HHS Sec­re­tary Azar pitch­es nam­ing and sham­ing tac­tics on drug price cam­paign, sin­gling out Cel­gene's Revlim­id

Cel­gene $CELG wasn’t sin­gled out by name in a speech by HHS Sec­re­tary Alex Azar Mon­day, but the big biotech got cast in the role of main vil­lain in his out­line of what ails Medicare — and how that should be fixed.

The price on Cel­gene’s wide­ly used Revlim­id — Ever­core ISI’s Umer Raf­fat made the con­nec­tion to Azar’s speech in a note Mon­day af­ter­noon — was jacked by 20% over the last year, which means that Medicare pa­tients pay an ex­tra $115 month, mov­ing from $575 to $690 per month, for their share of a drug that had cost $11,500 a month in 2015. 

Be­cause it’s a can­cer drug, Azar adds, its one of six pro­tect­ed class­es of ther­a­pies that Medicare is re­quired to cov­er. And as a re­sult, the fed­er­al gov­ern­ment is pay­ing an av­er­age 6% dis­count on these drugs, while pri­vate pay­ers are able to gain dis­counts of 20% to 30%.

“A 6 per­cent dis­count — I’m sor­ry, that is not ne­go­ti­at­ing,” said the HHS Sec­re­tary.

Azar went to some length on Mon­day to ex­pand on the drug price plan that he and Pres­i­dent Don­ald Trump pre­sent­ed on Fri­day — amid con­sid­er­able re­lief by Big Phar­ma play­ers and their in­vestors who quick­ly shrugged it off as large­ly a non-event.

In the speech to­day, Azar at­tacked two of the big weapons that have been sug­gest­ed for rein­ing in prices, but al­so said they would like­ly re­main on the ta­ble un­less the in­dus­try played ball in ne­go­ti­at­ing bet­ter terms for drugs like Revlim­id. And he broached the is­sue of merg­ing Part B drugs in­to Part D, so they could use bet­ter ne­go­ti­at­ing pow­ers to bring down their cost. 

Di­rect Medicare ne­go­ti­a­tions, lever­ag­ing the buy­ing pow­er of the fed­er­al pro­gram, wouldn’t ac­tu­al­ly lead to sig­nif­i­cant sav­ings, Azar point­ed out, cit­ing a CBO re­port. What would, he added by im­pli­ca­tion, is a for­mu­la­ry ap­proach adopt­ed by pri­vate pay­ers, threat­en­ing to drop drugs or pro­vide ex­clu­sive po­si­tions in ex­change for dis­counts. The sin­gle pay­ers’ so­lu­tion in set­ting prices, he added, was a non-starter.

Nev­er­the­less, he held those mea­sures out as a threat the in­dus­try has to deal with now by of­fer­ing bet­ter prices on drugs used by the fed­er­al pro­gram. From his pre­pared re­marks:

We don’t be­lieve ei­ther of these pro­pos­als would put Amer­i­can pa­tients first. They would move us to­ward the kind of so­cial­ized med­i­cine sys­tems that have such a no­to­ri­ous rep­u­ta­tion for poor qual­i­ty and ac­cess. This stacks right up there with the false promis­es of Oba­macare: that if you like your plan, you can keep it, and if you like your doc­tor, you can keep see­ing him.

But I don’t ex­pect these ideas to go away, no mat­ter how un­like­ly they are to work. If the phar­ma­ceu­ti­cal in­dus­try wants this idea off the ta­ble en­tire­ly, the on­ly way is to come to the ta­ble with us, to en­gage in mean­ing­ful ne­go­ti­a­tion with Medicare Part D plans, and to stop the price hikes.

For­get about reim­por­ta­tion, said Azar.

Cana­da sim­ply doesn’t have enough drugs to sell them to us for less mon­ey, and drug com­pa­nies won’t sell Cana­da or Eu­rope more just to have them im­port­ed here.

And un­safe drugs from un­re­li­able man­u­fac­tur­ers could be used to plug the gap.

Azar’s list of pro­pos­als, which will like­ly be the sub­ject of con­sid­er­able lob­by­ing with Con­gress, in­cludes over­turn­ing the cap law­mak­ers put in place on penal­ties for rais­ing drug prices be­yond the rate of in­fla­tion — a com­mon in­dus­try prac­tice for years. And he wants to in­cor­po­rate pri­vate dis­counts in­to the av­er­age man­u­fac­tur­er price — or AMP — used to set Med­ic­aid prices.

HHS al­so plans to use sham­ing tac­tics against any drug mak­ers that refuse to make sam­ples avail­able for gener­ic man­u­fac­tur­ers to use for their de­vel­op­ment work, call­ing them out on any abus­es they find. In a sense, Azar — a for­mer top ex­ec at Eli Lil­ly — is muscling the en­tire in­dus­try to back off some fa­vorite talk­ing points he once used him­self and get re­al with their pric­ing strate­gies.

For too long, there’s been a lot of talk on drug prices and no ac­tion. Drug com­pa­nies have in­sist­ed we can have new cures or af­ford­able prices, but not both.

I’ve been a drug com­pa­ny ex­ec­u­tive—I know the tired talk­ing points: the idea that if one pen­ny dis­ap­pears from phar­ma prof­it mar­gins, Amer­i­can in­no­va­tion will grind to a halt.

I’m not in­ter­est­ed in hear­ing those talk­ing points any­more, and nei­ther is the Pres­i­dent.

Af­ter the phar­ma ral­ly on Fri­day af­ter­noon, the Trump ad­min­is­tra­tion still seems set on il­lus­trat­ing its get-tough ap­proach to rein­ing in drug prices in the US, which far out­strip the prices al­lowed in any oth­er in­dus­tri­al­ized na­tion. Giv­en the lat­est fluc­tu­a­tions on the mar­ket, though, Trump and Azar have a con­sid­er­able dis­tance to go.

Cel­gene’s stock is up 1% to­day.


Im­age: HHS Sec­re­tary Alex Azar at the May 11 speech. WHITE HOUSE via YOUTUBE

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Welcome back to Endpoints Weekly, your review of the week’s top biopharma headlines. Want this in your inbox every Saturday morning? Current Endpoints readers can visit their reader profile to add Endpoints Weekly. New to Endpoints? Sign up here.

Next week is shaping up to be a busy one, as our editor-in-chief John Carroll and managing editor Kyle Blankenship lead back-to-back discussions with a great group of experts to discuss the weekend news and trends. John will be spending 30 minutes with Jake Van Naarden, the CEO of Lilly Oncology, and Kyle has a brilliant panel lined up: Harvard’s Cigall Kadoch, Susan Galbraith, the new head of cancer R&D at AstraZeneca, Roy Baynes at Merck, and James Christensen at Mirati. Don’t miss out on the action — sign up here.

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President Biden and Pfizer CEO Albert Bourla (Patrick Semansky/AP Images)

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Merck Research Laboratories CMO Roy Baynes

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