The Health 202: There's a fight brewing between the Trump administration and drugmakers

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THE PROGNOSIS

Pharmaceutical companies may have dodged one bullet with President Trump’s plan to lower drug costs. But now they’re trying to duck another as his administration pursues a Medicare restructuring that could cut deeply into their profits.

Of all the ideas the White House released last week, Health and Human Services Secretary Alex Azar says consolidating coverage for all prescription medicines under Medicare’s “Part D” drug program — instead of its “Part B” doctors program — holds the most promise for ramping down spending.

The drug industry hates the idea, since it generally gets paid more for drugs covered under Part B than under Part D. Drug companies have “serious concerns” this idea would limit “patient affordability and access,” Pharmaceutical Research and Manufacturers of America executive vice president Lori Reilly said on Tuesday in the lobbying group’s first public remarks about the proposal.

But Azar, the former president of the U.S. division of Eli Lilly, has been touting the proposal all week at news briefings and in public speeches – and he pushed back on Reilly’s comments yesterday, saying he would “beg to differ.”

“Bringing negotiation to Part B drugs is such a potent way to bring down prices that PhRMA is already protesting the idea,” he said in an address at the American Enterprise Institute. “This is really on their list of worst nightmares.”

Trump’s approach to lowering U.S. drug spending has been perceived as relatively soft on the pharmaceutical industry, at least compared to what he suggested on the campaign trail: Allowing the federal government to directly negotiate lower drug prices through Medicare plans.

The president has since discarded that idea, to the disappointment of Democrats. But Azar and Co. appear eager to take a different hard line against the industry by shifting more drug coverage under the Part D umbrella, a program that has more discounts and negotiating tools at its disposal.

To understand PhRMA’s opposition, just look at how much Medicare pays for medicines under each program. In Part B, the government generally pays a drug’s average sales price plus 6 percent. But in Part D — which operates more like the commercial market with private insurers bidding to provide coverage — drugmakers pay an average 23.8 percent rebate off the list price of their medications, meaning some goes back to those paying for the medicines to begin with.

So to drugmakers — particularly those that sell the drugs available under Part B — such a change could represent big losses for them.

“They can do math really well,” Azar told me yesterday.

To illustrate this, just look at how much money Part B could save if it also used a rebate system. Medicare could have collected $3.1 billion in 2011 if drug companies had been required to pay rebates similar to those paid under Part D, the HHS inspector general has estimated.

Azar says his end goal is to transition all prescription drug coverage to Part D, although he admits he’d need action by Congress to get it done.

“I doubt you can move all of them because that’s difficult, and that will become a lobby war in this town,” said Mike Strazzella of the lobbying firm Buchanan, Ingersoll & Rooney.

But Azar does have the power to start shifting certain drugs to Part D, using experimental models allowed under current law – and he said he’s moving swiftly in that direction. The move “will require a stiff spine,” Andy Slavitt, who led the Centers for Medicare and Medicaid Services under President Barack Obama, told me.

Slavitt, who has become an outspoken critic of HHS under Trump, isn’t totally pooh-poohing the idea, but he is a bit more skeptical. He listed some concerns with shifting the drug coverage, one being that 25 percent of Medicare recipients don’t have a Part D plan -- but they still need access to medicines.

And he noted that seniors’ out-of-pocket costs have been rising under Part D plans. They’ve been facing large co-pays or coinsurance when buying drugs at the pharmacy counter, and then there’s the “donut hole” where they lose drug coverage for a time after hitting a certain level of annual spending.

Slavitt feels the same goals Azar has outlined could be achieved by bringing the same negotiating tools to Part B as are available under Part D, rather than merging the two programs. Of course, PhRMA would likely oppose that move, too.

“Either path will be aggressively opposed by the PhRMA industry and their surrogates and either path will require a stiff spine from the secretary,” Slavitt wrote me in an email.

AHH, OOF and OUCH

AHH: Vermont’s Republican Gov. Phil Scott signed a bill making the state the first in the country to legalize the import of prescription drugs from Canada. Overwhelmingly supported by the state's Democratic-controlled legislature, the measure is “one of the most aggressive attempts by a state to tackle rising drug prices that critics say are crippling state finances,” Politico’s Rachana Pradhan reports. HHS still has to certify Vermont’s program, she adds.

“Trump previously backed the idea of importing drugs from Canada, but his top health appointees have been critical of the practice,” Rachana notes. On Monday, HHS Secretary Azar said any process to import drugs from other countries is a "gimmick." “The United States has the safest regulatory system in the world. The last thing we need is open borders for unsafe drugs in search of savings that cannot be safely achieved,” Azar said.

OOF: The FDA is reversing a decision to award a no-bid $4.2 million grant to a policy center at Duke University headed by former FDA commissioner and current paid board member for Johnson & Johnson Mark McClellan, after several health policy experts had expressed favoritism concerns about the initial no-bid proposal, The Post's Carolyn Y. Johnson reports.

"The funding opportunity was posted in late April as a five-year grant for which only a single institution, the Duke-Robert J. Margolis Center for Health Policy, was eligible to apply," Carolyn writes. "The grant's purpose was to 'to help advance regulatory science to promote the increased availability of safe and effective drugs to the public,' according to the request for application."

