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Sec. Azar on how new proposal ‘brings transparency’ to drug pricing

A new rule bans pharmaceutical companies from providing rebates to middlemen and insurers in exchange for choosing their drugs. Health and Human Services Secretary Alex Azar also called on Congress to pass a new prescription drug discount plan that would apply to all patients, even those without government-funded coverage such as Medicare. Sec. Azar joins to Judy Woodruff to discuss the details.

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  • Judy Woodruff:

    But, first, let's turn now to a different, but crucial pocketbook issue, the cost of prescription drugs.

    The Trump administration has taken a number of steps to tackle the issue. The latest, a big move that essentially bans drugmakers from giving money in the form of rebates to middlemen known as pharmacy benefit managers and insurers. The rebates, which add up to tens of billions every year, are widely seen as improving the chance that a drug will be used and covered.

    The new proposal would essentially treats those rebates as illegal kickbacks. Initially, this applies to Medicare and Medicaid, managed care plans. But the administration would like Congress to change the law so that it applies to private insurance, too.

    Alex Azar is the secretary of Health and Human Services, and he joins me now.

    Mr. Secretary, welcome back to the "NewsHour."

  • Alex Azar:

    Great to be here, Judy. Thanks for having me.

  • Judy Woodruff:

    So, tell us in brief, why do you believe this step is going to bring down the price of prescription drugs?

  • Alex Azar:

    You bet.

    So, what a lot of your viewers may not understand is, when they walk into the pharmacy, and they get a $300 drug, they're going to pay that $300 or often a percent of that $300, but, behind the scenes, a payment is going often from the drug company to the pharmacy benefit manager, or middleman. Might be $60, $80, $100.

    They don't know. It's concealed. But they're not getting the benefit of that when they walk into the pharmacy. And what we're proposing is to make that payment have to be given as a discount to the patient when they're in the pharmacy, because, right now, the system actually incentivizes higher list prices.

    The pharmacy benefit manager gets more money if the price is higher.

  • Judy Woodruff:

    Because there's so much secrecy about it?

  • Alex Azar:

    Because there's much secrecy, and these rebates are a percent of the list price.

  • Judy Woodruff:

    Already, some of the pushback — and there is some pushback out there — is that this inevitably is going to lead to higher insurance premiums. You — in fact, HHS, your department, acknowledges that.

    And what people are pointing out is that, yes, the benefit may well go to people who have high drug costs to pay, but for people who don't have a lot of prescription drugs, people who already benefit from generics, they're not going to see this kind of benefit. They're not going to realize these lower prices.

  • Alex Azar:

    So, right now, in our Part D Medicare drug program, which is the senior citizen retail drug program, there are $29 billion a year of rebates that are being paid by drug companies to these pharmacy benefit managers.

    We would now direct those for the benefit of the senior when they walk into the pharmacy. And so they're going to get — the vast majority of seniors are going to do better out of pocket by saving money. They buy a $300 drug, they will get a $100 discount if there's a 30 percent rebate that's being given. They're going to save that money; 90 percent of seniors get one drug a month.

    So most seniors are going to benefit much more out of pocket from just than the modest $3 to $5 potential premium increase that could come from this change.

  • Judy Woodruff:

    All right. So, there's another argument out there which I want to ask you about.

    Democrats are arguing that this is a plan that doesn't go far enough, because it still lets drug companies set and raise these prices, meaning high — as high as they want them to be, because you still have this lack of transparency.

    And they say essentially what you just described . There's this wall between what the pharmaceutical companies know and what consumers know.

  • Alex Azar:

    Well, actually, this proposal brings transparency for the first time to this entire system, because now those secret kickbacks that have been given by drug companies to pharmacy benefit managers will be transparent because they're given to the patient when they walk into the pharmacy.

    And what's going to happen is, you have certain classes of drugs where you have very, very high rebates, sometimes 50, 60, 70 percent rebates on drugs, and yet list prices keep going up.

    Why? Because the drug company wants to keep being able to funnel more money to these middlemen. With this change, where the patient gets the benefit of the discount in the pharmacy, we take away the last excuse the drug companies have to support these high list prices. They will bring their drug prices down closer to that discounted price.

    We will actually for the first time ever have competition based on price for drugs, if you can believe that.

  • Judy Woodruff:

    But it's still not complete transparency. I mean, drug companies will still be able to do what they want, set prices as they wish.

  • Alex Azar:

    Well, it's still — that is transparency. Transparency is, there price would be known, the discount would be known.

  • Judy Woodruff:

    Right.

  • Alex Azar:

    It would be available.

