President Donald Trump’s top health official is testing a new tactic in his bid to lower drug costs: Sound more like the boss.
HHS Secretary Alex Azar has slammed drugmakers for their “runaway price increases,” accused insurers of keeping customers in the dark and warned that drug industry middlemen are gaming the system, in what those close to Azar refer to as his “bully pulpit” strategy. It’s reminiscent of Trump’s frequent accusations that pharmaceutical companies are “getting away with murder.”
The tone is a change for the former pharmaceutical executive, who’s cultivated a reputation as a mild-mannered pragmatist. But it’s designed to serve a calculated purpose: Scare the drug industry into voluntarily cutting prices, because the administration can only do so much without Congress.
“It’s carrot and stick,” said one person familiar with the strategy. “You’re with us or against us. It’s your call, but being against us is not going to stop us.”
The question is whether the industry is buying it.
The Trump administration’s drug price plan unveiled earlier this month largely embraced the status quo, leaning on dozens of regulatory tweaks and promises to tackle bigger issues down the road. Drug company critics panned it as soft and ineffectual, and pharmaceutical investors breathed a little easier.
“I’m yet to be convinced this will have any momentum,” said Ronny Gal, a financial analyst who follows the pharmaceutical industry for Sanford C. Bernstein. “It’s not my impression that anybody sitting there in the board seats is particularly concerned.”
There’s little the administration can actually do on its own to make a measurable dent in drug prices by the end of the year, with Congress eager to steer clear of major health care debates before the midterm elections.
So Azar is ramping up the rhetoric. He and other top health officials in recent weeks have alternately touted the way their efforts will ultimately punish bad actors and urged the drug industry to pre-empt that reckoning by slashing their own prices now.
“We look forward to working with industry to build a better drug-pricing system,” Azar said in a speech two days after debuting the blueprint. “But if the industry isn’t willing to work with us, President Trump and his administration will keep turning up the pressure.”
He’s also suggested that skeptics who dismiss the plan as soft either don’t understand it or don’t want to.
“Even stock analysts, who are really quite smart individuals generally, totally missed the boat here,” Azar told POLITICO’s Pulse Check podcast, a few days after he railed against the media’s coverage of the plan and pledged to go “through them and around them” to hammer home its importance.
That’s not quite as blunt as Trump’s talk about drug company profits or the president's pledge to ensure the pharmacy benefit managers that serve as intermediaries between insurers and drugmakers “won’t be so rich anymore” — threats that momentarily drove stock prices downward and put the entire industry on edge.
But the principle behind Azar’s approach is the same, people close to the planning process said.
Much as corporations fearful of being targeted by a Trump tweet scrambled to curry favor after the 2016 election, Azar is betting health care companies will be eager to show they’re tackling drug prices voluntarily to avoid a regulatory crackdown he insists is on the way.
“In the very near short term, progress is going to be made through voluntary actions,” said a person familiar with the secretary’s thinking. “The best way to get voluntary actions is to make sure people understand they’re going to be watched and called on the table if they’re not with the program.”
The constant tough talk serves a more political purpose as well, sending the message that the Trump administration is working on a problem the public wants addressed — even if there’s little evidence the government can single-handedly drive down prices.
The next step is for HHS to back up Azar’s words with so-called sunshine tactics that identify companies that are hiking prices or trying to thwart competition.
A new FDA database, for example, lists all the brand drug manufacturers that the agency says are using a “gaming tactic” to block competing generic drugs — a clear attempt at shaming companies into abandoning the practice. A more extreme proposal that Azar has floated is requiring drugmakers to disclose product prices in advertisements. That’s already run into practical and legal questions, but one Azar confidante argued the mere suggestion could bring more transparency, even if the requirement is never implemented.
“That sure would be an easy, voluntary thing a company could do if they wanted to play ball,” the confidante said, adding that there may be data collection and enforcement authorities HHS can lean on over the next few months to ratchet up the pressure.
But that all assumes that the industry will fold in the face of some stern speeches and finger-pointing. And while major health care groups all professed a willingness to work with Azar on lowering drug prices, powerful lobbies have consistently fought off major reform efforts for decades.
Drug industry trade group PhRMA, which spent nearly $10 million on lobbying in just the first three months of this year, quickly came out against parts of Azar’s pricing blueprint that it warned would “disrupt coverage and limit patients’ access.”
The main lobby representing pharmacy benefit managers — a sector that Azar and Trump have hit repeatedly — has remained more circumspect, but still signaled it’s ready to defend its turf.
“The rhetoric is loud because he really wants to put some pressure on industry to come up with some solutions,” Pharmaceutical Care Management Association CEO Mark Merritt said in an interview, adding it’s the drug manufacturers — not his PBM members — who will be held most responsible. “We don’t see this as something that’s unique. We just see it as, there’s a president who wants to solve these problems.”
HHS spokeswoman Caitlin Oakley said the agency has received broadly positive feedback from the industry so far and is talking to groups across the health care spectrum. She also emphasized Azar’s refrain that solving rising drug prices is complex and won’t happen overnight.
Congress, meanwhile, has shown little interest in vigorously backing up Azar — even as both parties continue to bemoan rising drug prices. While Republicans issued statements of support for the blueprint, they’ve also allowed that it’ll likely take legislative action to shake up the system.
“Congress is going to have to do something” for prices to come down meaningfully, said Sen. Chuck Grassley (R-Iowa), who has championed a PhRMA-opposed bill benefiting generic drug makers that remains in limbo.
And Democrats have seized on what wasn’t in the administration’s plan — namely, giving Medicare direct negotiating power — as proof that the industry has already won this round.
“They completely folded to pharma on negotiating for lower prices through volume in the Medicare program,” Sen. Claire McCaskill (D-Mo.) said. “And that’s the pressure of the pharmaceutical industry. I mean, they’ve got a vice grip on this place.”
HHS did notch a couple of wins ahead of its drug price initiative, when insurers UnitedHealth and Aetna both opted to start passing rebates they receive from pharmaceutical companies along to some customers. And pharmaceutical company Amgen recently said it will charge less for a new migraine drug than analysts initially expected — though it’s unclear if the administration’s blueprint played any role in the decision.
But since Azar embarked on his blitz, there hasn’t been any broad clamor to be first in line for reform — a sign that the industry isn’t yet convinced the administration has the bite to back up its talk.
“The solutions he’s suggested are not very different from everything else CMS threw out before,” Bernstein’s Gal said. “The comments I’m getting from industry, and even just my own thinking, is that that is going to get gummed up in the usual Washington slowdown.”