The Trump administration may demand drug companies offer fixed discounts to lower prices, Health Secretary Alex M. Azar II said Tuesday, saying the current system of drug companies offering complex rebates isn’t producing enough savings for consumers.
Democrats said it’s time for the Trump administration to do something, after the president’s promise two weeks ago of big voluntary concessions by pharmaceutical companies have yet to materialize.
Mr. Azar said he’s looking to push for a more concrete system than rebates. Pharmacy benefit managers, or PBMs, negotiate rebates to slice a percentage off a drug’s price, yet those savings might not be passed on to consumers, the secretary told the Senate Health Committee.
And when drug list prices and rebates go up in tandem, everyone wins but the patient.
“We may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts,” Mr. Azar testified. “Such a system’s incentives, detached from artificial list prices, would likely serve patients far better.”
He said Health and Human Services appears to have the regulatory authority to enact the change, but a thoughtful approach from Congress would “shore up” the idea.
Sen. Lamar Alexander, Tennessee Republican and the health-panel chairman, said he’s intrigued by the idea and ready to help.
“I questioned the need for rebates, because they make it difficult to track where the money goes,” Mr. Alexander said. “And I understand that the administration may need some additional authorities to modify or end the use of rebates to increase transparency.”
The idea is one of several contained in Mr. Trump’s plan to address the thorny issue of soaring drug prices. It’s a pivotal midterm election year, and voters consistently cite the cost of their prescriptions as a key problem.
The administration is already naming and shaming companies that block generic competition, but Mr. Azar said he could use Congress’ help in other areas, such as forcing drug companies to disclose their prices in advertising.
“It would always appreciate Congress to back me up on that, because I undoubtedly will be sued,” he said.
Democrats said they’ve written bills that would help, but suggested it’s GOP leaders on Capitol Hill who are the obstacle.
“I hope that you’ll push Sen. [Mitch] McConnell to bring those up, as they’ve already been introduced and we can get some of those steps done,” said Sen. Patty Murray, Washington Democrat.
Complicating the effort, however, is Democratic frustration with Mr. Trump’s failure to follow through on a 2016 campaign pledge to directly negotiate down drug prices.
“He told crowds he would negotiate like crazy,” Mrs. Murray said.
Mr. Azar said Mr. Trump has expanded negotiations under Medicare’s drug benefit — Part D — and shifted doctor-delivered drugs under Medicare Part B, where no bargaining takes place, to Part D.
But Democrats said that’s much smaller than what they thought Mr. Trump was promising.
Sen. Elizabeth Warren, a potential 2020 presidential challenger, said Mr. Trump also failed to deliver the “massive” drops in prices he hinted at during a May 30 bill signing.
The president said companies would voluntarily drop prices within two weeks, but there’s been no announcement with one day to spare until his self-imposed deadline.
Ms. Warren, Massachusetts Democrat, said her office surveyed 10 drug companies and couldn’t find any that planned to decrease their prices. One indicated that prices may go up, she said.
“It’s been two weeks and there have been no decreases and an indication of an increase,” Ms. Warren told Mr. Azar in a contentious back and forth.
The secretary said pharmaceutical executives are working on ways to slash costs, without being treated unfairly under the current system of rebates.
“There are actually several drug companies that are looking at substantial and material decreases of drug prices,” he said.