Azar on Grassley-Wyden: No Price Controls, No Impact on Innovation

“I fundamentally disagree with the notion that the inflation penalty provisions that are in the Grassley-Wyden bill constitute price caps or price controls.”

 

“The changes here still leave plenty of room for profit-margin innovation and investment. There would be no material impact in any way to the R&D enterprise in the United States…”

 

Washington – Department of Health and Human Services Secretary Alex Azar, a former president of a major pharmaceutical company, said yesterday at a Senate Finance Committee hearing led by Chairman Chuck Grassley (R-Iowa) that the Prescription Drug Pricing Reduction Act would not negatively impact U.S. innovation and that a key provision does not constitute price controls. Video can be found HERE and text below.

 

TRANSCRIPT:

 

  CARPER: Some of our Republican colleagues believe that the finance bill would amount to price controls in the pharmaceutical industry and jeopardize innovation for new therapies. And as a former CEO – a native, I think of Salisbury, Maryland – but as a former CEO of a major drug company, do you agree with these concerns? And second half of that question would be, do you think drug companies can continue to innovate under the Finance Committee's bill?

 

  AZAR: I – with all respect, I fundamentally disagree with the notion that the inflation penalty provisions that are in the Grassley-Wyden bill constitute price caps or price controls. These are the – these are reasonable restrictions on price increases that create basically a financial disincentive to the year-after-year price increases that we see. And as long as those incentives are in the system, we will continue to see, year after year, price increases. And the Grassley-Wyden package would contain that. It's important to remember, these drug companies already sign contracts with the middle men, with long-term price predictability guarantees. So this is not an alien concept to the drug companies. This exists as a commercial practice already. We would just get the benefit for our seniors and our taxpayers through this – through this program. And I'm sorry, Senator. There was a second part to your question. I wanted to make sure I get that?

 

  GRASSLEY: Senator Carper, before you repeat the second question, without taking time away from you, wouldn't another way of saying it, since we pay $138 billion of taxpayers' money for Medicare drugs, that we would be just capping the subsidy that we give to insurance – give to pharmaceutical companies?

 

  AZAR: Well, it does. And that's – that's one of the – the really important innovations of the Grassley-Wyden package, is it actually changes the dynamic. Right now, interestingly, the middle men who run these drug plans have every incentive, actually, for the drug companies to jack up their list price because it races the senior to what's called the catastrophic phase, where the government pays most of the cost of that insurance through the reinsurance. This would be fixed by Grassley-Wyden.

 

  GRASSLEY: Senator Carper?

 

  CARPER: Yeah, thanks, Mr. Chairman. The second half of my question, and I don't think you got to it, was do you think drug companies can continue to innovate under the Finance Committee's bill?

 

  AZAR: Oh, absolutely. The changes here still leave plenty of room for profit-margin innovation and investment. There would be no material impact in any way to the R&D enterprise in the United States, which we are all committed to.