Freedom Line Blog

It’s been just one month since President Trump unveiled his American Patients First plan to reduce drug prices and, despite the naysayers, we’re already seeing results.

This week, U.S. Department of Health and Human Services Secretary Alex Azar appeared before the Senate Health, Education, Labor and Pensions (HELP) Committee to provide detail on the progress that has already occurred.  His testimony extended over two hours, and Sec. Azar answered tough questions from both Democrats and Republicans, reiterating some key parts of the President’s plan.  Among other important testimony, he highlighted the transparency failures of Pharmacy Benefit Managers (PBMs) and stressed the need to increase competition throughout the market to bring prices down.

That stands to reason, since President Trump’s plan pays special attention to PBMs – “middlemen” that operate in the opaque prescription drug pipeline – who negotiate with insurers, drug manufacturers and pharmacists to bring drugs to market.  As Senator Susan Collins (R-ME) pointed out in the hearing, the way in which PBMs earn profits creates an “incentive for higher list prices,” further driving up the price of prescriptions throughout the industry.

Accordingly, President Trump’s plan deliberately opens up this opaque system, providing greater information to all parties to stop what Sec. Azar characterized as the “perverse” incentives in the system.  By removing the ability for PBMs to profit from price increases, the President’s plan allows the natural downward pressures of the market to take hold, eliminating another driver of cost that consumers feel at the pharmacy counter.  Secretary Azar described the blueprint as a “comprehensive tackling and restructuring of the drug channel, nothing short of that,” further evidence of the President’s bold commitment to this issue.

Senator Collins continued to highlight PBM abuses, explaining how PBMs often employ “gag clauses” that prevent pharmacists from helping consumers to find the best price for their medication.  Those clauses are widely used to help PBMs maximize their profits, but the Trump Administration has already taken action to ensure that contracts with CMS cannot employ gag clauses.

Secretary Azar also explained how the President’s plan will bring greater competition to Medicare Part B, modeled on the success of the Part D program.  Currently, the federal government purchases drugs for Part B at the list price, costing the program billions in extra costs.  In contrast, Medicare Part D allows private companies to negotiate and manage plans to keep costs low.

Secretary Azar further explained to Sen. Michael Bennet (D-CO) that President Trump’s plan proposes greater negotiation between private-sector actors to help lower costs down across the program.  Nevertheless, Sec. Azar cautioned that, due to the size and complexity of the program, the President’s plan purposefully remains open on that issue, so that the Administration can work with Congress and other stakeholders to ensure that these competitive reforms are implemented without harming existing enrollees.

Those actions, along with an overall increase in transparency in the marketplace for all parties to bring more information and competition, are already at work.  President Trump’s plan works because it finally addresses the real drivers of cost, and removes the barriers that are stopping free market forces from bringing costs down.  On that basis, Sec. Azar’s testimony shows us that we are finally on the right path to bring prices down.