    So, this is the — this is the single biggest step in history ever to bring drug prices down for people.

  • Judy Woodruff:

    Beyond that, Mr. Secretary, there's a more fundamental question that's being asked out there. This is something President Trump talked about on the campaign trail when he ran for president.

    And that is, why not press the pharmaceutical industry? Why not change the law, so that the government can negotiate directly with pharmaceutical companies through Medicare, in other words, use Medicare as a way to get these drug companies to bring truly significant lower drug prices?

  • Alex Azar:

    So we actually do use Medicare to bring significantly lower prices.

    So in this retail drug program…

  • Judy Woodruff:

    But part of Medicare, not all.

  • Alex Azar:

    Well, actually, we're bringing competition and negotiation where it hasn't existed before.

    So, right now, in this retail drug program, we have these massive pharmacy benefit managers that control tens of millions of lives. They negotiate some of the best discounts on Earth. We actually get European level discounting in that program.

    We're bringing to our Medicare Part B program, which is the fee-for-service program where, if you get an infusion from your doctor, we basically paid close to sticker price, plus a markup, for the last decade. We're for the first time actually bringing negotiation, discounting to that.

  • Judy Woodruff:

    But why not do it for all of Medicare?

  • Alex Azar:

    Well, that's what we're doing, is we're bringing competitive market discounting to all parts of Medicare. No need to bring it where it already exists.

    And what we're doing…

  • Judy Woodruff:

    So you're saying you don't need to change the law?

  • Alex Azar:

    We don't need to, because we have negotiation.

    Peter Orszag, the Democratic head of the CBO and OMB, has made clear that you wouldn't get in the Medicare Part D drug program better discounts than we currently get unless you set a single national restrictive formulary.

    What that means is, the secretary picks one drug in America, and you don't get the other drug, all seniors. If you don't like it, go to England. So far, I haven't heard a lot of support for that type of restriction on patient access for our seniors, especially when we can get the discounts we want.

    And that doesn't actually solve the problem out of pockets or list price. That would actually reinforce the current messed-up system that we have now. What we're doing, pulling these discounts to the patient at the pharmacy, changes all that.

  • Judy Woodruff:

    Let me ask you finally about another policy that is under your purview. And that has to do with immigrant families who are coming across the border into United States.

    The inspector general at HHS, at your department, said last week that it turns out there may be many, many more of these children separated from their parents who came across the border since mid-2017 than were previously acknowledged.

    But what I want to ask you about is, there have been a number of reports and cases of migrant children being abused while in government run-shelters, government-run facilities.

    How much do about this, and what's being done about it?

  • Alex Azar:

    Yes.

    So, we take — we take the care of these children that come into our custody very seriously. It is a sacred obligation that we have to provide a safe, secure, loving environment for these children when they're placed.

    These are kids — all of the kids that we have basically come across this border alone. They were sent here by their families, their parents, crossed here illegally and alone, many of them abused. Many of the young girls, a large percent of these girls are abused, sexually abused on the way here. It is a dangerous journey.

    They come across. They're — they're taken into custody, and then they're given us to care for, where we, as expeditiously as possible, try to place them with other family members or sponsors here in the United States.

  • Judy Woodruff:

    But I'm asking you about those children being…

    (CROSSTALK)

  • Alex Azar:

    When — when we — when we receive any allegation of any type of abuse, neglect, or any impropriety in any of our facilities, we take it with the greatest seriousness.

    We go in, we investigate, we work with state investigators.

  • Judy Woodruff:

    And how widespread do you think this is, this problem?

  • Alex Azar:

    It's quite rare. This is very rare.

    These — these grantees are social service child welfare providers, very experienced, subject often…

    (CROSSTALK)

  • Judy Woodruff:

    So, you're confident you're getting to the bottom of exactly how much of this is going on?

  • Alex Azar:

    When we get reports, we take this deadly seriously, and we will refer to — to — for state and local prosecutors, if need be.

    We will disband — we will actually kick providers out of our program. We will stop admissions getting.

    (CROSSTALK)

  • Judy Woodruff:

    Have you done that?

  • Alex Azar:

    Yes, we have.

    And, usually, we're acting on these before the media has ever even learned about them. Often, the reports that you're hearing, we have already dealt with, and they're trailing — they're trailing reports.

    We can only act on what we learn — what we learn about. But when we get an allegation, we take this with the gravest of seriousness. We want these children to be in a safe, loving, secure environment while they're in our care.

  • Judy Woodruff:

    Secretary of Health and Human Services Alex Azar, thank you.

  • Alex Azar:

    Thank you, Judy.

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