Allowing Medicare to negotiate directly with drugmakers to set prices could backfire and force the program to pay even higher prices for drugs, HHS Secretary Alex Azar told senators on Tuesday.
In a Senate Committee on Health, Education Labor & Pensions (HELP) hearing, Democratic lawmakers suggested drafting a bill allowing the HHS secretary to tell drugmakers it will pay the lowest of prices they are now offering to another country. For instance, if the UK is paying $30,000 for a drug and the U.S. is paying $150,000 for the same product, HHS could say it too would only pay the UK price.
But former Eli Lilly executive Azar said drugmakers would take action to protect their U.S. profits if the CMS starts negotiating drug prices. The proposal wasn't part of President Donald Trump's recently unveiled drug pricing blueprint.
"A company could pull out of Canada and Europe as a result so there would no longer be the low price point," Azar said. "They could then jack up prices, and we'd end up paying more."
Sen. Doug Jones(D-Ala.) urged Azar to create a pilot to negotiate prices on a select type of drug to see if it could be a viable approach.
"Why don't we give this a real-world trial instead of talking theoretically?" Jones said. "If it doesn't work we can just stop it right?"
But Azar maintained that the move could lead to Medicare paying more, potentially limiting seniors' access to needed drugs.
Azar's pessimism was echoed by the drugmaker trade group Biotechnology Innovation Organization on Twitter during the hearing. The group urged the senators not to pursue the idea and pointed to a Congressional Budget Office analysis that found negotiating can only work if price controls and restricted access to some drugs is also in place.
Azar has referred to such a system as "socialized medicine" in the past and opposed similar proposals.
During the hearing, he noted that patients in other countries with similar policies have less access to drugs.
"God help you if you get cancer in the United Kingdom," Azar said. "You don't have access to more innovative cancer treatments."
Azar praised President Trump's proposal to move some Medicare Part B drugs into Part D so more treatments will fall under Part D's price negotiating process. The CMS contracts with private health insurance companies to manage Part D benefits and negotiate discounts with drugmakers.
The idea could save as much as $30 billion and gives seniors choices to determine what coverage best suits their medication needs, he said.
Sens. Bob Casey (D-Pa.) and Elizabeth Warren (D-Mass.) were wary of the change and cited an Avalere study released last month that found average out-of-pocket costs were about 33% higher for Part D-covered new cancer therapies than for those covered in Part B.
Azar refused to respond to Warren's multiple questions over whether seniors could face higher costs due to the change. Instead, he said he hoped the savings generated could be used to offset any new out-of-pocket costs a patient may face.
But that didn't assuage Warren't fears.
"If a so-called negotiation ends up raising Medicare drug prices [for beneficiaries], its not a negotiation at all, it's just a bad deal for seniors," she said.
