- HHS Secretary Alex Azar underscored proposed changes made in President Donald Trump's "American Patients First" blueprint in a speech to the American Enterprise Institute, where he defended against criticism that Trump dropped support of Medicare directly negotiating drug prices.
- Azar argued that the free market is better equipped to drive down costs while preserving consumers' right to choose what works for them.
- Trump's plan seeks to merge some parts of Medicare Part B into Part D, which the pharmaceutical industry has opposed. The secretary warned that if pharma doesn't bring the administration "a plan for which drugs make sense to move from Part B to Part D, we'll decide that for them."
Azar championed policymaking that's driven by "pragmatism and evidence" over ideology, while warning pharmaceutical companies must get in line with the administration's recent drug pricing blueprint.
The administration says it is skeptical of having Medicare negotiate drug prices, an idea popular among many Democrats and advocacy groups, because of those principles as well as faith in the free market's ability to self-regulate pharmaceutical costs, he said.
But Trump during the campaign backed the idea.
The majority of Americans have a favorable view of direct negotiations, believing Medicare's purchasing power and the federal government's ability to say no to high-priced medicines would ultimately lower drug prices — authority that's already allowed at the U.S. Department of Veterans Affairs.
But Azar referenced studies that predict limited effects. He cited a 2007 Congressional Budget Office study that he said "found that the idea of direct negotiation would generate almost no savings." The report, authored by former CBO director Peter Orszag, found that direct negotiations could generate "limited savings" if applied to select drugs.
President Barack Obama’s Office of Management and Budget reached a similar conclusion, Azar said, when it assessed a direct negotiation proposal. And, in a 2004 letter, former CBO director Douglas Holtz-Eakin estimated striking the provision that bars the HHS secretary from interfering in negotiations would "have a negligible effect on federal spending."
According to CBO, the HHS Secretary would need authority to establish a defined formulary in order to create savings.
"The only way that direct negotiation saves money is by doing something this administration does not believe in: denying access to certain medicines for all Medicare beneficiaries, or setting prices for drugs by government fiat," Azar said. "We don’t believe either of these proposals would put American patients first. They would move us toward the kind of socialized medicine systems that are notorious for poor quality and access."