This week, the FDA said it is in the process of opening the grant application to other institutions. "Several health policy experts had expressed favoritism concerns about the initial no-bid proposal, raising questions about what made the Duke center uniquely qualified to do the work, which involves convening discussions with drug companies, health-care providers and patient groups to discuss key issues in the drug approval process," Carolyn writes.

OUCH: Michigan State has agreed to pay $500 million to settle lawsuits filed by 332 alleged victims of disgraced former sports physician Larry Nassar, The Post's Will Hobson and Cindy Boren report. The settlement ends the university’s involvement in litigation over the former Olympic gymnastics doctor’s rampant sexual abuse of girls and women under the guise of medical treatment.

“This historic settlement came about through the bravery of more than 300 women and girls who had the courage to stand up and refuse to be silenced,” said John Manly, one of several attorneys representing victims. “It is the sincere hope of all of the survivors that the legacy of this settlement will be far-reaching institutional reform that will end the threat of sexual assault in sports, schools and throughout our society.”

“Nassar, 54, is serving an effective life sentence in prison after pleading guilty to assaulting nine girls and women in Michigan, as well as to federal child pornography crimes,” Will and Cindy write. “The settlement will pay $425 million to the 332 girls and women who have come forward to date, averaging about $1.28 million per victim. Michigan State will set aside an additional $75 million in a trust fund for any victims who come forward in the future.”

AGENCY ALERT

— The search for a permanent head of the Department of Veterans Affairs appears to be narrowing. Two retired generals under consideration for the role visited the White House in the last week to interview for the job, the Wall Street Journal’s Peter Nicholas reports.

  • Retired Air Force Lt. Gen. Ronnie Hawkins and retired Army Lt. Gen. Michael Ferriter are on the short list of contenders for the spot, joining Ron Nicol, a top adviser at the Boston Consulting Group (although a White House official said Nicol’s chances of getting nominated are low, Peter writes).
  • Ferriter runs a consulting company, the Ferriter Group, and Hawkins is president and chief executive of the Hawkins Group, which provides federal and commercial advisory and consulting services for cybersecurity and information technology.

“The White House, having promised to overhaul the long-troubled VA, which serves nine million veterans, is now taking more time to vet candidates before putting forward a nominee,” Peter writes. “One person close to the White House said Mr. Trump has also considered his chief of staff, John Kelly, for the VA job. But White House officials insist Mr. Kelly, a retired four-star Marine general, isn’t a candidate.”

INDUSTRY RX

— Health care startup Oscar Insurance Corp. said it plans to expand in Arizona and at least three other new markets next year, a signal that it believes the Affordable Care Act will survive despite uncertainty over the law. “We feel comfortable that the risk pool will remain comfortable, and that we can roll out the blueprint for expansion that we have in more areas,” chief executive Mario Schlosser told Bloomberg News’s Zachary Tracer.

“Oscar has stuck with Obamacare even after years of financial losses, as well as political uncertainty driven by the Trump administration’s push to repeal the law,” Zachary reports. “After pulling back from several states for 2017, the company expanded into four markets for 2018 — Cleveland, New Jersey, Austin and Nashville — and enrolled about 240,000 members at the end of the first quarter, up from about 90,000 last year.” The company didn't say what new markets it plans to expand into in 2019.

REPRODUCTIVE WARS

— Surrogate mothers are in Washington this week to ask the Supreme Court to clarify the rights of women and children in the controversial industry, our colleague Ariana Eunjung Cha reports. 

Three women who have filed lawsuits in different states charge that surrogacy contracts are exploitative to birth mothers, create a class of women as breeders and commodify children. An attorney for the women said surrogacy contracts prevent “a child being placed where it's in the child’s best interest.” One of them, Melissa Cook, was carrying triplets as a surrogate in 2015 when the intended father asked her to abort at least one of them over financial concerns. Cook refused to do so and has since been fighting for custody of the children.

“While the U.S. Supreme Court is unlikely to be influenced by a news conference, there is a patchwork of statutes on surrogacy in different states and lower courts have returned sometimes conflicting verdicts on the parental rights of surrogates,” Ariana reports. “Experts have said such cases raise critical constitutional issues that need to be addressed. Influential groups such as the Family Research Council and the American Association of Pro-Life Obstetricians and Gynecologists have urged the court to consider the issue.”

— A few more good reads from The Post and beyond:

HEALTH ON THE HILL

MEDICAL MISSIVES

DAYBOOK

Today

  • The House Energy and Commerce Committee is scheduled to hold a markup on legislation to combat the opioid crisis.
  • The House Oversight and Government Reform Committee holds a hearing on a “Sustainable Solution to the Evolving Opioid Crisis: Revitalizing the Office of National Drug Control Policy."
  • The Advisory Board holds a webinar on combating clinician burnout.
  • The FDA’s Vaccines and Related Biological Products Advisory Committee holds a meeting.

SUGAR RUSH

From the shadows to the spotlight: Melania Trump belatedly steps into her role as first lady

President Trump disclosed reimbursement of over $100,000 to personal attorney Michael Cohen amid the Stormy Daniels controversy:

From the Late Show with Stephen Colbert, the Hallmark White House apology collection: