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Alex Azar's nomination clears Senate with support from five Democrats and one Independent – but not Rand Paul, R-Ky.



Alex Azar, Trump’s HHS secretary nominee, who spoke at the Senate HELP committee 11/29/17




Now that his nomination to be HHS secretary has cleared the full Senate, Alex Azar is likely to focus on advancing the government's development of policies to reduce drug prices in Medicare Part D and Part B.



Azar's nomination was approved by the Senate in a 55-43 vote, with support from five Democrats and one Independent. (See box.)



Only one Republican, Kentucky's Rand Paul, voted against the nomination. During Azar's confirmation hearing in the Senate Finance Committee, Paul threatened to withhold his support because of the nominee's opposition to drug importation. (Also see "Targeted Importation: A Drug Pricing Mechanism For 'Predatory Actors' And An A-Pauling HHS Confirmation Dilemma" - Pink Sheet, 27 Dec, 2017.)



During his confirmation process, Azar's background as an executive with Eli Lilly & Co. was criticized by several Democrats, who expressed skepticism about his commitment to effectively lowering drug prices. A number of them reiterated their concerns during floor statements prior to the Senate vote.



As head of HHS, Azar will lead a department including FDA, the Centers for Medicare and Medicaid Services, the National Institute of Health, the Health Resources and Services Administration, which operates the 340B drug discount program, and the Centers for Disease Control and Protection.



Azar said during his confirmation hearings that lowering drug prices would be among his top priorities as secretary. Other priorities include reforming the Affordable Care Act, promoting value-based payments in Medicare and tackling the opioid epidemic.



He expressed concern with marketplace "incentives" that are driving manufacturers to raise list prices and pledged to work on ways of "pulling down those list prices" so that patient cost sharing is reduced. Although he didn't specifically mention it, the idea of point-of-sale rebates in Medicare Part D could fit that description. [A #PS122273]



CMS recently issued a request for information (RFI) on sharing a portion of negotiated rebates at the point-of-sale to lower cost sharing, a policy that is strongly supported by the biopharma industry but opposed by payers. The RFI was part of a proposed rule on Part D and Medicare Advantage plans. (Also see "Rebate Pass-Through Would Lower, Not Raise, Medicare Spending – PhRMA" - Pink Sheet, 18 Jan, 2018.)



Redirecting Rebates And The 'Non-Interference' Clause



One argument against the policy is that it would violate the so-called "non-interference" clause in the Medicare Modernization Act, which established Part D. The Pharmaceutical Care Management Association raised the issue in recent comments to CMS responding to the RFI. The clause prohibits HHS from "interfer[ing] with the negotiation between drug manufacturers and pharmacies and [prescription drug plan] sponsors."



The interaction between the rebate policy and the non-interference clause was raised by the leaders of three key congressional committees in a Jan. 19 letter to HHS and CMS. "We want to emphasize our support for the protection of [the] integral non-interference clause," wrote Senate Finance Committee Chair Orrin Hatch, R-Utah, House Energy & Commerce Committee Chair Greg Walden, R-Ore., and House Ways & Means Chair Kevin Brady, R-Tex.



The letter does not specifically challenge the point-of-sale rebate policy but cautions CMS to proceed with a separate rulemaking process if it decides to go ahead with it. "As changes to the Medicare program are considered using the feedback from the RFI. … We urge the Administration to pursue any specific policy changes through a future notice and comment rulemaking," the letter says.



"A full and transparent process is paramount for potential changes of this magnitude. Thus, policy changes as a result of the RFI should not be included" in the upcoming final rule on Part D and MA plans "to allow for robust input from the public and full examination by congress."



Price Negotiations For Part B Drugs



Azar endorsed price negotiation for Medicare Part B drugs as another way to lower drug costs during his confirmation hearings. Unlike Part D, where pharmacy benefit managers negotiate prices, "we pay sticker price plus a mark-up; there is no negotiation" in Part B, he said. (Also see "Medicare Price Negotiations: HHS Nominee Suggests Adapting Part D 'Learnings' To Part B" - Pink Sheet, 29 Nov, 2017.)



Part B drugs are agents that are administered in a physician's office, such as chemotherapy or treatments for age-related macular degeneration. Medicare pays the average sales price (ASP) plus 6% for Part B drugs. Although annual spending for Part B drugs is less than one-fourth of that for Part D – around $25bn versus $140bn – expenditures in Part B are growing rapidly and CMS has long been concerned about the trajectory.



Azar's drug pricing goals also include promoting the generic drug and biosimilars markets and cracking down on "gaming or exploitation" of patents for branded drugs, he has said. (Also see "Azar's HHS: Generic Certainty, REMS Fixes Can Lower Drug Prices" - Pink Sheet, 29 Nov, 2017.)



To address patent gaming, Azar has proposed removing barriers imposed by Risk Evaluation and Mitigation Strategies (REMS), such as by reviewing whether the plans are still necessary when generics arrive. Those goals are in sync with the plan laid out by FDA Commissioner Scott Gottlieb.



Azar has also been critical of "multiple filing of patents to evergreen a product with a modification" of the manufacturing or delivery process. "I think that's one of the important avenues that we ought to be pursuing," he told the Senate Health, Education, Labor & Pensions Committee.



Azar will succeed Tom Price, who resigned from HHS in late September, following controversy over his use of expensive chartered air travel. HHS Deputy Secretary Eric Hargan has been acting secretary after he himself went through the Senate confirmation process shortly after Price departed. Hargan and Azar previously worked together at HHS, including during Azar's own stint as deputy secretary from 2005-2007.



In a statement on Azar's confirmation, the Biotechnology Innovation Organization expressed support for the soon-to-be secretary but did not mention his comments on drug pricing.



“The opportunities facing HHS today are enormous," BIO said. "From encouraging the development of new technologies to help solve the opioid crisis and removing barriers to value-based payment models, to overseeing the FDA and NIH as they implement landmark new legislation to speed the science and development of new cures and promote greater competition and choice in the marketplace, the decisions made at HHS today will leave a lasting imprint on American health care for decades to come.”



The Pharmaceutical Research and Manufacturers of America did acknowledged pricing issues more directly in its statement: "PhRMA congratulates Alex Azar on his confirmation as Secretary of Health and Human Services, and we look forward to working with him in this new role to improve patient affordability and access to medicines. His broad health expertise and extensive experience in both the public and private sectors will serve to make him an effective leader in tackling our nation’s health challenges."



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