tv HHS Secretary Azar Speaks at Forum on Prescription Drug Prices CSPAN November 19, 2018 5:51pm-8:00pm EST
end of the meeting i invite major health to join in a discussion on the critical issue in health and medicine policy. again three years ago we have tackled important issues of aging and healthcare reform and if you remember that last year's form tackled the crisis from which we say we need a more unified collective effort to look at these solutions. as you heard today found that these collaborators and it is been great. this year we will undertake a critical issue that is important. how to make life enhancing drugs affordable and accessible for all people.
but continuing to accelerate scientific innovation discovery. and what is needed for a breakthrough and force. throughout the day we talked about cancer and the last session was outstanding. touching on the issue of cancer therapy and breakthroughs the affordability of the the things. as we talk more broadly today about prescription drugs. as you know, the annual expenditure is exceeding one half trillion dollars in count for more than 70% of u.s. healthcare spending. it is expected to rise. this is a major public interest and desire for action. in 2017 a survey ranked making drugs affordable the topmost priority for congressional action. as we said, access is
meaningless without affordability and this is why i believe this administration is taking this on in a very serious and energetic and effective way. administration agrees and assuming his will this year -- secretary azar led -- made up his priorities -- opioid crisis, insurance reform, lead- based care and drug pricing. the initial drug pricing -- the -- they was with two take action. in may president trump and secretary cesar released the first blueprint about a comprehensive plan to bring down prescription drug prices. we are honored and delighted to have secretary either with us today. to discuss the items of the administration and the plans
going forward. i believe he has an important message for us and publicly -- possibly a policy statement. we look forward to this. it is my great privilege to introduce secretary cesar who was sworn in as the secretary of hhs in january 2018. is on the the snow hhs is the largest department in the federal government by sending a budget of $1.3 trillion in 2018. secretary acer has spent his career working with senior debt senior healthcare new ship in public and private sectors. the tenant is second tour of duty and he served as hhs general counsel from 2001 two 2005 and then as deputy secretary in department is the chief operating officer. during his time as deputy
secretary he played a key role in international affairs and global health diplomacy and implementation of the new medicare prescription drug program in public health emergency preparedness and has made efforts in food and drug regulation. he also led the department several successful management and operational transformations. secretary cesar the private sector in 2000 sector going to indiana with his wife and children. is a great pleasure to have them back at the helm. it is a great pleasure to have secretary azar is the 24th secretary of health and human services. secretary azar. >> [ applause ]thank you so much for your kind introduction. good afternoon, everybody.
i am grateful to the national academy of medicine for inviting me here today. to share with all of you an update on the trump administration use of one of the serious challenges that our country faces. as today that reflects the members have taken a leading role not just in events in american science and medicine also begin about how to help translate scientific discoveries in the clinical benefit that reach patients. h hs' goals are not different -- to support pioneers expanding understanding of medicine and science while ensuring that americans enjoy the benefit of these discoveries. it's not always easy to achieve both of these goals at the same time. including the area i want to discuss today -- the market for prescription drugs. new generations of complex and advanced medicines are unlocking opportunities to extend americans lives and improve their help.
these include a cancer innovation that you have been discussing today. at the same time the cost of prescription drug has risen dramatically which is why nam has turned its attention to the issue of drug pricing. in 1970 with the national academy of medicine founded as the institute of medicine prescription drug spending stood at $5.5 billion. in 2016 prescription drug spending was $328 billion. this is a four-time larger share of the economy and in 1970. there are good reasons for this. prescription drugs play a more important role in keeping his health today than they ever have before. the system for pricing and purchasing these drugs has not kept pace with the changing role in today's system test and today's system needs many
americans struggling to a for the drugs they need. the trump administration is focused on four problems in particular. high and rising list prices for drugs, government programs overpaying due to lack of negotiation tools, high out-of- pocket costs, and foreign governments writing on american investment and innovation. in may president trump release american patients first blueprint laying out a plan for fixing these problems. this blueprint has four strategies for putting america first. bringing down out-of-pocket costs, boosting competition, strengthening negotiations, and creating incentives for lower list prices. many of these strategies and many of the specific actions we have taken also map recommendations the nam report
from last november on the national imperative of making medicine affordable. today i want to address each of the four strategies. i also want to announce you steps forward on a significant policy proposal within the blueprint. our efforts to create better incentive for list prices. first, will address out-of- pocket spending. we were pleased to see congress take action recently. even before the blueprint was released and the trump administration had taken steps to bring down out-of-pocket costs for consumers he changed how the medicare part b pays for drugs under the discount program so the payment that are matched true drug costs. saving seniors 320 million dollars in out-of-pocket costs this year alone. since the blueprint proposes to expand the changes and also proposed lower payment for certain you drugs in part b
were seniors and taxpayers are overpaying. for transparency and choices will also help reduce out-of- pocket costs. and hh s report this year, medicare spent $9 billion on brand name drugs that have a generic alternative. choosing generics in these situations would be $3 billion in total savings for part d including 1.1 -- $1.1 billion in our public savings for our patients. -- out-of-pocket savings for our patients. since this release they have tools to encourage use of generics and we are looking at more avenues with it within the part d program. often more affordable options have been written by our system but this week president trump find two pieces of bipartisan legislation that will help shed some light by banning gag
clauses that prevent pharmacists from informing patients when they can get a lower price by paying cash. within a week of this blueprint released by the president h hs had already informed medicare plans that d -- that these bad clauses were unacceptable. we are pleased that congress has responded to this call by formally banning them in both the private sector and in medicare. part of the reason why pharmacists can provide an exact -- an attractive price for some drugs is the competitive market for decreased costs for many generic drugs so dramatically. according to an fda analysis the introduction of three generic competitors drive down prices by one half. in many cases for competitors driving the price even lower. under trump the fda had already made it a priority to streamline the approval of generic drugs resulting in a
record number of generic drug approvals in fiscal year 2017. since the blueprint this pace has accelerated. last week the fda announced that it had set another record approving even more generics in fiscal year 2018 then the year before. importantly, 12% of the 2018 generic approvals were for complex generics can be especially expensive. we estimate that just the results from 20 seven -- 2017 alone will save american patients $8.8 billion. since the release of the blueprint fda has approved the first generic version of the epipen. the bio similars and the first three generic drugs under a new pathway drug to support competition. fda's success is in large part
due to the action plan that the commissioner unveiled last year. one element has been cracking down on drug manufacturers abuse of fda programs that were intended to protect the public health to pad profits instead. we appreciate the recommendation from nam on this front in the drug rising report. already fda has gone after a number of ways that manufacturers game the system including the use of programs to didn't -- to delay generic competition. just last week we issued new draft guidance making it clear that manufacturers should not be misusing the system to block generic competition and noting that abuse of the system could and would be referred to the ftc as anticompetitive behavior. the complement -- this summer fda announced a bio similar
action plan -- is a market for biological projects just as there are four small molecule generic drugs today. as we endeavor to build a real drug please there are places where the manufacturers of off patent off exclusivity drugs the power to take significant price increases. that's why earlier this year i directed the fda for the first time ever stand up a work group to determine how safely import sole-source drugs that faith big price spikes and have no patent or any protection. -- exclusivity protection. >> [ applause ] >> this was not an idea that was in the blueprint. follows the principles of the blueprint in that it could bring down costs without harming patient safety, patient choice, or innovation.
