    And then, finally, how do we lower out-of-pocket drug costs? Well, as the President talked about, we're going to get rid of these gag rules. Right now, some pharmacy benefit managers are telling pharmacists, "You're not allowed to tell the patient that if they paid cash for this generic drug, it would be cheaper for you than if you run it through your insurance." We think that's unconscionable. And in Part D, we're going to work to block that.

    We also think it's a right that when you're sitting there with your doctor, you ought to be able to know what your out of pocket is for a drug you're going to be prescribed under your precise drug plan, and you ought to have that information, and you ought to have information on what competing drugs are that your doctor is not prescribing, and what you would pay out of pocket for that. And that ought to be across the Part B Plan and the Part D Plan.

    Let me give you an example. If you're in with a doctor - this doctor has an infusion clinic as part of their office. So they write you a drug that might be an infused drug. You might have a $300 copay for that. Well, wouldn't you like to know that if the doctor instead wrote you a self-injectable drug, you'd have a $20 copay? And you could at least have an informed discussion. So we think that kind of informed consumer on out of pocket will also help drive real savings in the system.

    So these are just some of the measures. There are over 50 actions that we have in the blueprint. And this, again, not one and done. We are learning, we are open, we're hearing. We want this to be an active, ongoing process. This doesn't get solved tomorrow. It's going to take years of restructuring the system. But these are big, they are bold steps. This is the most comprehensive attack on prescription drug affordability in history, by any President. And I'm just grateful President Trump is standing behind us and encouraging us to do these kind of bold measures.

    So with that said, let me open it up to questions.

    Q Mr. Secretary, there's a tremendous number of moving parts in this blueprint, many of which will require legislative action. How much of this works without the rest? Do you have to do it all, or can you do just a part of it? And how much can be done through executive action versus legislative?

    SECRETARY AZAR: That's a great question. Most of this, we believe, can be done by executive action. Now, we are more than happy to work with Congress on a bipartisan basis. So many of these solutions ought to be attracting bipartisan support. We all acknowledge these are problems we have to deal with. But we believe most of these actions are steps that we can take using our regulatory authorities, especially with the power in the Medicare program.

    They are - a few of them are interdependent. And so it's not as if any one is requiring a preceding act there. We think we can attack many of these steps. It is complex, though. It is very - because the system is rocket science. It's unbelievably complex. And it is a very sophisticated approach hitting at so many of the financial and business levers behind the system. Instead of throwing just, sort of, political speak at this as it would have been easy to do, it's a very business mindset focus on how do you actually change the underlying financial levers here to genuinely solve the problems. That's what the President wants. He wants it to actually solve the problem and lead to results.

    Q Thank you. How soon will consumers actually see lower drug prices?

    SECRETARY AZAR: Yep. So already they're seeing drug prices from that historic level of generic drug approval last year. That's an almost $9 billion a year from all those generics on the market. The cuts that we made on how we reimburse on Medicare drugs, $320 million a year from that already.

    As we make more of these - we are certainly moving forward with any of these changes to make sure that they're going to see it in the pocketbook right away. You know, it's going to take time. Some of this will take regulatory action. We'll have to go through the administrative process. But I can tell you, as soon as I walked out of the Rose Garden, you know what the first question the President and the Chief of Staff had, was?

    Q How soon can -

    SECRETARY AZAR: When's the - I want the executive framework. We're going to have a meeting next week on the timelines and getting it all done. So there's -

    Q Is it a matter of weeks or is it months that consumers could actually see that benefit?

    SECRETARY AZAR: It's going to be months for the kind of actions that we need to take here. Again, this is - it took decades to erect this very complex, interwoven system. We're talking about entrenched market players, complex financial arrangements that would have to be redesigned. So I don't want to overpromise that somehow on Monday there's a radical change. But there's a deep commitment that this is fundamental structural change that we're talking about to our system.

    Yes.

    Q Mr. Secretary, thank you very much, sir. India is making a lot of drugs by your company. There are many other companies. How India is going to be affected for this action today? And also, at the same time, next month is Yoga International Day announced by the United Nations and Prime Minister of India. How yoga can help? Maybe you don't need any drugs if you have yoga. (Laughter.)

    SECRETARY AZAR: Well, I'll stick with the first one, which is generic drugs. Generic drugs, competition in our system is absolutely vital. That's why the deep commitment of the administration to remove any anticompetitive barriers to generic competition.

    Yes.

    Q Mr. Secretary, you talked about calling into question the entire rebate structure.

    SECRETARY AZAR: Yes.

    Q Specifically, what steps are you doing now? And when might consumers see changes on that?

    SECRETARY AZAR: Yes, so as part of the blueprint, we're releasing a request for information that's the initiation of seeking input. This is the possible restructuring of a major sector of the economy. One doesn't do that lightly. It's beginning a national dialogue with the public, with stakeholders, with Congress, on, if we were to do this, if we were to outlaw rebates, say, in the Part D Drug Discount Program and instead require that the products be discounted at a fixed price.

    So for instance, just to explain how this works now. Let's say you have a $1,000 drug. You go to the pharmacy benefit manager and say, "Hey, if you cover my drug, I'll give you a 30 percent rebate on that after the fact if any of your patients use this." Okay? So a $300 rebate on that. What this would say is, instead of that, you would have to negotiate, and the contract would say you get reimbursed $700 this year. And then maybe $702 next year, for some inflation. So it's fixed and indifferent, then, to list price.

    So this game - what goes on now is, frankly, a bit of a game, which is the drug company negotiates this 30 percent rebate. And then the next day, increases price 30 percent. And it's this game of chase that goes on. Instead, fixed price, make everything indifferent to this list price and all the fees not be based on a percent of this artificial list price, which for so many people is like the rack rate on the back of your hotel room door. Almost nobody pays it. But too many people now in the healthcare system are paying it, and they're suffering from that.

    Q But any timeline for this? How long this might take?

    SECRETARY AZAR: So this is out today. And we're going to seek comment and we want to learn, and then we're going to move forward on that if it makes sense. And we need to learn how to restructure things. I believe that even one pharmacy benefit manager just yesterday talked about this precise issue of restructuring their contracts to get out of this rebate spread conundrum that the world is in.

    So I believe it's doable, and I think it will have tremendous systemic impact.