CMS' Verma touts value-based pricing—not negotiation—for high drug prices

Kaiser Permanente CEO Bernard Tyson (left), CMS Administrator Seema Verma and moderator David Agus, M.D., discuss drug prices at the TIME 100 Health Summit. (Brian Ach/Getty Images for TIME 100 Health Summit)

NEW YORK CITY—Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma said the Trump administration wants to move forward on a value-based pricing approach to pharmaceuticals to help curb the high cost of drugs.

Verma said drugs represent one of the fastest-growing costs for CMS.

"We're seeing price tags of 1 million to 2 million dollars; that's not sustainable," Verma said while being interviewed at the TIME 100 Health Summit Thursday. "We want to encourage innovation, but that doesn’t mean anything if people can’t access the medications."

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RELATED: Verma: CMS working 'fast and furious' on IPI drug pricing model, but doesn't say when it will be released

The Trump administration is focused on targeting the cost of physician-administered drugs, Verma said. "Part of the problem is the way the government pays for some of these drugs. We’re the largest payer of drugs, probably in the world, due to the Medicare population," she said.

Currently, Medicare Part B pays the average sales price for a physician-administered drug, and the agency gives the doctor or hospital 6% of that price for handling and storage costs.

The Department of Health and Human Services (HHS) released an advanced notice of proposed rule-making last October outlining a  demonstration project to tie Medicare Part B prices to those prices paid overseas. That program would target certain physician-administered drugs paid for under Medicare Part B. HHS had planned to release the proposed rule by this spring and start the demonstration program by spring 2020, but so far no proposed rule has been released.

Verma shot down the idea of giving Medicare negotiating power over drug prices.

"The idea of negotiation, that works really well when there is competition in the marketplace. Patients have to be empowered to make decisions about their care. Turning over negotiation to the government doesn’t work well," she said. "The President is pushing hard on drug pricing and addressing drug costs. We’ve put out proposals. Congress is debating this right now. We hope they come up with a bipartisan solution to this," she said.

Thursday, two House committees held a markup of a plan from House Speaker Nancy Pelosi to give Medicare the power to negotiate for lower drug prices. However, it was derided by Republicans in the GOP-controlled Senate, making its chances of getting out of Congress slim. 

RELATED: House committees both advance Nancy Pelosi's drug plan with some changes

Other perspectives

During an interview at the TIME 100 Health Summit later in the day, former President Bill Clinton weighed in on drug pricing and healthcare policy, saying the U.S. government should have the power to negotiate lower drug prices.

Countries such as Germany and Switzerland have vibrant pharmaceutical industries but also have price controls, he said. "We're the only one with no price restraints. Giving the government the power to bargain for lower-priced drugs would make a big difference," he said.

Clinton said the nation was "at a crossroads" on healthcare reform with premiums going up faster than wages and co-pays, deductibles and drug prices going up more than premiums.

The Democratic party should target the "low-hanging fruit first," he said. "I think we need to pass a public option and go back to encouraging all-payer systems in states so that you can have some control over the costs and keep it as simple as possible," Clinton said.

HHS Secretary Alex Azar, who spoke earlier in the day, and Verma again blasted "Medicare for All" even as some Democratic presidential candidates continue to propose the idea for healthcare reform.

RELATED: Verma, Azar take aim at 'Medicare for All' proposals

"I’m always very concerned that we’re hearing conversations about more government, more Medicare for All. I think those kinds of things are very scary to me,” she said. "We need to put patients in control of care, not the government."

She added, "And this is coming from a government bureaucrat."

Azar referred to Medicare for All as a "simplistic notion" that was attractive to the public because the Affordable Care Act (ACA) "made a lot of promises and didn't deliver on them."

"Most Americans aren’t beguiled by utopian visions of healthcare. The American people actually take a fairly incremental approach to healthcare,” he said, preferring to gradually improve current systems rather than overhauling them entirely.

Kaiser Permanente CEO Bernard Tyson, who also spoke on the panel about healthcare pricing and drugs, warned that the increasingly high price of innovative therapies could impact access to care. 

"We need to address drug affordability or end up with even greater disenfranchised who will not benefit from the research that goes into helping to create these drugs," Tyson said.

Tyson cautioned about any major healthcare reforms that would "blow up" current insurance coverage options and create something new, whether that's Medicare for All or repealing and replacing the ACA.

"We're not playing politics. We’re in the middle trying to take care of patients," Tyson said.

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