there are other areas where drug companies are taking advantage of well-meaning rules including orphan drug issues raised by the nam work on drug pricing. earlier this year the fda finalized a guidance on designation requirements making it clear that we will no longer grant orphan drug designations to drugs for pediatric populations of otherwise common diseases. we also recognize the need as the nam does for government programs to affected negotiations. we will be careful to ensure that it is done in a way that protects innovation and patient choice and protects patient access but there is plenty of room to update the programs and increased negotiating power. this is especially true in medicare part b where there is currently no price negotiation at all. in part b medicare gets the bill and pay. plus an add-on fee calculated
as a percentage of the price. for the first time ever we have now introduced new tools to allow the care advantage plan to negotiate discounts for drug covered by part b. in total 12 begin dollars in spending for 20 million beneficiaries. starting in 2019 plans will have the ability to use step therapy to have patients try one clinically appropriate drug first before going on to other options. for the first time the plans will be allowed to use consolidated programs for drugs covered under part b and d bringing these programs closer together. at least half the savings generated new discounts will have to be passed on to the patients. these new tools will be coupled with strong patient protection, existing prescriptions will be grandfathered and an expedited appeals process is required and
step therapy must be coupled with a care coordination plan. most importantly patients will be able to exercise control over these tools. they will have exit rights. these negotiation tools will only be as, as the patients want them to be. this will allow us to leverage the power of medicare without endangering patient choice. as it so happens american -- medicare advantage open enrollment began today. we have seen stuff interest from plants in using the tools. -- plans in using these tools. patients could see savings in plans they begin to select this week and just today one insurer announced it would take advantage of the opportunity president trump and hhs have provided to encourage patients to use lower cost bio similar alternatives to and especially expensive biologic. medicare part d by contrast does have strong competition for drugs and a track record of
cost control. is the private market has advanced part d no longer delivers the most competitive results for its beneficiaries. we like to say that part d was a great drug plan for the year 2003 and it still a great drug plan for the year 2003. many reforms for medicare part d are in the blueprint. this includes ideas like formulary possibility which was mentioned in the nam drug pricing manifesto. we have announced one change for the 2020 plan by allowing the use of indication-based formulary design and management. today when a plan covers a drug for one fda-approved indication as to cover all indications. a more appropriate or more affordable drug may not be covered because the plant is required to cover a therapeutic alternative. this allows indication-based management winning more choices
for parents and power for the part d plan to bring down prices. again, the patients will maintain power over the system. if they want to vote their feet away from a medicare advantage plans and part d plans that use these tools they can do that. the final strategy i want to address today is incentives for lower list prices. we need to empower patients to improve the system. within a week of the drug pricing blueprint cms drug pricing dashboard again to display pricing information thousands more drugs than ever before. for the first time the manufacturers that were responsible for big price increases. we have worked with congress to restore the medicare drug rebate program break on list price increases and limited a change to ensure companies aren't giving up rebates they owe by
introducing one extensions of drugs. the much more fundamental changes are needed. this will deflate the list price bubble that manufacturers and other actors have created. to help empower consumers to reduce drug prices as well. that is why today i'm pleased to announce that president trump is taking historic action to bring patients more transparency through consumer advertising. we are proposing to require american drug companies for the first time ever to include in their tv advertisement the list prices of drugs paid for by medicare or medicaid. >> [ applause ] >> patients deserve to know what a given drug could cost when they are told about the benefit and risk that may have. they deserve to know that the drug company has pushed the
prices to abusive levels and they deserve to know that every single time they see a drug advertised on tv. >> last president trump signed legislation to give you the right to know the lowest cost option at the pharmacy. this week he is proposing to give you the right to know your drugs price when you see it advertised on tv. for too long drug pricing has been like no other market. prices are completely opaque and the industry actually makes a point of planning that the list prices are often meaningless. that second part isn't true. list prices are meaningful to every american senior on medicare part d because they typically have to pay coinsurance, a share of -- a list price for specialty and nonpreferred drugs. list prices mean a lot to the almost half of americans under 65 who have a high deductible
health plan meeting that the elephant pay thousands of dollars to work the list price of an expensive drug before the insurance kicks in. list prices matter to american patients. i've heard personally from patients myself and so is the president. taking action to protect consumers from opec opec pricing is unprecedented. a similar story unfolded 60 years ago when the manufacturers came under criticism for inflating sticker prices of cars. this made it impossible for consumers to compare prices the manufacturers complained that the prices were not meaningful so mandating the disclosure wouldn't help. doesn't that sound familiar? you may have heard that this morning. since 1958 car companies have been required to post sticker prices. people still get discounts when they purchase a car sticker prices are considered an important piece of needed
consumer information. there is no reason it should be any different for drugs. if you buy a car every once in a while but millions of patients by expensive drugs every month. a years' worth of the most advertised drugs can cost more than a car. despite the ample precedent for this, then measure the pharmaceutical industry has resisted this. they may have succeeded in delaying congress and permitting a solution but president trump is undeterred. it is no coincidence that the industry announced a new agency to today to help make price and cost information more accessible. we appreciate that. plessis information on a website is not the same as putting it right in an ad and it has taken five months the blueprint to start getting to where the puck is going. the initiative is a helpful couple met to, but not a
substitute for, what we proposed today. we will not collect on voluntary action to accomplished our goals including delivering transparency in other areas. various industry actors have also talked about moving away from the opaque system of rebates. calculating a share of list price. it, action has been slow to materialize. we believe today's rebates which help drive list prices skyward are not necessary to a strong negotiating ecosystem. they could be replaced with fixed price upfront discount. a concept reflected in the call for patient's out of pocket cost to reflect -- reflect net prices. players can begin this shift now or as an advertising we have the power to redesign the system for them. when we rolled out the blueprint i said that drug company executives should be thinking carefully about who would take huge price increases
in this new environment. while there is much more needed change to come, and it will come, we have begun to see the shifts in behavior that we expected. earlier this year 15 different pharmaceutical companies announced rollbacks of price increases and cuts in their prices for price freezes the rest of the year. overall companies have taken 60% fewer price increases for brand drugs this year than they did last year. there have been 54% more brand and generic price decreases. one company introduced an authorized generic of a highly expensive hepatitis c drug long before the patent expired so that the patients could benefit from the lower cost sharing the get him a dramatically lower list price. these actions would not have occurred in the absence of president trump blueprint. sometimes pockets evolve on
their own and sometimes -- markets evolve on their own and sometimes it takes the government to make the first move to lay down new rules of the road. you have heard today that we are willing to do that. we will not meet for the industry with so many complete thing incentives to reform itself. when we change the rules the market players will reorganize businesses to fit this. it will be a very different world for american drug pricing. today i mentioned at least 17 separate actions that we have taken the blueprint's release. that is not exhaustive. if i got into all the request for information and fda guidance as we've done we would be here well into the night. this president has taken more action on drug pricing at any president in history. you have just seen the tip of the iceberg.
