This is the most comprehensive strategy for reforming drug markets in American history. Together, these actions will transform the system we have, building one that features real competition and affordability using private sector incentives.
As Prepared for Delivery
Good afternoon, everyone. As I said earlier in the Rose Garden, I’m immensely grateful for the opportunity the President has given me, to lead the Department of Health and Human Services in tackling the problem of high prescription drug prices.
Our mission at HHS is to improve the health and well-being of the American people, and what we’re discussing today is vital to that goal.
As the President said today, we need a system for prescription drug pricing that puts American patients first—one that takes care of American patients, not takes advantage of them.
That doesn’t mean cheap political gimmicks and tired ideas. It means bringing real private-sector negotiation and private-sector competition to our system.
There are four major problems we face: high list prices for drugs; government rules getting in the way of plans getting good deals for seniors; foreign countries’ free-riding off of American innovation; and high out of pocket costs, especially for our seniors.
As you heard from the President today, this administration has already made progress on those challenges, with historic levels of generic drug approvals—saving billions of dollars a year—and bringing billions of dollars in out-of-pocket Medicare savings to seniors.
Our work, and the President’s blueprint, is focused on four strategies to fix the problem we face: increased competition, enhanced negotiation, incentives for lower list prices, and lowering out-of-pocket costs.
First, it’s crucial to have more competition in prescription drug markets—in generic drugs, in biosimilars, and in branded drugs.
As the President said, FDA is going to stop manufacturers from gaming the rules to block competition and keep prices high. Right now, drug companies use safety rules to prevent their competitors from getting access to samples that are needed to develop cheaper generic drugs—even after FDA has told them it’s safe to share them.
We’re going to go after these abuses.
Second, we’re going to bring more private-sector negotiation to Medicare.
Part D has been a real success since its introduction. It revolutionized the market for prescription drug plans. But the private sector has now surpassed it, by figuring out new ways to negotiate better deals.
We have to ensure Medicare drug plans have the private-sector tools they need to work for our seniors.
This is a particularly serious problem with high-cost drugs we’ve seen enter the market. Medicare plans are hardly getting any discounts on them at all.
We also want to look at harnessing these negotiating tools for drugs in Medicare that have never been negotiated for. They’re currently paid for with a set price and a commission: HHS gets the bill, and we pay it. It’s no wonder prices keep rising.
Third, we’re going to address incentives that are driving higher list prices.
As I mentioned earlier, FDA is going to get straight to work on having drug companies share their prices in direct-to-consumer ads. It’s only fair for consumers to know just how high list prices of drugs have gotten.
But we’re looking at a fundamental shift in this system, too.
In Medicaid, the Affordable Care Act has put a cap on the penalties manufacturers could pay for huge price increases—a giveaway that allows them to keep pushing list prices up.
These big price increases are actually a good deal for pharmacy benefit managers, who are supposed to keep prices down.
They get paid a share of the discounts they negotiate and they get fees based on list prices, which means the higher the prices, the more they get paid.
Everybody’s winning off of these price increases except for the patient and the taxpayer.
This system of backdoor rebates isn’t a brake on price increases, it actually encourages them.
So it’s time to re-examine this entire system and have a national debate about why it’s not working.
Fourth, we’re going to take action to lower out-of-pocket costs.
Can you believe that, in some cases, contracts actually prevent your pharmacist from telling you when you could get a better deal on your drugs by paying cash? As you heard from the President, we’re going to ban these gag clauses.
In fact, we’ll go further and figure out how to ensure patients are told when there’s a lower cost alternative to a drug they’re taking.
When you’re getting a drug, you ought to be able to know what it will cost you out of pocket and what alternatives might cost.
It’s not going to happen overnight, but we’re going to get there.
These are just some of the actions we’re considering—more than 50 separate measures, in fact.
Altogether, as I said, this is the most comprehensive strategy for reforming drug markets in American history. Together, these actions will transform the system we have, building one that features real competition and affordability using private sector incentives.
As industry players digest the President’s blueprint, I believe we’re going to start seeing practices change.
If we don’t, we have plenty more levers, outlined in our blueprint, to drive the changes we need to put American patients first.
We’re excited to get to work on making all of this happen.
Now, I’m happy to take any questions you have about the blueprint.