Biotech and Pharma

Health Secretary Alex Azar: ‘Bold action is on the way’ for drug prices

Key Points
  • Secretary of Health and Human Services Alex Azar promised "bold action is on the way" to rein in drug prices.
  • Azar said the entire system is under review.
  • President Donald Trump is expected to make a speech about drug prices soon.
Steve Cole | Getty Images

Is government action actually coming for the price of pharmaceuticals in the U.S.? It's been a campaign promise going back to 2015, from both sides of the political aisle, but nothing substantial has changed.

Thursday, Secretary of Health and Human Services Alex Azar promised "bold action is on the way," in a statement following a speech from his FDA commissioner, Scott Gottlieb, that sent ripples through the drug industry and its supply chain.

"We at HHS are working with President Trump on a comprehensive plan to bring down the high price of prescription drugs," Azar said. "The entire system is under review."

In a speech at the Food and Drug Law Institute Annual conference Thursday morning, Gottlieb said the U.S. doesn't have a "truly free market" when it comes to drug prices, and suggested the federal government should re-examine whether drug rebates, which manufacturers pay to pharmacy benefit managers and insurers in exchange for more favorable coverage of their products, should be exempt from an anti-kickback law.

"Such a step could restore some semblance of reality to the relationship between list and negotiated prices, and thereby boost affordability and competition," Gottlieb said.

The comments signal a "willingness by the administration to get more aggressive" on drug prices, analysts at Evercore ISI wrote in a research note Thursday.

"Now it appears more meaningful disruption is possible, though the goal Gottlieb has in mind is unclear," analysts Ross Muken and Michael Newshel wrote.

The anti-kickback statute, they said, makes it illegal to offer remuneration in exchange for health-care services or products reimbursable by a federal health-care program. A change along the lines of what Gottlieb suggested could mean the government could impose fines or threaten other legal action "to force changes in the rebate system."

Rebates have come into focus in the drug pricing debate as many in the pharmaceutical industry — most prominently Mylan CEO Heather Bresch, amid the controversy over the price of the EpiPen — have blamed the system of paying discounts to middlemen, like PBMs, for driving drug prices higher.

Rebates are also seen as tools to get better placement for drugs on formulary plans and sometimes to exclude competition. Just this week, Regeneron and Express Scripts announced a new deal for the cholesterol drug Praluent, in which Regeneron would significantly increase the rebate it pays on the drug in exchange for fewer obstacles for doctors to prescribe it — and the exclusion of the competitor drug from Amgen from coverage on Express Scripts' largest formulary.

"To get access and affordability is something we had to bargain for," Regeneron CEO Len Schleifer said in an interview on "Squawk Box" Tuesday, referring to the increased rebate as a bargaining chip. "If we just lowered the price, we would have nothing to bargain with."

HHS Secretary Azar, who served as president of drugmaker Eli Lilly's U.S. operations before joining the Trump administration, said the plan the bring down drug prices "has to include looking at the thicket of manufacturer rebates and discounts that aren't working for many Americans."

He said the administration is targeting four problems: drugs' high list prices — those set by the drugmakers, off of which they pay rebates and discounts — seniors and government programs "overpaying due to lack of negotiating tools;" high out-of-pocket costs for patients; and "foreign governments free-loading off American innovation."

President Donald Trump postponed a speech scheduled for last week about drug prices, with many expecting it may take place on May 8, though the administration hasn't confirmed the date.

Watch: Regeneron, Express Scripts announce new pricing policy

Regeneron and Express Scripts announce exclusive pricing policy
Regeneron and Express Scripts announce exclusive pricing policy