almost all the ideas i've mentioned were included in the blueprint and each of them is a significant accomplishment. we will go beyond the blueprint if we need to. any ideas to bring down costs while respecting innovation and patient toys are on the table. make no mistake -- the american drug pricing market is changing. it will change a lot more before patients get the deal they deserve. i appreciate the nam's contributions and look forward to working together on more solutions in the future. thank you very much for having me here today. for listening to my remarks. thank you. [ applause ] >>
thank you, secretary azar for a compelling talk and the actions you taken in addressing this difficult issue. we welcome your efforts as we carry on this work. i know secretary azar had to leave right away. let's move to the panel discussion. john o'brien will represent this panel. i will ask you to join me on stage. i will introduce them and they,. >>
before i begin let me say that senator cassidy tried to come for this event, unfortunately is stuck at the airport. today we have many hope not been able to get to washington but this discussion will be active with these panelists. i would like to jump right into this. let me introduce them first. i think the subject is well introduce. many of the actions taken by the government you have heard
in great detail. >> let me begin by saying that it is wonderful to introduce doctor john o'brien, the advisor to the assistant secretary for health and policy at hhs and he is a trained pharmacist. he joined hhs from blue cross blue shield and is vice president for public policy and advises on federal and state policy with internal research and external program evaluation and serves as an internal expert on payment policy and system reform. >> next, to the right is boudreaux, a leading health benefits writer serving more
than 40 million consumers through this health plan. in total and the serves 73 million individual across 27 states through the broad folio of health insurance. prior to that president of blue cross and blue shield of illinois. >> can pressure -- chairman of the board and chief executive officer of merck. he has increased investment in research including early research and focusing the organization on the growth of key products providing benefits. has led the formation of initiatives that build on merck's 125 plus year legacy. last but not least my good friend norman augustine the retired cayman ceo of lockheed
martin. he served as assistant secretary, undersecretary, acting secretary of the u.s. army. he has been on the faculty of princeton and served as chairman of american red cross and the chairman of the science board. norm is a member of the national community of scientists , the national academy of engineering, -- the national academy. most recently as you heard he chaired the academy's major study thinking medicine affordable. >> so, let me get right into this. we heard many aspects of this whole issue of affordable drugs. i would like to cover today quite a bit of the waterfront. ranging from the complexity of
our system, particularly thinking about pricing, to innovation which is important to all of us. and as you heard from secretary azar the price negotiation. to value-based pricing. particularly as we look at the kind of tools we have to assess technology and the scientific advances. and the issue of generics and other questions. let me begin by saying norman, remember when i came to the study committee i said can you explain to me the complicity of the system to my knowledge, there is the drug manufacturers and wholesalers and pharmacies and pharmacy benefit managers and employers. the interplay of these players
determined to a large extent what the patient's pay and what the prices. with that many complex systems is there a way to streamline this? i would like to ask you that question first. then maybe turn to gail for interpreting the insurance plan and things like that. norman? >> thank you, victor. i should say that many of you are wondering what an engineer is doing on this panel. that's what i asked victor when he got me into this. i can think of only two reasons -- one is at icon from an industry that is highly regulated and with a major customer as a government. the second reason is that i am a rocket scientist.
>> as a background, might think that as an outsider, among manufacturers and physicians -- that would be it and as you cited there are other elements. there are the third parties that pay the bills -- mainly the insurer and offered the federal government. -- open the federal government there are wholesalers and retailers and physicians and regulators. then there is the other entity that is unique to this industry -- pharmacy benefit managers. pbm's for short. to totallythe industry would be huge but it did seem that there were ways to work with this
that you could preserve the market forces. the market forces that exist. do this more powerfully and reduce the cost of pharmaceuticals. another element, of course, well you reduce the cost of pharmaceuticals you don't want to undermine the ability to develop new products for future use. i suspect that is something else you would want to raise. >> thank you. i will give you 5 minutes. i am eager to jump into this. why don't i take a step back and make sure you have a chance to really give us your perspective before i asked my questions. i will start with you again, norm. >> thank you. >> i would start out by saying is a truly important issue. the
price of pharmaceuticals and ensuring that research can be afforded. this has an impact on the quality of life for citizens. it's not unlikely that there are people in the room who would not be alive today if not for the research performed in our pharmaceutical companies and universities and by government. last year at the end of the year a survey was conducted in which was asked what is the most important problem that congress should be working on as we approach the end of last year? the number one item that came up by considerable margin was the control of car of pharmaceuticals. -- the cost of pharmaceuticals. it was ranked above freezing the minimum wage and reducing
taxes. rebuilding the infrastructure and so on. that is how important the public views this issue. the average american spends about twice as much on pharmaceuticals as do citizens on average of other developed countries. as the secretary referred to, americans are paying some of the bills for people in other countries. some would argue that that's there that we are a wealthy country. that is in issue of itself. the top issue -- the underlying issue that the committee ran into, was, is the pharmaceuticals and entitlement that everyone should have independent of their personal financial needs? if it is, can the nation afford it? that is the fundamental moral question. is a practical question which
the nation has not answered yet. in this environment the nam with victors leadership that up a group consisting of 17 members diverse in professional background. it went all the way from economists to physicians to business executives in the pharmaceutical industry and academics and patient advocates. there was one aerospace engineer. i am the partridge in a pear tree. >> i can also point out that some of my colleagues are in the room, incidentally. i owe them a great deal of thanks. i should point out that each of our recommendations enjoy the support of at least 88% of our members. many of the recommendations enjoy unanimous support. we found that there are only three basic alternatives. the dogs companies need to
think about this. -- the drug companies need to think about this. one alternative it is to remain the path we are on. the second alternative is to modify the existing path and try to maintain as i said as much of the free market forces as one could maintain. the third is to go to an entirely new system -- a single- payer system while he adopted elsewhere in the world. were the single-payer -- the government -- either de facto or direct authority sets prices and also controls formularies. to close let me go through some of our findings. we came up with 32 findings and 8 recommendations and 27 actions. i will only tell you three or four in terms of the recommendations. the first was to rebalance the negotiating power between the
drug providers and the patients. as heard at present in medicare part b it's against the law for the government to negotiate prices. another proposal is to enhance market competition eliminating marginal sometimes abusive extensions of patent protection known as ever greening. and to eliminate practices i wish potential generic producers are kept out of the market by being paid to stay out. this is done by the patent holders. that is referred to as paid to delay. we also propose increasing the transparency of this all the way from the laboratory to the patient. we propose eliminating the misapplication of funds and federal discount program that are intended to aid the vulnerable populations. we proposed terminating the tax
deductibility of direct to consumer advertising of prescription drugs that the united states and new zealand permit. the last thing is, we propose that the fda should seek reciprocal arrangements with regulatory agencies and other countries for generics and file similars. -- bio similars. whereby we could agree upon safety and viability of the drugs including such countries as canada, great britain, australia, and new zealand. that is where i will stop. we have offered enough to offend most everyone here. >> thank you, norman. john? >> thank you. it is terrific to be here. looks like you found my bio on
the website. the one that i prefer is a pharmacist when my mom got sick. i wanted to be something else but i was fascinated by the role that medicine played in her life and the science and technology that led to not just the discovery of therapeutic action but the ability to get something out of a petri dish into a bottle and into the patient and to the side of action where it is needed. all the innovation and other challenges behind that. how there can be such a difference between two 5- milligram tablets of something that similar but behaves differently. so, to be here today representing secretary azar and the work that he does to implement the president's blueprint to bring down drug pricing is an honor. in the last five months hopefully many have heard what
the secretary described in -- in terms of the problems we are trying to solve and the ways we are going about this. of course, the secretary did a great job and there is no problem -- no point in recapping out. >> in five months we have gone from it's going to just be an rf i to a number of actions released to have some that over time are starting to come across the board. as the secretary noted we've had 15 drug companies including merck -- thank you very much -- who have decided lower a price for rollback a christ -- price increase or freeze prices for the remainder of the year. with a company take a couple of drugs in an important class and even though they had patent protection decide to introduce an authorized generic.
this will allow them to lower the list price of that drug so that patients can access these at a much lower cost. this gets to the complexity of the system that you describe. it should be easier for companies to be able to lower their list prices to something similar to their net priced and begin negotiating from there. as the secretary described the system has a necessarily worked to make that easy as it could be. i will echo what the secretary announced it today -- what a big deal it is for him to take a step forward. it was posted on the federal register at 4:15 for those that don't have service and are trying to refresh the website. we are indeed proposing that drug companies will be required to post the list prices in
their televised ads much in the same way that they have to disclose the side effects but not the effect that buying the drug could have on your wallet. the secretary believes we deserve more transparency. over the course of the last week if you've seen the president signing the action on gag causes to prevent from this is from telling patients how to save money by not using their insurance moving toward transparency continues. by proposing that these prices be included in their avenue. that everybody understands how important list prices are. today many patients either pay the list price for prices that are calculated on the list price. secretary described how these prices factor into the coinsurance that is present in every part d plan that seniors are enrolled in today.
more people have high deductible health plans and more people have secretary desk separate drug deductibles within the health plan so the impact of the list price is real and hopefully this information will create that conversation between patients and providers and others to help determine the value because if we are truly going to move to a value-based healthcare system and value equals benefit over cost we can get there if we don't know the benefit or the cost. it is important to note that we are exploring additional ways to improve drug price transparency and consumer decision-making. all of which were described in the blueprint and hopefully many of which will be coming soon to a place near you. again, i want to thank the academy for the work that it is doing on this topic. i was going to hold up your book -- i will do that.
more importantly for the opportunity to be here today. thank you. thank you very much indeed. [ applause ] >> gail? >> thank you, doctor dzau it is a pleasure to be invited to participate on this panel. i think the things that secretary azar outlined are important. as we think about transparency and a complicated healthcare system that needs to be typified and affordability at the core. the role that consumers play. these themes are critically important. we are at a time of incredible clinical innovation and discovery. but, affordability overhangs that entire discussion and affordability -- i want to put some perspective on that because i think drug affordability -- we need to think more broadly about total
healthcare affordability and drugs are an important part of that. thing in our perspective in the industry i'm in, a family of four today and average program spent about $28,000 a year including co-pays. that is a huge amount of money in terms of most people's incomes. looking at the market where if you are not on a subsidized program or get a subsidy you could pay almost $1000 a month in premiums and that also has two add co-pays and other things for your pharmacy benefits. so, these issues, i think, are significant. drug classes historic he is historically have not been in on the conversation but now over 20% of health insurance premiums and one of the single largest areas that is increasing year-over-year. clearly this is important, not just for this industry but for
all americans. and i agree with secretary azar that it is something that we have to figure out working together how to solve this issue. i do believe that there are important partnerships that can happen across the industry. at anthem we have been working on many partnerships. we begin on the policy front working with eli lilly several years ago to introduce two new policy format, physically to negate some of the issues around legal risk and discussing value based payment. how to move the payments. in 2016 the fda approved one which allows insurers and manufacturers to talk about drugs prior to them being approved which is a step in the right direction. where also as a result of the blueprint that has been shared have been talking to over 10 different drug manufacturers about how to move the ball forward on a couple of areas. one is fixed pricing which is
at the core of this discussion -- around the lowest net cost of healthcare. we can never forget that in the midst of many discussions we are having. value based payments are an opportunity to get there but ultimately lowering costs for all consumers. in terms of these co-pays and what they pay. at anthem we are in the process of launching a new bbm. if you think about pbm , what is the role of the pbm ? pbm have had an important role in drug distribution and working on how plan designs are integrated in moving consumers toward generics and bringing the cost down of overall therapeutic categories. but that's not enough. we need to look at integration. right now we have a fairly fractured disintegrated system. and is not just about drug outpatient drug -- total cost to care. net cost of total care. and as we think about that the
new generation of pbm -- what we are trying to watch -- is a pbm that fundamentally look at whole person care. what i mean is, it takes the information not just from medical and not just pharmacy but behavioral and dental and vision and all of the aspects of a person's interaction in the system and bring that information into the hands of care providers and allows both consumers and patients and care providers and the payers the opportunity to help consumers make the right choices through transparency. that type of unique pinnacle model is the next generation and the next opportunity for us. one point -- we launched some of this work several years ago and in 2017 by our ability to integrate medical pharmacy -- not necessarily how standalone pbm thanks -- they think about the specific thing about
outpatient drug class but if you think about the right intersections and the right points between medical and pharmacy and behavioral health, we are able to demonstrate that we can decrease premium increases and trends to less than 2%. this is traumatic but that means looking at inpatient and outpatient costs and the behavioral health as well as arm as he and in a completely integrated way. i will close with this -- as we think about the blueprint and the challenge that has been brought out for all of us who are part of this industry and the overall key point about affordability, i think we have modernize the way that we contract for pharmacy and drugs today. if you think about it, across the rest of healthcare we have been moving toward a value based pay for performance system versus a pay for volume system. we at anthem have over 70% of the hospital contracts some pay
for value elements and where we to more heavily pay for value and we work with about 159 acl's and 70,000 providers that take share value. it are pharmacy -- the drug contracts -- basically the same they have been for over a decade if not longer. that has not moved to value- based and it is not change. when an element of that that hasn't changed is that manufacturers similar to what secretary azar said can change the pricing at any point in their contract. they often do. that creates a burden both on how we think about it because we price 18 months as does the government in terms of our contracts with medicare advantage and part d ahead of those. so, when you change that type of mechanism inside of a contract without set pricing it creates increased costs for consumers. believe that there are opportunities for us to work
together. i would say that as we think about and bedding fixed price contract and longer-term contracts we can take the current structure around rebates and set fixed prices so we have a transition into more determined cost so that when drugs are headed to therapeutic categories that would bring down the overall cost. that is not the case today. third, as we look at the unit cost and total cost of pharmaceuticals and drugs we are looking at value. not value in the broad sense but the impact and output for specific patient classes so is not the broad version. what it drives purposes -- specific patient. and opportunity to target patients where the drug really has advocacy and impact secondarily that the impact is judged based on the patients and care provider if the as well as payers. because again this comes back
to affordability and the opportunity for us create more things inside of our system that drives value and gives consumers twice because they are paying a big portion of these costs. as well as being able to have specific clinical interventions. and the question is, the issue of complexity -- i think we touched on the role of -- should we have single formularies, i think that we are system driven by consumer choice. consumers should have transparency and the opportunity to make decisions. today in the policies that we have they have an opportunity to make choices either with their employer with an individual market or through an accurate bandage for every single year they enroll and as you know today is the beginning of that aroma process where they can compare specifically different policies and all our policies are on the website. we have not had any gag clauses.
