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'Wacky' drug price system keeps costs high for patients paying for prescriptions, FDA chief says

Key Points
  • Food and Drug Administration Commissioner Scott Gottlieb says the U.S. has a "wacky" system where discounts on drug prices don't flow to patients paying for drugs.
  • "The sick people are helping to subsidize the healthy people. That's not how insurance is supposed to work," Gottlieb says.
  • Executives from seven pharmaceutical companies — AbbVie, AstraZeneca, Bristol-Myers Squibb, Johnson & Johnson, Merck, Pfizer and Sanofi — will testify Thursday before the Senate Finance Committee.
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FDA Commissioner on drug pricing: There must be more marketplace competition

Food and Drug Administration Commissioner Scott Gottlieb on Tuesday blamed high drug prices in part on the "wacky" system where pharmaceutical companies discount their medications but patients don't see those savings.

Drugmakers negotiate discounts, known as rebates, with pharmacy benefit managers in order to secure a spot on their formularies. Employers typically use these rebates to lower premiums for employees across the board rather than giving them to the patients who are paying for the drugs.

"[Patients are] spending money to subsidize everyone else's premium," Gottlieb said in an interview with CNBC's "Squawk Box. " "The sick people are helping to subsidize the healthy people. That's not how insurance is supposed to work. So we've got a wacky system where the discounts aren't flowing to the people."

Lawmakers are set to grill executives from seven drugmakersAbbVie, AstraZeneca, Bristol-Myers Squibb, Johnson & Johnson, Merck, Pfizer and Sanofion Tuesday at a Senate Finance Committee hearing. They are sure to ask about high list prices. Drug companies say these prices are merely starting points and that few people really pay list price.

Rebates are a favorite target of drug companies, who say pharmaceutical benefit managers extract huge discounts but keep them for themselves instead of sharing the savings with patients. The PBMs say it's drugmakers alone who set high prices.

The Trump administration has proposed that PBMs pass on an estimated $29 billion in rebates to consumers. Gottlieb said that by removing the middlemen's payments, the administration hopes drugmakers will cut list prices for drugs.

He said lawmakers could come together on legislation to address high drug prices.

"I think we're seeing a consensus emerge in Washington for some kind of bipartisan action," he said.

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, in a separate interview said there's a "very good opportunity" for "bipartisan results and bipartisan legislation" to come out of the hearing.