• Text Resize A A A
  • Print Print
  • Share Share on facebook Share on twitter Share

Remarks to the AcademyHealth Conference

Alex M. Azar II
The AcademyHealth Conference
February 4, 2019
Washington, D.C.

The President is committed to transparency not just in drug prices, but in every aspect of healthcare: ending surprise bills, empowering patients to shop for healthcare services, and holding providers accountable for outcomes. These efforts will be key piece of our work to transform America’s healthcare system into one that pays for value.

As Prepared for Delivery 

Thank you, Lisa [Simpson], for that introduction.

Good morning, everyone, and thank you for welcoming me here today.

I’m very glad to be here, because gatherings like this one are important opportunities for healthcare experts and stakeholders to come together and think big about what works and what doesn’t in our healthcare system.

Sometimes, parts of these conferences can feel a little like deja-vu: You come in and discuss the same problems you did at the last conference.

I know, because I’ve not just listened to plenty of such discussions—I’ve led a few myself!

But I’m especially glad to be here today because I’m representing a President who isn’t content just to hear about the stubborn problems we face in healthcare.

He wants solutions, and he wants action.

That’s why, last week, he proposed to replace the longstanding, opaque system of prescription drug rebates, which push prices higher and higher, with a system of transparent and upfront discounts, delivered directly to patients.

The President demands aggressive action on prescription drug pricing because he really understands just how broken the system is.

But part of what gives him the courage to follow through on actually fixing these problems is the stories he hears from ordinary Americans.

When we published the President’s blueprint for lowering prescription drug prices last May, we heard a lot of stories about the high prices that millions of American patients struggle to pay for their drugs every month.

One story was about a woman from Kentucky, named Sue, who retired from an insurance company a couple years ago.

Sue has a genetic skin condition, an autoimmune disorder, that causes great discomfort to her. She found what she called a “miracle drug,” which helped treat it effectively.

Unfortunately, the sticker price for a year’s treatment on this drug runs into the tens of thousands of dollars.

Sue was told that her out-of-pocket costs for the drug would be $7,200 a year on her Part D plan.

When she heard that price, she said, she just broke down and cried. She simply couldn’t afford it. She lives on Social Security and a small pension, amounting to about $24,000 a year.

She had to stop taking the drug she needed, and resort to less effective ointments and creams.

“It’s not fair,” she said. “I’m basically healthy. I eat healthy. I live healthy. I’ve done my part, and my country is not doing enough. I will not sell my house to pay for this medication—I’m leaving my house to my two sons. And it’s not like I can go back to work to pay for the medication—I’m 76, who’s going to hire me?”

Sue is right: This system isn’t working for her. She deserves better care.

That is why, yesterday, President Trump proposed the single biggest change to the way Americans’ drugs are priced at the pharmacy counter, ever—and it’s aimed squarely at helping patients like Sue.

We’re proposing a major change to our Anti-Kickback Statute safe harbors, which have always been about protecting legitimate, beneficial business arrangements from the threat of prosecution.

Behind these protections, the drug industry has built a system of kickbacks that has long drawn the ire of those concerned about prescription drug prices—both Democrats and Republicans.

Today’s system has pushed the price of Sue’s drug higher and higher every year. The manufacturer hiked the price 6 percent just this January, in fact.

The President is proposing to replace this utterly broken system with transparent, upfront discounts, passed on directly to patients at the pharmacy counter.

First, let’s look at what’s wrong with the current system.

Sue was told that the out-of-pocket cost for her drug was going to involve coinsurance, 33 percent of its price, up to a certain point, and then larger and then smaller percentages after that.

No one told her that she was being asked to pay 33 percent of an inflated list price set by the manufacturer—a price the manufacturers claim no one pays.

No one told her that the net price paid by her Part D plan was significantly less than the price from which her out-of-pocket costs were being calculated.

No one told her that her drug plan was getting a kickback from the drug’s manufacturer—a kickback that did not reduce the astronomical cost-sharing she would have to pay every month.

In total, each year, more than $150 billion in rebates are passed around our drug-pricing system—and patients are left totally in the dark.

Even health policy wonks are largely in the dark about where these rebates go—we may know the structure of the system, but we still don’t know what happens to the rebates on any drugs we take.

Under our proposal, the rebates moving around Part D, which in 2017 totaled more than $29 billion, will have to be passed directly on to patients, right at the pharmacy counter.

Think about that: $29 billion of discounts, would now be reflected in seniors’ pocketbooks, at the pharmacy counter, starting January 1, 2020.

Amazingly, we have seen some still defend today’s opaque system.

I want to be clear: Any defenders of the status quo are arguing patients like Sue are better off not knowing what happens to discounts negotiated on their behalf.

They’re defending a system where we keep discounts away from the seniors who need them.

The way I’ve put this to some audiences is that, every time you go pick up a drug at the pharmacy, there’s a lurking middleman no one tells you about, who’s getting a kickback that isn’t reflected in the price you pay.

