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The Journal Gazette

Wednesday, June 13, 2018 1:00 am

Health chief calls for end to drug pricing tactic

Anna Edney | Bloomberg

Health and Human Services Secretary Alex Azar told lawmakers Tuesday it may be time to eliminate the complex system of rebates that drug companies and pharmacy-benefit managers use to negotiate and set prices.

Once drugmakers set a list price for a product, pharmacy-benefit managers like CVS Health and Express Scripts Holding negotiate rebates. The PBMs have been criticized for keeping some of the rebates for themselves instead of passing them directly to consumers to lower their out-of-pocket costs. Other critics say the spread between a drug's list price and the PBM-negotiated one can hurt patients who don't use insurance.

In his health care blueprint released last month, President Donald Trump called for looking into reducing or ending the rebates.

“We may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts,” Azar said Tuesday in testimony before the Senate Health, Education, Labor and Pensions Committee.

“Such a system's incentives, detached from artificial list prices, would likely serve patients far better.”

Sen. Lamar Alexander, R-Tenn., chairman of the committee, has questioned the need for rebates because they make it difficult to track true drug spending.

“I understand the administration may need some additional authority to modify or end the practice of rebates,” Alexander said.

Azar's testimony came as the Food and Drug Administration released the final version of a plan to make it easier for drugmakers and insurance companies to negotiate pricing deals based on how well a medicine works, a change that both sides say could help lead to a more efficient health care system.