New HHS Secretary Azar Pledges to Focus on Prescription Drug Costs

Policies will promote market competition to rein in rising prices

Stephen Miller, CEBS By Stephen Miller, CEBS January 30, 2018
New HHS Secretary Azar Pledges to Focus on Prescription Drug Costs

​Alex Azar

Former pharmaceutical executive Alex Azar is promising he'll use his new role as secretary of the U.S. Department of Health and Human Services (HHS) to tackle the rising costs of prescription drugs.

The Senate voted Jan. 24 to confirm him to the role. He was nominated for the position in November by President Donald Trump.

Azar ran Indianapolis-based Ely Lilly & Co.'s U.S. operations from June 2007 until last year and before that served as HHS general counsel and deputy secretary under President George W. Bush. Tom Price, the past HHS chief, resigned after reports that he used an excessive amount of government funds for private jet travel.

During his Jan. 9 hearing before the Senate Finance Committee, Azar testified that his insider knowledge "of how insurance, manufacturers, pharmacy and government programs work together" would help him to address ways to moderate drug price increases "while still encouraging discovery [of new pharmaceuticals] so Americans have access to high-quality care."

While there is no "silver bullet" to fix the complex issue of drug pricing, Azar told the Senate committee, he would support policies to ensure robust market competition for both generic and brand-name drugs and to "create a viable and robust biosimilar market also, to compete against branded companies in that high-cost biologic space."

He said he intended to "go after any types of 'gaming' or exploitation" of branded drug patents by pharmaceutical firms so they can delay competition from generic versions of a drug and to take steps to "create incentives that actually pull down those list prices so that when patients [need to] pay out of pocket at the pharmacy, they're not hit with that kind of [high] cost."

A Presidential Pledge

During his State of the Union address on Jan. 30, President Donald Trump said: 

One of my greatest priorities is to reduce the price of prescription drugs. In many other countries, these drugs cost far less than what we pay in the United States. That is why I have directed my administration to make fixing the injustice of high drug prices one of our top priorities. Prices will come down.

Employers can also design their drug plans to help control costs, HR Magazine reported last year.

[SHRM members-only toolkit: Managing Health Care Costs]

Market-Based Approaches

"Through advertising and marketing, the pharma industry has built demand and preference for name-brand drugs by both the doctors who prescribe them and the patients that fill those prescriptions," said David Henka, president and CEO at RxTE Health, a pharmacy benefit management firm. "While these name-brand drugs are effective, there are oftentimes less expensive and equally-as-effective drugs available. The question is, how do we get patients to switch to these generic pharmaceuticals?"

Henka told SHRM Online that one solution is to "incentivize the selection of the lowest-cost drug option within a therapeutic category" by providing cost incentives that prompt consumers to switch to a lower-cost alternative that achieves equivalent clinical outcomes.

"We've seen time and again that more products lead to lower costs and [that] incentives to pay for [prescription drugs] based on their value help improve outcomes," said Joel White, president of the Council for Affordable Health Coverage (CAHC) in Washington, D.C., which last year proposed a set of market-based reforms to lower the cost of prescription drugs and health care. "As policy makers look for solutions to lower costs, we believe it is important to offer reforms firmly rooted in competitive markets and incentives that promote value, innovation, transparency and appropriate access to treatment."

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