we ensure that when an individual goes to a pharmacy that we provide them with the lowest cost. whether that is part of what's in the co-pay -- the lowest cost relative to the negotiated rates. the last point i would bring up -- in terms of that -- what is important is the reason we want this. we don't have a chance to capture the data, we don't have the opportunity to integrate it with the rest of the healthcare. we have an opportunity to help them close care to look at different ways which drugs are being prescribed across the behavioral health and medical policies were potentially the disability. that integration of information and data is important. that drive the transparency. thank you very much. i am looking forward to a spirited debate. >> okay.
>> i want to bring this back to the patient. i think that is what we should be focused on here today, and today, all over this country, patients received for the first time a diagnosis from cancer, and that word strike the fear in patients unlike anything else. with these patients heard that word, their fundamental concern is that malignancy itself, the tumor growing inside of their body, and for them, the fundamental hope is for their survival. with decades of research yielding breakthroughs and treatments that transform and kill diseases, and cancer is one of them. i agree that with these new treatments have come significant issues of affordability. also want to say that we are now living in an exciting time,
and we talked about the unprecedented scientific answers in oncology. these provide the new hope.[ applause ] >> thank you for being here. let me welcome senator cassidy, and i know he went through planes and automobiles to get here. the weather elements have been quite challenging, and the fact that you came to our meeting and i know you are not in session, and we greatly appreciate your presence. i will give you your introduction shortly since mister fraser is in the middle of talking about his point of view of patients, and we have gone through along the panel, summarizing your thoughts, so
hope you will be next. >> i was just saying we are at the forefront of tremendous advances in immuno oncology at mark, we are studying a immunotherapy drug, and we are studying in 30 tumor types and we have evidence of activity in 25 and has been approved in various tumor types. we talk about the benefit of this drug, we are not just talk about patients living longer by a couple of months. in a recent study we was able to show that if you add the struct to the standard of care, that you would do at the risk from -- of reducing lung cancer by 50%. we are not talking about patients living 2-3 more months. patients are living much longer, and 70% of those
patients are living at one year, and we haven't even reached the median for overall survival. that is a significant breakthrough. the question becomes how do we now inc. about the value that drug has which is significant costs when you added to the system, that we have it for society? i would argue to the point that was just made and the first question is what is that incremental cost versus the incremental benefit to that patient? we are talking about affecting their survival advantages, and in the discussion early on, if you list all of the cancer drugs over the past 25-30 years, many did not cause people to live very long. i think we need to look at individual therapy and make a judgment about what that really means. i know that have to close right now, and i will make one more point. that is when you think about it
holistically, that was a study recently from the university of chicago but said the -- reducing the cancer death rate by just 10% in the united states would be worth $4.4 trillion in economic value to current and future generations. i will come back to the point and if we are going to have a serious discussion, you have to look at cost holistically, and not just look at drug prices and isolation. i heard the comment earlier that drug prices are 50% of the cost of cancer in this country. it depends on what you mean about drug prices. some say it is 20%, but with hospital roundup, it could be 500%. it is really important for us not to have these kind of high level discussions without focusing on specifics. thank you. >> we started some really great conversation, but let me welcome
bill cassidy, who is a senior u.s. senator from louisiana serving since 2015. he previously served in the house of representatives and the louisiana state senate. prior to that, he provided care for the uninsured and underinsured patients in the louisiana charity hospital for nearly three decades. during this time, he cofounded the greater baton rouge community clinic providing free dental and healthcare to the working and uninsured. he also created a public and private partnership to the greater than 36,000 in the baton rouge area with children against hepatitis b. i would like everyone in this panel that i've had the pleasure of interacting with, and maybe john, maybe my first time
meeting you, and certainly with your qualities, and i was say to the senator, welcome us and engages in many discussions. so, senator. >> thank you for having me and i'm honored to be with this panel. so i worked in the public hospital system of louisiana, and it took care of the uninsured. i actually started my training at the los angeles county hospital in los angeles at the advent of the hiv crisis. i am struck when i was a resident and we first began seeing hiv in 1983, with patients, it was a death sentence. everyone died. i would see my patients at the hospital in that ridge and i remembered a young lady with such a story, that her mother had picked her up as she was an adolescent young woman, the older men like these teenage
girls thinking they would be clean. she had this terrible hiv and she had no sensory input. she had had an infection of her spinal cord and lay there blind and deaf moaning in her bed rocking back and forth. that doesn't happen now. because this incredible innovation that has occurred in the pharmaceutical industry. i could go on about hepatitis c. i am a hepatologist actually. i am treating that which was formally oh my gosh, it could lead to liver cancer and transplants and cirrhosis with all of those complications. it is just incredible. my senate hat, i will save the financial burden of drug cost
is something that can cripple our nation, and also obviously cripple families. and it does sometimes. let me quickly point out there are really rarely villains in any of the supply chain. but there is villain disincentives. terrible incentives which work against that which should be primary, which is the patient and just after that the taxpayer. i can give you examples that we perhaps all know of of two over- the-counter drugs which will cost you $20 out-of-pocket and or package together and sold on medicare for $2000 a month. 20 bucks of generic for $2000 a month. the medicare rebate system, which was supposed to be to the benefit of the patient and the taxpayer, probably cost them more while saving pharmaceutical and manufacturers money. that is slick, i am telling you.
