HHS Secretary Alex Azar joined me this morning:
HH: Joined now by Health and Human Services Secretary Alex Azar. Good morning, Mr. Secretary. Welcome.
AA: Hey, Hugh, it’s great to be with you again.
HH: I want to talk Medicare drug pricing, but first, a quick comment from you. Yesterday, it was announced that Covered California, Obamacare in California, enrollments plummeted by 23, new enrollments plummeted by 23.7%. Only 295,000, 296,000 new signups compared with 388,000 last year. Is that the death spiral beginning to kick in?
AA: Well, I think it’s just further evidence that the Obamacare plan is just fundamentally broken at its core structure. It’s just not meeting people’s needs, and that’s why President Trump has been trying to bring alternatives to people like short-term limited duration plans, like employer groupings that could get together across state lines, association health plans where they could get together to bring low cost alternatives to the one size fits all approach of Obamacare. But the State of California hasn’t exactly been welcoming to these options.
HH: All right, now to drug pricing. One of my sponsors is Citizens For Truth in Drug Pricing. And therefore, I cover this again and again and again, and I know about the reference pricing program. We’ve talked about it. But my friend, Mark Levin, hates your experiment, absolutely hates it. What do you say to critics of the experiment?
AA: Well, that’s a proposal that we made earlier this year around one part of our program where we act, frankly, as a European, almost as a European single payer. We, there’s no choice in the program. It’s called Medicare Fee for Service part B. These are the drugs that the doctor administers to you in their office or at the hospital. And we basically pay this formula called average sales price, which is usually just about list price plus a 6% markup, and we don’t get discounts. We’re paying 1.8 times what the Europeans and Japan are paying for the exact same drugs. And what we’re saying there is hey, give us just a portion of the discounts that you, Pharma, voluntarily are giving the Europeans, just a portion of it, not even the lowest price, just a portion, because, and that will bring down what patients pay, because they pay 20% of whatever we reimburse. But we’ve got a very new plan that we just announced last night that I think Mark and anybody else ought to be agreeing with, which is transparency to our drug pricing system in America for the first time. We proposed last night that we would actually get rid of these behind the scenes, opaque, non-transparent kickbacks that drug companies pay to middlemen, and the patient does not get the benefit of when they walk into the pharmacy.
HH: So how do you determine what those kickbacks are? And how do you police them?
AA: You bet. So Hugh, let me let you in on a little secret on how this system works, and it’ll show you what we’re doing. When you show up at the pharmacy to buy a drug that’s got a price of $300 dollars, and you’re paying $300 dollars or a percent of that $300, there’s somebody in the background. They’re called a pharmacy benefit manager or a middleman. They are receiving a kickback from the drug company based on your having bought that drug. And that kickback might be $60 dollars, $80 dollars, $100 dollars. And what President Trump is proposing is that you, the patient, should get that discount when you walk into the pharmacy. So you save that money directly, tens of billions of dollars of direct savings to patients starting January 1, 2020, when they walk into the pharmacy.
HH: Well, who’s opposed to that?
AA: I don’t think, I can’t imagine how anybody is opposed to it, but some people in a reflexive reaction have said that they’re, that they don’t want this, that they want to defend the status quo, that they want back door concealed rebates and kickbacks going to these middlemen, that they don’t want senior citizens getting these out of pocket savings. I would think that Democrats and Republicans that should be in a kumbaya moment around this saying let’s make this happen faster. Let’s pass it in legislation. Let’s not even wait for the rulemaking process, because this it just so good for the system. It breaks the status quo, defies the special interests and gets us out of this horrible trap we’re in right now where list prices spiral up and up and up, and the patient suffers at the pharmacy counter.
HH: Well now, tell me how long will the rulemaking take? If you put a proposed rule out there, I guess it goes in the federal register today, or it went in yesterday. 60 days notice and comment?
AA: You bet. 60 days notice and comment, and then we’ll review those and come out with a final rule. And what we have proposed in the rule is that these practices would no longer be protected as of January 1st, 2020. But we’re creating a new exception to the kickback rules that allow these discounts to be paid for the patient at the pharmacy counter, and that would take place as soon as legally possible, so basically 60 days after we go final with the rule. So Pharma companies and these middlemen are able to deliver savings to patients actually as soon as the rule takes effect. They don’t even have to wait until January 1.
HH: I look forward to reading the rule and having you back to talk about it, as I’m sure you’ll get thousands of notices. I’m sure you’ll get comments flowing in from Big Pharma. They will not like this, but I know you’ve got good lawyers over there, Matt Bowman among them. And so good luck to them. They might be up to their necks in paper. Secretary Azar, thank you for joining me as always.
AA: Thank you, Hugh.
End of interview.