Trump, Biden HHS chiefs clash over impact of Medicare drug price negotiations

Two health secretaries from the Trump and Biden administrations agree that bringing down high drug costs is a critical priority to make healthcare more affordable for patients.

But they have far different views on the strategies to do it and the government's role in the marketplace.

Former Department of Health and Human Services (HHS) Secretary Alex Azar, who served under the Trump administration, bashed the Biden administration's program for negotiating lower Medicare drug prices with pharmaceutical companies, calling it "price fixing."

"I'm quite nervous with the IRA that we're going to see a dramatic reduction in the incentives of innovation. You won't see investment in line extensions, you won't have enough time to add new indications. You might see delayed launches in the U.S.," said Azar, a former Eli Lilly executive, during the Milken Institute's Future of Health Summit event in Washington, D.C., on Monday. The event was also live-streamed.

"Americans aren't going to be happy when France gets drugs before we do," Azar said.

Congress passed the sweeping Inflation Reduction Act (IRA) last year that gives Medicare the power for the first time to negotiate a small subset of Part D and Part B drugs.

In August, the Centers for Medicare & Medicaid Services (CMS) unveiled its highly anticipated list of 10 drugs subject to Medicare price negotiations, which includes popular blood clot prevention drugs Eliquis and Xarelto and diabetes drugs Jardiance and Januvia.

The former Trump official's comments echoed criticism heard from the pharmaceutical industry that the impact of the IRA would curb innovation and delay drug launches.

Azar also argued that the Medicare drug negotiation program sets up perverse incentives that could lead pharmacy benefit managers to place drugs with high rebates on different coverage tiers, which could drive up patients' out-of-pocket costs.

President Joe Biden's HHS Secretary Xavier Becerra touted the program as an effective way to lower drug costs, pointing out that the IRA now caps the cost of insulin at $35 per month for seniors who have Medicare.

"We're going to make sure that we continue to innovate in America by making sure we have competition drive what the price of prescription drugs should be," Becerra said during the Milken Institute event.

He pushed back on Azar's claim that the program amounts to "price fixing."

"No one is captive in this negotiation; no one is forced to negotiate. If any of those drugmakers don't wish to negotiate, they're not required to. They are asked to participate in the negotiation on their particular drug," he said. 'If they want to access to the 65 million Americans who have Medicare, we're saying, 'We want to be able to negotiate a price.' No car dealership requires you to buy the car from them. So it's unfair to claim that these companies are going to be compelled to accept the price that the secretary sets. You don't have to participate in that process."

He added, "Secondly, in that process, we're going to essentially disclose to them all the information we're getting, in fact, we're asking them for information so we know exactly how they're coming about the pricing of their particular product. We'd like to have some transparency, so we can see what they're doing."

As the IRA negotiations play out, industry is pushing back. In a series of lawsuits, major drug companies and industry groups argue the law violates their constitutional rights, Fierce Pharma reports.

But many drug companies that have sued the federal government over the drug price negotiation provisions in the IRA also have signaled that they will participate in the negotiation process. 

"All the companies that are part of the negotiation sued us to not go forward with this new law. And all so far, they've lost every one of those lawsuits. All of those drug companies have signed up to negotiate with us," Becerra said.

Both secretaries highlighted that high-income European countries pay significantly lower prices for drugs, but Azar lauded former President Donald Trump's policy that tied prices for drugs reimbursed under Part B to prices paid by countries overseas. The Biden administration rescinded the so-called Most Favored Nation model, which providers had slammed due to concerns over reimbursement.

"How do we get in healthcare market forces to work as best possible, because you're going to get the right allocation of capital and the right incentive structures on innovation the more you've got basically free market approaches towards pricing mechanisms," Azar said.

Becerra argued that the Biden's administration Medicare price negotiation program addresses these same concerns over higher prices in the U.S. market.

"Why is it that those same drugs that were paying one amount for, those countries are able to secure those drugs at a third of the price? All we want to do is negotiate to make sure we're not we're not the saps here and being taken advantage of," Becerra said. "We want to have fairness for the 65 million Americans who are Medicare. I'd love to have it for everyone. But right now the law only gives us authority for the folks on Medicare. But at the end of the day, these are market forces. We can't negotiate a deal without being able to show folks what's behind the curtain."

Changes to the Medicare Part D program from the IRA include capping insulin copays and out-of-pocket spending and eliminating the 5% coinsurance requirement for the catastrophic phase.

Many payers think the changes will have an adverse impact on their portfolio of Part D plans, according to a recent survey. About 1 in 5 payers think they will need to reduce the number of plans they offer.