pay for the late. a drug that has been offered patent for years which is $48,000 in the united states, and $8000 in canada. or the 340 b program that is evidence that hospitals and facilities on this program are actually less likely to treat the medicaid or the uninsured. now that is upside down. profit driven innovation which means that no longer am i scoping someone at 3:00 a.m. in the morning for the uninsured . isn't that fantastic. first there is the exportation of regulations for profit. that is not good for our country and many families and what we should resolve. i personally favorite market solutions and right now, we do not have it. guess who does a heck of a lot better in that transaction? i think that we need to return
to where we do have market- based solutions. my fear is that the hard left will take over and have less respect for the prophet-based innovation that i have seen, and more disregard for the exportation of regulations for profit. that which is as was mentioned, bringing us to the advent of cures of cancer that we've never thought could be cured before. before we get that cure for alzheimer's, or for other cancers. i am wearing my doctor hat and my senate hat and i try and put them together and say the solution would be if we go back to making the patient and the taxpayer primary, and if we do that, not just as a rhetoric or
a throwaway line in the conference like this, we are looking at each regulation is to the end result and it means that with all things considered, better for that patient. right now it is not. not for the diabetic who cannot afford insulin. if we can make it that, then we would have accomplished our goals. thank you.[ applause ] >> so perfect. let's first deal with this. i think you mentioned how many agents in the blueprint. >> there was 165 questions. it was organized in such a way that there was think that the secretary and the president knew, knew what we wanted to do with the stroke of a pen. there was things that we knew we would have to partner with congress to act on, and there was things that we knew that we
could do via regulation, but they had the potential to be so disruptive that we want to get feedback from the public and get it right. we received over 3000 comments, and we appreciate all of those who took the time. i think july 11 with the end of the comment period but not the end of public input. we continue to appreciate those who have come into share more information with us about what we should be doing differently, and we look forward to more to come. >> admitted he -- in many ways, senator cassidy said we have to fix it, and we are going to look at every single area. the blueprint is trying to do that in some way. you call the singles and doubles and not homers. so how many singles and doubles do we need to really fix the system, and would you be able to tell me at the end of that initiative that you have, what is in fact the collective evidence for savings and what %? >> i think rather than throw
out a very specific target of this is the goal that we hope to have by the end of the year, we are measuring the progress that we have made other actions that we have taken and the response to them. again, many people said that the blueprint fell short of what the president promise, which is negotiating for drug prices, and the secretary wrote it out in the rose garden, and said no, we are going to improve the negotiation that we have been part d, and begin negotiation and were we have not seen it in! where we have not -- where we have not seen it in part be back. -- b. and cross manage, manage these drugs for the $12 million of drug spent in medicare advantage plans. again, i think as people look
at what are you going to do, here is what we announced and what we are going to do. on the first day of enrollment, we saw medicare advantage plans, who had to work really quickly. many of these negotiations were sorely closed and they was given new authority, and they went out there and begin renegotiating, and they have announced how they are going to do it. there is two key pieces of that. one was patient protection and making sure that patients who are stable on their existing drug was going to remain on that medicine that the doctor felt it was best for them and in doing so in a way that reduces physician abrasion. you don't want doctors to be barraged by faxes and patients waiting at pharmacy counters. we believe there are electronic tools it would seem medicare
advantage plans can do that better. but ultimately, we wanted the savings this year to be shared with the beneficiary. next year and in the next benefit season going into these negotiations, knowing that they have this authority, there is this ability to save money on those costs, and ultimately see lower premiums. perhaps next year we will be talking about the premium saving that is attributable to improve the ability of that medicare advantage plans to negotiate. i think that is just one example of that we have some questions and we set we was going to do something, we did it. the private sector respondent and here is the result. >> i think in your report that you propose collectively the government sector together to negotiate pricing kurt!. can you explain --.
can you explain? >> the proposal that we have was that states would have the option if they wish to to join with the federal government in negotiating prices, and the benefit of this of course would be to give those representing the patient a bit more leverage in the market. this is not an easy thing to do as we have just heard. until we do get a collected wage of the prices, we are likely to continue to face a kind of problems we are facing >> what you think about that approach? >> i have a couple of concerns about it. making a little paradox, i am afraid of monopoly pricing whereby the purchaser is such a major purchaser that the purchaser can't dictate the price. we had the tension between profit fuel innovation and
profit taking. it is going to be, and we are going to get there, and the best way to balance that right now, and i don't think we have, but if they monopoly based pricing mechanism, and i think it is going to be so tempting for someone to say that we can lower cost and we are going to pay you this. then the capital flees and it will flee before we have a cure for alzheimer's as one example. i am also fearful of the other side of industry capturing the regulators and coming up with this type of negotiation, which we have now, which on the backside, people end up making far more money than what is apparent. i will lay it out like that, and i am not adverse to it, but i do think there has to be safeguards as to how we do it. >> i have a couple of issues on both. for one, i think the flexibility on medicare
advantage makes a lot of sense and it's an incredibly competitive market and a market were seniors make decisions with the help of god's each and every year. i think the flexibility that the administration allows in the plant allows us -- plan allows us, and we are happy to cover them but not should be expanded into categories with other alternatives to make war since for patients. the prime system works very well that way when it is given the flexibility within those boundaries. the second issue applied directly to should the government be the negotiator? fundamentally we believe that the private market can work and will work, but we have to ensure , and one of the major opportunities around this is for me a replacement. pharmaceutical companies negotiate with their payers surrounding which drug is on or off their formula, and also if you think about consumer choice, if the government is going to negotiate as many
countries do, it is a single formula without any patient choice. they make the decision and i think that goes against the tenant around individuals have that opportunity to choose with great transparency. we should honestly have better tools to make those decisions, and it should be clear, that if we really do believe that total cost, and i do fundamentally, that we are talking about lowering overall healthcare cost, there are transfers between effective drugs versus therapeutic things inside of the hospital that we are doing, that those trade-offs should be looked at the best possible outcome for the patient. we have to be looking at the total cost, and if you had the government negotiating solely for pricing, i think that will stifle payment innovation. what manufacturer is going to be willing to factor into the value-based payment or other things when the price is already cut. i think there is a number of
complexity that we have talked about in the system, but taking the right step, and we have talked about what is trying to get a fixed longer-term cost, and transparency for consumers, so they will see that and start moving us in the right direction. >> so let me just summarize a couple of comments. first of all, we live outside of the united states in markets where we negotiate with governments. i can tell you that from an experience. what they do is they dictate the price and i just came back from japan where they have a short-term budgetary issue, and guess what? they renegotiate the price. they come in and say the price that we agreed to, we cannot afford it anymore. the challenge that you have in those systems is that essentially the government is deciding at the end what the value of the innovation is. it has some advantages as the prices are inevitably going to be lower in that situation, but as was suggested, there is going to be in the final
analysis less choice for healthcare providers and their patients in those systems. the problem with our system is that it lies on insurance larger, and it -- largely, and it provides any quality. there are some people that have good service and some that do not. there are some people who have drug covered that allows them to pay less out of their pocket, and other people who don't have that kind of coverage, the administrative costs are higher. one of the things that we have to be very careful about what we say our system is broken, we have to be careful not to look for simplistic answers. it reminds me of the conversation about our broken educational system in this country with kindergarten through 12th grade. we have to bring lots of people to the table. senator cassidy is absolutely right. we want to make sure that patients can have access to these medicines, but make no mistake about it.
it is not easy in the world today when we are going after diseases that have evaded cure, to convince people to provide the patient capital to go after alzheimer's disease. that the marketplace is such that people believe that the rewards associated with this risk we are taking over a long period of time is not going to be sufficient, then i am just worried that we will not get the capital market to give us the length of time that we need to find these new drugs. >> let's talk about innovation since you raised this issue. >> it has always been said that to support innovation, the companies have to make a good profit and good is still to be defined. if we are not able to have a reasonable profit, it is difficult to supply innovation. it is not clear to me though to
determine how much you invest into your research and development. data shows that with two recent reports that 70% of the new drugs actually come from the smaller pharmaceutical technology, and they have been able to lessen it and acquire etc., so what is this connective in this picture here? is a large amount of research and development necessary, and yet the innovation occurs in the smaller innovative laboratories and universities. >> i think that is a generalization, but let me just say that we spent 8 million dollars a year on research and development. a lot of that money is being spent by bringing things into the outside from an ecosystem. research is much more distributed than it was 25 years ago. those folks can develop opportunities and often pharmaceutical companies purchase them. we are actually still a research and development
company. we are not a search and development company for the most part. we believe in basic research and we have opened up new labs in cambridge, san francisco, and london. at the end of the day, and i want to go back to this drug that we are talking about. we are now running 850 clinical studies for this truck. that is how we can -- drug. that is how we can see today activity in the tumor types. what we bring to the table beyond the early stage research is the capital investment that is necessary to get these drugs to people quickly and get it to them globally, and that is why it makes sense to have an ecosystem of small companies with a few researchers over here, and large companies that have the kind of capital intensity that you need to get the drugs everywhere. >> do you think in fact that our current system of approval
and clinical trials, which is very costly, is one of the reasons that you need such capital and whether or not you need a fundamental change in the way that we actually approach the development, clinical trials, and approval. >> i think the fda is doing a terrific job with some the truly important drugs. but i do agree that there is ways of streamlining regulatory sign is to make you keep up with the science of today. the fda for example this year, they approved an indication across tumor types based on a genetic signature. i think we are going that way in the future, and with artificial intelligence and the greater understanding of human biology, we can reduce the cost of the regulatory period. >> it is fair to say if you
look at the cost of drugs, it is extremely high here compared to others. when multinational companies say look, we need innovation, and we income that comes with it, i think the united states is paying for the other countries. >> weight -- we pay almost 50% of the cost of research in our country, and the rest of the world splits that other 50%. >> it is also important to note that the initial price of a drug that is not necessarily mean you have a relationship cost to research and development. there is an article on the wall street journal from a couple of years ago where pfizer figured out this is how much oncologist will pay for a medicine, and not be sticker shocked. it was quoted in the paper that had no relationship to the research and development. i will also point out this drug, which has been off patent for years, $48,000 in the united states and $8000 in canada? that is not research and development.
so yes, we need to get profit driven investment, but some of this is just profit-taking. >> picking up on the point by senator cassidy. our commute voted in regular time to this question, and although the data, it does appear that the pharmaceutical companies devote a greater percentage of revenue to research the most any other industry. at the same time, there is an impression held by the public that a reduction of a dollar in revenue means a reduction in dollar of research, which are committee would argue is not the case. it does not map on a 1-1. in recent years, and i'm going to speak of the average drug
company, there is specific examples that are quite different, but on average, drug companies spend more on marketing than they do on research and development. they spent more in the last two years on dividends and share purchases than on research and development. they are among the most profitable industries and ranked number 1 and number 4 in that profit margin. there is a lot of choices that a drug company should be able to make, once revenues have dropped by a dollar. that doesn't necessarily mean that research and development drops five dollars. it could mean that, but our argument means it doesn't have to. >> we spent 19% of each dollar on research and development. i think at the end of the day and you talk about profitability, what the market is asking, what is the risk adjusted return on invested capital?
if you are going to be in a business where you are going to spend billions of dollars and go after things like cancer and alzheimer's, for which there is no cure, and you are taking a huge risk that you are going to fail, and we fail over 90% of the things that we start. so when you do win, it is a little bit of a jackpot industry. at the end of the day if you are asking investors to put money at high risk, they have to have a high return. they look at what they call risk-adjusted return on capital, and this is a lot more risky than food consumer businesses, so again, at the end of the day, that is sort of what we look at. if you look at the large pharmaceutical companies compared to the s&p, if you look at it, we are trading at a decrement to the s&p, and that is a lot of the scientific risk, but increasingly, it is
the risk of whether or not it is going to be a market that will pay for your return. >> back to your point, the public also i think this not appreciate that when they buy a pill, the price of the pill is included in the price of all of the refills. someone has to pay for those. >> i guess that what i would add, i say we are talking about certain classes and be varies pacific about the efficacy of those classes and the return of just extending them off label. i think we also missed one subset. we have significant cost inside of our system around not using generics. we see them every single day were -- were the -- where generics are brought together under a namebrand.
you start to look at those scenarios, and say as we started this conversation, you have to get into the pacific's of what truly adds value to the system, and people have to have the transparency to make that. we are very comfortable when we see that something has true outcomes, and that it goes to the economic filter of best outcome across the system, and not just for pharmaceuticals, but for everything about what the overall total cost are going to be. we have been very willing to pay for that, and you don't see rebates and those kind of drugs, you just don't. 10% of those drugs our own rebate and i think that is quite frankly a smokescreen to the truly net cost issue that we are dealing with. >> are you talking about the rebates? >> rebates, they are less than 10% significant. >> i will challenge you own insulin.