Many of you in this audience know plenty about these middlemen—some of you have worked for them, studied them, or negotiated with them!

But here’s the thing: Even though you know about this, there’s little you personally can do about it until the system changes.

And you might know what’s going on in the system, but your elderly relatives, your parents, your neighbors—they have no idea how bad a deal they’re getting from this broken system.

I also should note: Knowing about the current system doesn’t mean any of us can explain how it’s supposed to make any sense.

The other day, one Senate committee held a hearing about high drug prices, featuring some true experts: people like Peter Bach from Sloan-Kettering, whom some of you probably know.

Senator John Cornyn asked the witnesses, “Can anybody on the panel explain to me why we have a general prohibition against kickbacks, but we nevertheless allow it for prescription drug pricing? What’s the sound public policy reason for excluding prescription drug pricing from the anti-kickback rule?”

Nobody on the panel had an answer—they just shrugged.

If you’re wondering, what does it take to stump Peter Bach and a bunch of other healthcare policy experts, who I think had about 3 or 4 different doctorates between them?

Now we know the answer: Ask them to justify the crazy drug pricing rules we have today.

The good news is, come January 1, 2020, no one’s going to have to justify it anymore.

Even better news is that the change we’re proposing will go beyond just providing upfront discounts on patients’ out-of-pocket costs.

Maybe most important, no more rebates means no more reason for drug companies to take the list price increases we hear about each January.

For that matter, there will be no more reason for the price increases they take every July. Or every August. Or every February. Or every March.

The President’s proposal will eliminate the single biggest reason for these seemingly perpetual drug price increases: today’s rebate system.

Make no mistake: Drug companies are responsible for the prices they set.

But each year, drug companies tell us quite explicitly why they raise prices on so many drugs.

It’s because higher prices allow them to give larger kickbacks to drug plans, securing better placement on drug formularies and, therefore, more sales.

That’s right: In drug markets, a higher price often makes your product more attractive, rather than less attractive. This market works, essentially, like no other market.

In fact, keeping list prices high to allow for big rebates is fundamental to the current business models of the system’s middlemen, pharmacy benefit managers.

They actually complain when list prices don’t go up as much as they need them to. Really—I can’t make this stuff up: One of these middlemen companies recently told investors that they’re facing “rebate headwinds” because prices and rebates aren’t rising quickly enough.

In a reformed market, a drug’s list price, the number Sue would have to pay a share of, can be much closer to the net cost of the drug that the market produces.

These lower list prices will mean relief for the huge number of patients who are paying their drug costs as a share of list price.

That includes not just seniors on Medicare Part D who need specialty drugs, like Sue, but also the 47 percent of Americans under age 65 on high deductible health plans, who pay based on list price until they hit their deductible each year.

Each January, so many Americans see their out-of-pocket costs shoot up, as their deductible or out-of-pocket maximums reset for the new year.

Under a system of upfront discounts, it will be vastly less common for patients to have to spend through a big deductible like so many patients are doing right now in January and February.

Upfront discounts and lower list prices will mean a fundamentally fairer, more predictable, more transparent experience for any American who goes to the pharmacy to fill a prescription for themselves or a loved one.

The final point I want to make about today’s broken system is one more way it impedes competition from lowering prices.

I’ll give you a very recent example: This month, a drug company introduced a new generic version of a common asthma inhaler.

If you want to buy this new generic without insurance, just paying cash, you can expect to pay $35 or less for a month’s supply. That’s the generic’s list price.

Compare that with the list price of the brand name alternative, which is almost $60 a month.

But when the generic hit the market, pharmacies across America got a notification from at least one large middleman that said essentially the following: We won’t cover the generic. If someone comes in with our insurance, you cannot process the generic with their insurance card. We’ll only cover the brand drug.

If you’re wondering just how obscure these backdoor deals are, by the way, I’ll let you know how we found out about this notice: Somebody posted about it on LinkedIn.

That vaunted source of important medical news: LinkedIn!

By one estimate, a quarter of patients will pay more at the pharmacy counter by using their insurance to purchase the brand drug than they would pay if they just paid cash for the new generic.

The reason the drug plan wants patients to take the brand drug is because the brand drug gives the drug plan a kickback.

That’s how broken our system is: When a new option comes onto the market, instead of pharmacies being told, “Hey, there’s an affordable new option, you should tell your patients about it,” the insurer tells your pharmacist, “We’ll only cover the expensive incumbent option.”

Patients are none the wiser unless their pharmacist tells them otherwise—and until we implement a system with upfront discounts.

This is where the rebate issue intersects with some other transparency measures we’ve taken.

Last fall, the President signed legislation banning pharmacy gag clauses, which prevented some pharmacists from telling patients when they could get their drug more cheaply by paying cash than by using your insurance—exactly the circumstance I just described.

