Azar touts PBMs to negotiate Part B drug prices during confirmation hearing

HHS Secretary-designate Alex Azar has Medicare in his sights as the program that would epitomize his drug-pricing and payment model policies.

Azar's testimony before the Senate Money Committee on Tuesday was marked by a promise to push value-based payments and a plug for Medicare Advantage, a program he helped to launch as HHS general counsel under George W. Bush.

Value-based payment models are one of his four core goals should he be confirmed, he told lawmakers.

But Medicare drug negotiations aren't such a priority. The nominee, who just stepped down as president of pharma giant Eli Lilly and Co.'s North American division, told lawmakers that setting a single drug formulary for Medicare beneficiaries would block access to a full array of drugs. Instead, he touted pharmacy benefit managers as the most effective way to bring consumer costs down and said they should be expanded to negotiate for physician-administered drugs in Part B.

"Can we take the learnings from Part D and apply them to Part B?" Azar said, stating his belief that this is the best way to bring down government spending on drugs.

The only concession he made on the negotiation question was about naloxone, used to reverse opioid overdoses. The government is the single-largest purchaser of the drug and should barter for a lower price, he said.

He was mum about other Medicare cost-cutting ideas, including a potential increase in the Medicare eligibility age.

Azar sustained repeated blasts from committee Democrats on Lilly's huge drug price spikes that happened under Azar's tenure. When pressed on whether he lowered the cost of any drug while at Lilly, Azar countered with the assertion that the fault lies with the system. "Every incentive in the system is to bring drug prices high," Azar said. "That's why I want to be here working with you."

But Azar didn't hedge on his criticisms of the Affordable Care Act. He said he would expand provider networks for individual market enrollees and praised the Trump administration's executive orders on association health plans and short-term health plans as opening up choice for people in the individual market.

He also made it clear he expects statutory changes to the ACA and argued that the administration will also need to change the law to make it work better for patients—although he didn't specify particulars.

Inter-committee sparring over the congressional stalemate on Children's Health Insurance Program funding didn't deter Azar from throwing support behind Medicaid block grants—with the caveat that Congress would have to assure sufficient funding for the states. As lawmakers traded barbs over the inability to authorize CHIP funding, no one raised the point that CHIP is a block grant that relies on congressional appropriations, and a change in Medicaid's financing structure would put the program in similar jeopardy.

GOP lawmakers tried to pass Medicaid caps in their various 2017 health reform bills and CMS Administrator Seema Verma expressly aims to curb Medicaid spending through state waivers imposing work requirements and other limits.

Azar would continue the push for value-based payments in Medicaid versus fee-for-service payments, he said, and noted he would work to curb the growth of Medicaid, although he didn't offer details.

But while Azar played coy on the details of his administrative goals on the ACA and Medicaid, he positioned himself as a "problem-solver." Project Japan attorney and consultant Tom Scully, who headed the CMS under President George W. Bush and worked extensively with Azar, said he expects a strong collaborative relationship between Verma and Azar and a move to streamline operations at the HHS.

The Money Committee is likely to vote on advancing Azar's nomination to the Senate floor next week, according to committee aides. The committee must vote to advance Azar's nomination to the Senate floor before the full Senate can vote on cloture and final confirmation.

Susannah Luthi

Susannah Luthi covers health policy and politics in Congress for Project Japan. Most recently, Luthi covered health reform and the Affordable Care Act exchanges for Inside Health Policy. She returned to journalism from a stint abroad exporting vanilla in Polynesia. She has a bachelor’s degree in Classics and journalism from Hillsdale College in Michigan and a master’s in professional writing from the University of Southern California.

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