You ought to know how much a drug costs, how much it’s going to cost you, and whether there are any cheaper options, long before you get to the pharmacy counter. We look forward to working with Congress and stakeholders to understand how best to deliver this level of transparency.
Mr. Chairman, Ranking Member Murray, and Members of the Committee, thank you for the opportunity to appear before you to discuss an important issue: why prescription drug prices are too high, and what we are doing about it. I know all of you care deeply about this challenge, and I have appreciated the opportunity to speak with many of you about it.
It was one of the very first topics I mentioned when I appeared before this Committee during my confirmation process earlier this year, and I applaud the effort of the HELP Committee to illuminate and address this issue.
From Day One of his administration, President Trump has directed HHS to make drug pricing a top priority.
Earlier this year, the President’s 2019 Budget laid out a range of proposals for lowering drug prices, including through reforms to Medicare and Medicaid.
In May, building on the budget, the President released a blueprint to put American patients first, a plan of action for how to bring prices down while keeping our country the world’s leader in biopharmaceutical innovation.
Over the last decade, four significant problems have arisen in the pharmaceutical market: high list prices; seniors and government programs overpaying for drugs due to lack of the latest negotiation tools; rising out-of-pocket costs; and foreign governments free-riding off of American investment in innovation.
The President’s blueprint lays out four strategies for tackling these problems, and we have begun to take action on each of them already.
First, we need to create the right incentives for lowering list prices. I know firsthand the serious problems with today’s complex system of drug pricing. Right now, everyone in the system makes their money off of a percentage of list prices: both drug companies and pharmacy benefit managers, which are supposed to keep prices down. Everybody wins when list prices rise—except for the patient, whose out-of-pocket cost is typically calculated based on that price.
One of HHS’s initial actions is working to require drug companies to include their list price on their television commercials. For example, Americans deserve to know the price of a wonderful new drug they hear about on TV—before going to ask their doctor about a product they may find unaffordable. But more fundamentally, we may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts. Such a system’s incentives, detached from artificial list prices, would likely serve patients far better.
We also recognize that a real market for drugs requires improvements in open, responsible communication between drug companies and those who make drug reimbursement decisions. This morning, the FDA issued guidance to advance that goal, providing clarifying recommendations for how drug companies can share certain information with insurers and payers about drug effectiveness and other matters. We want to encourage competitive contracting based on measures of value that matter most to purchasers and patients, and this guidance will help accomplish that.
Our second strategy for lower prices is better negotiation for drugs within Medicare—that is what President Trump has promised, and it’s what we’re going to deliver.
In Medicare Part D, HHS will work to give private plans the market-based tools they need to negotiate better deals with drug companies. Part D is a tremendously successful program, but it has just not kept pace with innovations in the private marketplace. Well-intended patient protections may be preventing prescription drug programs from appropriately managing utilization, even in accordance with the formulary created by doctors and pharmacist and approved by CMS. While everyone agrees in the importance of the drugs in Part D’s protected classes list, manufacturers often use that list as protection from paying rebates, providing discounts or reducing list prices.
We also want to bring negotiation to Medicare Part B, physician-administered drugs. Right now, HHS just gets the bill, and we pay it. This system may actually be driving doctors to prescribe more expensive drugs, while potentially tempting drug companies to develop drugs that fit into Part B rather than D. We are going to look at ways to merge Part B drugs into Part D, to create competition where savings can be safely obtained, and leverage existing private-sector options within Part B.
Third, we need a more competitive pharmaceutical marketplace. Thanks to the reforms Congress passed in the 1980s, America has the strongest generic drug market of any country in the world.
But there are still too many ways that drug companies are unfairly blocking competition. Since the rollout of the Trump Administration blueprint, FDA has publicized the names of companies who may be using safety programs to block competition, and issued two new guidances to help lessen the effects these actions may have on generic approvals. This work follows many FDA accomplishments under Commissioner Scott Gottlieb, including record-setting generic drug approvals in 2017 and measures to build on Congress’s work to build a market for biosimilars.
Finally, we need to bring down out-of-pocket costs for American patients. Patients should not be dropping their drug regimen because of high costs. Since the blueprint rollout, CMS has reminded Medicare Part D plans that it is unacceptable to bar pharmacists from working with patients to identify lower cost options.
More broadly, you ought to know how much a drug costs, how much it’s going to cost you, and whether there are any cheaper options, long before you get to the pharmacy counter. We look forward to working with Congress and stakeholders to understand how best to deliver this level of transparency.
What I have laid out are just some elements of an aggressive, long-term plan to solve the problem we all care deeply about. Thank you for having me here today, and I look forward to taking your questions.