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November 16, 2017

What does Trump's HHS secretary pick, a former Eli Lilly executive, think about drug costs?

Daily Briefing

    Health care industry observers are questioning how President Trump's pick for HHS secretary, Alex Azar, will tackle rising prescription drug prices—a key focus of Trump's administration—given Azar's background as a pharmaceutical executive.

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    Azar's background

    Azar from 2007 until this January held executive-level positions at Eli Lilly and Company. In 2007, he worked as the company's SVP of corporate affairs and communications, and in 2012, he began overseeing the company's U.S. operations. According to Axios, the company is among three drugmakers at the center of a class-action lawsuit that alleges insulin makers and pharmacy benefit mangers (PBMs) colluded to raise prices.

    During his tenure at Eli Lilly, Azar focused on counterfeit treatments, health IT, and federal and international government affairs and public policy. Before coming to Eli Lilly, Azar served as general counsel and deputy secretary at HHS under the Bush administration.

    Azar also serves on the board of HMS Holdings, a publicly traded company that audits health care payments.

    Trump's message on prescription drugs

    According to Axios, Trump has been a vocal critic of pharmaceutical companies: In January, Trump said drugmakers are "getting away with murder." In the past, Trump suggested using the government's buying power to rein in prices. Trump has also suggested that other countries, where brand-name medicines generally cost less than in the United States, should pay more.

    However, the Trump administration hasn't taken much action to curb brand-name drug costs, Bloomberg reports. Rather than pursing direct price controls, the administration so far has backed moves to increase competition for generics.

    Azar's stance

    In a tweet Monday, Trump said Azar "will be a star for lower drug prices!"—but according to Axios, Azar's previous comments and actions suggest it's unlikely that he will pursue major pricing reforms.

    For instance, Azar has opposed government intervention on drug prices in the past, preferring a more industry-led approach, Bloomberg reports. Azar at a drug costs panel hosted a year ago by the Manhattan Institute, said, "When the government gets involved, it is more likely than not to create perverse incentives and unintended consequences than when the market players can work together to figure that out."

    Further, Bloomberg reports that Azar's comments on drug costs have aligned with a common pharmaceutical industry argument that other parts of the supply chain are responsible for much of the cost increases. In May, for instance, Azar said, "Why did things erupt [over drug pricing]? They erupted because we have seen a complete and fundamental restructuring of health insurance in the United States over the last three to five years."

    Azar has said industry members should work together to tackle drug costs. "We're trying to usher in a golden age of medicines with a payment system that is in its golden years," Azar said at the Manhattan Institute event. "That system needs to be retired and replaced. The only way to do that is for every private health care institution, drug companies, insurers, employers, [pharmacy benefit managers], hospitals, to work together to create a better way to pay for medicines."

    Nonetheless, Azar has said that if the government does intervene, "then so be it."

    Industry comments

    Citing Azar's comments, some industry stakeholders have expressed doubt Azar will do much to prioritize drug pricing if confirmed as HHS secretary. As Walid Gellad, who heads the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, said, Azar "is not the pick you would expect from someone who is going around calling the pharmaceutical industry a bunch of murderers."

    If Azar does address drug pricing, Axios reports that industry experts expect that he will likely prioritize easing or revising regulations to benefit industry players. For example, Spencer Perlman, a health care analyst at Veda Partners, said, "We expect that HHS under Mr. Azar's leadership will continue to pursue relatively pharma-friendly approaches to drug pricing, such as value-based purchasing initiatives and cutting red tape at [FDA]."

    But not everyone agrees. Mark Merritt—CEO of the Pharmaceutical Care Management Association, which represents prescription plans—said he doesn't think Azar would target his group's members to advance the positions held by the pharmaceutical industry. "Serious policymakers like Alex see through that," Merritt said. He added that he thinks Azar would want to distinguish himself from his background in industry and "focus on public policy where he's known as a fair and honest broker" (Edney et al., Bloomberg, 11/14; Herman, Axios, 11/14; Nisen, Bloomberg/Washington Post, 11/13).

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