Alex M. Azar II, Secretary of Health & Human Services (HHS) spoke at the Council for Affordable Health Coverage’s Price of Good Health Summit in Washington, DC on January 15th. Secretary Azar defended the Trump administration’s blueprint for reducing the cost of drugs for Medicare Part B recipients. Azar noted that Medicare pays 80% more than other wealthy countries for some of the more expensive drugs under Medicare Part B. The administration proposes reducing what Medicare Part B pays from 80% more than what other wealthy countries pay for these drugs to 26% more.
Secretary Azar explained that the administration’s proposal, known as the International Pricing Index (IPI) model, would allow Medicare to “receive a share of the discounts that drug companies currently give other countries…The IPI model aims to cut the cost of the most expensive drugs in Medicare Part B by 30%.”
Azar noted that since the administration announced its blueprint for lowering drug prices the number of drug price increases has dropped. While this is good news, the Secretary stated that there is still a long way to go. “In fact, some manufacturers are still in denial about whether bringing down list prices is even an important goal. They claim that these skyrocketing prices don’t matter. But these prices do matter to patients, and our programs, in a number of important ways…[P]atients taking specialty drugs often pay coinsurance, calculated as a share of list price. Coinsurance could be, say, 25 percent of a drug’s list price—that’s what a Medicare Part D plan’s explanation of benefits would say. This can create an interesting, perverse situation, as the real cost of a patient’s drug—the net cost to the plan and the net revenue received by the manufacturer—is often well below the list price, because of rebate payments made from the manufacturer to the plan.”
Secretary Azar gave an example of why the list price of a drug does matter. “For a drug with a $200 list price, a patient’s coinsurance might be 25 percent of the price, or $50. But after rebates, the real cost of that drug might be just $100. That means the patient’s coinsurance, at $50, is actually 50 percent of the drug’s real cost—when they were told they’re only supposed to be owe 25 percent of the drug’s price. It’s just one reflection of how list prices matter and how these third-party payments aren’t accruing to the patients who need them most.”
The Secretary concluded his comments with a pledge to work across the aisle in the fight against high drug prices. “We’ll continue taking action within the scope of the President’s blueprint. But if we need to go beyond its four corners to bring down list prices and out-of-pocket costs, we will. This administration is open to working with Democrats and Republicans on these challenges. We are open to any ideas that preserve drug safety and keep the patient at the center. Nothing that meets that standard is off the table until prices come down.
Read a complete transcript of Secretary Azar’s remarks to the Price of Good Health Summit here.