HHS Secretary Azar outlines Trump administration’s drug pricing plan | CNBC

Health and Human Services Secretary Alex Azar intensified the Trump administration’s attack on drug middlemen Tuesday, even suggesting the elimination of discounts that critics say inflate pharmaceutical prices.

President Donald Trump unveiled his administration’s blueprint to lower drug prices last month. It includes rethinking rebates, or discounts that firms called pharmacy benefit managers negotiate with manufacturers. Azar expanded on the idea in a hearing with the Senate Committee on Health, Education, Labor and Pensions.

Pharmaceutical companies set the advertised price, known as the list price. Pharmacy benefit managers, or PBMs, negotiate discounts, or rebates, down from this. Critics argue the practice inflates drug prices because it encourages manufacturers to set higher prices.

They’re a favorite target of the pharmaceutical industry, which says it’s a way for middlemen to profit from high drug prices. Azar, a former executive at drugmaker Eli Lilly, suggested possibly scrapping them in favor of a more straightforward pricing system.

“We may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts,” he said. “Such a system’s incentives, detached from these artificial list prices, would likely serve patients far better, as would a system where PBMs receive no compensation from the very pharma companies they’re supposed to be negotiating against,” Azar said.

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HHS Secretary Azar outlines Trump administration’s drug pricing plan.