Trump to focus on anticompetitive foreign practices, PBMs in push to lower drug prices

HHS Secretary Alex Azar testified before the Senate appropriations committee on Thursday. (House Energy and Commerce Committee)(CSPAN)

President Trump will turn his focus to the anticompetitive practices of foreign governments, while also seeking to encourage generic innovation and competition in efforts to drive down the cost of prescription drugs in the U.S., Health and Human Services Secretary Alex Azar said on Thursday. 

Trump will also address the role of drug companies in driving up drug prices and U.S. policies, including patent protections and Medicare rules, that have enabled them, said Azar, who testified before the Senate Appropriations Subcommittee to review HHS' FY2019 budget request. He was referring to the long-awaited drug pricing speech by the president to be held at the White House on Friday.

"List prices are too high, seniors and government programs are overpaying due to lack of negotiating tools, out-of-pocket costs are too high, and foreign governments are free-loading off of our investments in innovation," Azar said. "To address these problems, the Budget proposes a five-part reform plan to further improve the already-successful Medicare Part D prescription drug program, by straightening out incentives that too often serve middlemen more than they do our seniors."

Azar was coy about details, saying he couldn't give particulars that would preempt the president's speech planned for tomorrow afternoon during questioning by members of Congress. But their discussions throughout the two-hour hearing on the budget gave glimpses into the questions being raised and issues Trump would likely focus on in his speech tomorrow.

RELATED: What to expect from Trump's drug pricing announcement: Medicare demos, drug compacts

Among them: 

Addressing the role of pharmacy benefit managers:

Sen. Joe Manchin, D-W.Va., asked about several issues regarding inflated U.S. drug prices. "People say: 'How come I can order drugs from Canada and get them so much cheaper?'" Manchin said. "'Why are pharmaceuticals charging so much? Why are drugs protected for such a long period of time before they are able to be sold as cheaper generic drugs?' And the whole pricing structure, the PBM's, the purpose of PBM's ... They're telling me it's the pricing structure and how we sell drugs to the consumer is why the price of drugs is so much different than anyplace else in the world."

Azar told him to stay tuned. "The president will be rolling out a comprehensive plan around drug pricing that addresses all aspects of the channel including the role of the pharmacy benefit managers."

Rising prices despite rising drug company profits: 

Sen. Tammy Baldwin, D-Wis.,  pointed to reports showing that last year, the pharmaceutical industry spent $170 million on more than 880 lobbyists in Washington.

"This investment paid off for their CEOs and shareholders as first-quarter earnings showed seven of the largest drug companies in aggregate receiving $1.12 billion in profits since the beginning of this year," Balwin said.

Azar assured her that drug companies' role would be addressed. "All players will be impacted. It's a systemic issue that requires a systemic, multifactorial solution," he said.

RELATED: Report: Brand-name drug prices grew 10 times faster than inflation over last 5 years

Threats from foreign nations:

Sen. Marco Rubio, R-Fla., raised concerns about anticompetitiveness and outright "theft" as China seeks to dominate the biotech and pharmaceutical space. 

"They block off their own market to foreign competition. And frankly, they steal intellectual property," Rubio said. "Is anyone at the agency thinking about this, thinking about how to protect our research knowing this industry is a target of a nation with a long track record of stealing intellectual property?"

Azar assured him it was on the administration's radar and a "very important" problem.

The government's inability to negotiate prices: 

Sen. Jeanne Shaheen, D-N.H., pointed her concerns to the example of the rising cost of insulin. 

"This is insulin pricing," Shaheen said, holding up a piece of paper with a chart showing an upward trend. "What it shows is that these insulin prices started going up dramatically in 2003 after we passed Medicare Part D. I believe there is a correlation between what's happening with the cost of insulin and other drug prices and our failure to negotiate with pharmaceutical companies."

Azar pointed to HHS' budget proposal which has a five-part plan to bring to Congress that would restructure components of Part D program that he said create incentives in the system for drug companies to get higher list prices for their drugs.

"We the taxpayers bear 80% of that cost and the drug plan only bears 15% of that. We've proposed to Congress to flip that to cram down those prices," he said.