We want pharmacists, like all other healthcare providers, from physicians to nurse practitioners, PAs, and everyone else, to be able to act as navigators for patients—helping patients get the right treatment at the lowest price possible.

Banning gag clauses means you can always ask your pharmacist if you’re getting the best deal.

Banning today’s kickbacks means the answer you’re going to get may be a lot more appealing.

Another key transparency measure the President has put forth is requiring the disclosure of drugs’ list prices in TV ads.

We proposed that rule back in October, the comment period is closed, and we got 140 or so comments.

We already knew that the prices we proposed disclosing are meaningful—I’ve explained to you today why list prices matter.

Now, in a system where kickbacks are replaced with upfront discounts, list prices are going to be lower, and more meaningful, than they have been before.

But we’re going far beyond prices in ads.

Last year, in conjunction with providing new negotiation tools to Part D plans, we also proposed to require that every plan provide access to a real-time prescription benefit tool.

Doctors and patients can use these tools, linked to e-prescribing systems, to understand what a patient will owe out-of-pocket for a given drug option.

Combining that with upfront discounts and lower prices means a lot fewer patients facing shocking bills at the pharmacy.

Of course, drug prices are only one kind of surprise bill in healthcare. The other day, President Trump held a roundtable at the White House with patients who had been stuck with surprise bills in hospitals.

One patient got an $80,000 bill for anti-venom medication after a snake bite.

One got an emergency room bill for $15,000—though the hospital was so generous as to offer her, up-front, a 50 percent “uninsured discount.”

Who exactly would pay the list price, if there’s already an uninsured discount, I have no idea.

The President, like so many Americans who’ve heard these stories or had such an experience themselves, was shocked and outraged.

He’s committed to making fair, accurate, and transparent prices a key part of his healthcare agenda.

We’ve already taken some steps in this direction.

Last week, CMS unveiled the first eMedicare tool, an app that lets seniors know instantly whether a given service is covered by Medicare.

And starting January 1, for the first time ever, hospitals have been required to post their chargemasters online.

Many of them have complained that they don’t feel like this information will be useful to consumers.

We’re well aware that could be an issue, and that this is just Step One around hospital price transparency.

But to the extent that hospital list prices aren’t useful information for the patients they serve—well, hospitals are the ones in the best position to do something about it.

We also required that the price information be machine-readable, so that it can be incorporated into apps that patients can use without having to go to the hospital’s website.

Channeling transparency through consumer-facing technology is an important theme of our work to empower patients through health IT.

Last year, as part of an initiative called Blue Button 2.0, CMS made it possible for seniors to share their Medicare records with private-sector apps.

Over 1,400 app developers are building user-friendly apps that help Americans understand and access their Medicare data, like sharing their claims history and list of medications with their doctor, or delivering reminders for care.

We also overhauled the incentives in CMS’s Meaningful Use program to focus on interoperability, helping to build a health IT ecosystem that provides patients and physicians with the information they need.

A truly interoperable, patient-centered health IT system will be a huge step toward greater transparency and better quality of care.

Right after the release of the drug pricing blueprint, we updated Medicare’s drug-pricing dashboard, providing significantly more information than ever before.

This allows consumers to track any increases in the price of their drugs, but it’s also part of our commitment to empowering researchers to better understand drug markets.

Last year as part of the President’s drug pricing blueprint, FDA took some transparency steps too. They began publishing the names of brand drug manufacturers that may be blocking the provision of samples for generic competitors.

Some researchers put together these two sources of data, and found out that price increases on the drugs where manufacturers may be blocking competition cost Medicare and Medicaid nearly $12 billion in 2016.

That’s another important kind of transparency.

Many of you in this room can play a role in helping us better understand what works and doesn’t work in our healthcare system.

We at HHS are committed to working with researchers to get you access to the data you need.

In fact, CMS has taken historic strides under President Trump toward making Medicare and Medicaid data more accessible to researchers and entrepreneurs.

Specifically, I know many of you in this room had been just salivating for years over the idea of CMS releasing its Medicare Advantage claims data, and we were pleased to start making that data available last year.

That was just one more step toward a healthcare system characterized by real transparency—where shadowy practices are brought to light, and patients are no longer left in the dark.

The President is committed to transparency not just in drug prices, but in every aspect of healthcare: ending surprise bills, empowering patients to shop for healthcare services, and holding providers accountable for outcomes.

These efforts will be key piece of our work to transform America’s healthcare system into one that pays for value.

This President is going to deliver Americans unprecedented transparency around the care they receive, and more transparent care is better care.

With your help, President Trump can usher in a new era for American healthcare: one where prices are transparent, discounts are delivered to patients, and every player in our system finally has to level with their customers —so everyone knows that they’ve put the American patient first.

Thank you all for having me here today.

Content created by Speechwriting and Editorial Division 
Content last reviewed on February 4, 2019