it maybe $100 net cost but a $400 cost. >> i can take my diabetics, they were be out and this man, whose daughter is a diabetic, he just wears me out because he is paying so much. if the patient in the portion where she is pay is 100%, she is getting host. >> -- host -- hosed. >> i would agree with you, and we completely support the issue of get the lowest net cost. >> i want to f one last question i want to have time to open it up to the entire audience as i am sure they have lots of questions. i don't want to drift too far away from the conversation of innovation because today, we heard about innovation, and you are right ken, these are miraculous advances which are amazing.
we did talk about the sustainability of this approach. we would all agree that the innovation is moving at a rapid pace. we have never seen this as fast at this before. can we catch up with this innovation? this comes back to what is value based pricing. the earlier panel talked about what is cost-effective? let's look at each one, and measure them one to another. what other mechanism can we use to at least begin to have some way to assess, that in fact should be the right cost for major innovation. saving lives or maybe me too. how do we do that? >> i think there is a couple of ways to think about that, and i
will note that i spent last weekend and a cancer hospital as my dad has been recently diagnosed, and i appreciate not just the fact that the physician took the time to walk through the options, but that there was options and i was able to go look at the cross trial and other evidence that you cited. we want to be able to continue to bring forward innovation. i also want to have the ability that when i help my parents choose a plan every year, they had the ability to choose a plan that is going to work for them. the medicare advantage announcement is done against the backdrop, if people don't like the plan they chose, they have until the end of march to say what you said you was going to do, it may not be what is actually happening, or is not working for me, so we are going to go somewhere else. i think the value base purchasing as a number of different meetings, and i tend to prefer outcome-based contracting as it relates to the conversation we are having here. we don't believe that outcome- based contracting on its own is
a panacea to the concept of drug pricing. we do recognize that some of our rules may be in the way of bona fide contracting negotiations between plans and manufacturers that may want to agree on a bona fide therapeutic outcome and choose to contract based on that. how our rules work, it may affect other is reporting mechanisms. but like the choice and competition, we believe that the private sector needs to tool they have to be able to evaluate technology, and there is a fear that if the government tries to take a health technology assessment itself, it will lead to the government making a choice, and this is the government ultimately allowing access to a drug like my mom and dad could use.
>> another way to think about it though is that increasingly in cancer, we are looking at the genetic makeup of the person's tumor. that is another way of demonstrating value. another way of reducing cost to the system. in addition to developing medicines that have lesser toxicity and requires less hospitalization. i agree with the value based contracting thing, but it is not the only way we can figure out value. it we can more precisely target medicines to the people to where it will work and those kinds of things, we can also demonstrate greater value to the system. >> just quickly, and it has come up a little bit before, but to be -- to me, one of the important aspects of value judgment is what is the impact of the treatment today on reducing future cost? there is a great deal of leverage in many cases, were something that is rather
expensive today, it is discounted back to today's fun -- fund. the trouble our committee had with value-based pricing is that we all like the idea, and that is basically you buy a car or a bicycle or an apple. but the difficulty in determining value with people's lives involved, whether it is quality adjusted or what have you, it is terribly difficult. >> what if that was a totally independent and neutral evidence-based organization that says, [ laughter ], when you have this come through, that is a deep value assessment
with economic value, and at least recommend like some organizations do, to say here is where we say this should be, and had the ability to compare if you will what is there and what is in there. is that something that can be considered? >> that is a two track process to take wilma co-panelist have or descent. australia has a way of evaluating medication, and if they decide the medication doesn't ring value, you can still get it, you just have to pay the difference. if there is a combination drug of over-the-counter motrin and this other drug that would cost you $20 a month but in combination, it would cost you 2000. if you want to pay the difference, then you can still get it if you wish. on the other hand, i used to treat crohn's patients, and
there is someone in this disease that has crohn's disease and if you are in this room, you are not in the hospital. you would keep stripping away a portion of the bow because you couldn't -- bowel because you'd could not control the information. now they take an infusion once a month and they are great. if you talk about value, i can do that out just like that. you don't need the national academy of medicine you -- to do that, because you had the insurance company saying one hospitalization pays a lot for an infusion. i applied the administration, i think we can also rely on market phenomenon. i will tell you that it is amazing that the databases when they are crossed together, can give you information regarding patient outcomes. >> you would agree that it is somewhat fragmented at this time when you try to tackle this issue. >> i totally agree. i am simply saying that
whatever the mechanism is, where we can actually look at it together. for example, i see rebecca in the audience and maybe she is gone, and we have been working in louisiana, and what if i got x amount of doctor -- dollars and if we treated all of the hepatitis patients in prison, what with that due to the real cause? oh i don't have a spreadsheet, and using the medicaid data, which is difficult to come by, but medicaid data is different than your data. so the payer misses something. it is going to be very hard for anybody unless they are all seeing and all knowing, to get everybody's dad in a way that would be effective, not just for medicaid but also medicare and also for our prison system. i do think at some point you have to introduce it into the real world and introduce it into a plan and it may work.
>> just two quick points. number 1, i have not heard it from the panel just to remind you that a lot of the high- value discoveries that are funded are funded by taxpayers. so taxpayers have a lot of skin in this game already. not locking pharmaceuticals because you helped to bring it to market, but a lot of these game changing discoveries are paid for by the american people. second, every system is designed to get the result that he gets. the way that the market works in medical innovation in the day, you only make money by charging higher prices to the product you are replacing. if that was true in consumer technology, this iphone would be $250,000. if we rethink how we run the markets in biomedical research and reward innovation that will lower prices and gets rewards
to the public, i think american ingenuity will knock this thing out of the park. but into we do, we are going to continue to try to replace drugs with a more expensive drug and technology with more expensive technologies. we need to change the underlying market signal. i am like you, i believe in the market, but we have a market that rewards higher prices than a market that rewards a better value. i am interested in what you think about those. >> certainly it is definitely the case that everything that we do is based which is essentially provided by nih. the other side of that and what i said about this drug, is they come after a decade of translational research by the pharmaceutical company. no question without someone understanding that as we just saw this nobel prize that was won for the discovery of pd one. it took for ever for some company to say how do you
translate that into practice. there are thousands of those targets out there and i mentioned before, we fail 90% of the times because those targets cannot be reduced to practice. so what we actually bring to market, and i don't disagree with you, but don't underestimate how much it cost to do the translational part of the research. on the last point, i agree with the thrust of what you say, but we have to look at the total cost of care. it is not just a question of whether or not the first drug is more expensive than the second drug. it is also whether or not that drug that was introduced into clinical practice reduces the holistic cost of the disease. i want to come back and say we are having a discussion today about whether or not we can afford the newest cancer drug. the question is also can we afford cancer because cancer a natural disease and its progression has a much higher cost than its medicine. >> i would like to add to that
and say that i agree that we need to fund innovation, but we have new things added to therapeutic category, the cost should go down. this is the only industry where we have not seen that, and we still see price increases for no improved outcome. i think that is where i would disagree with my colleague is that i do agree that we across many categories today to see a price decrease much more to -- dramatically than what we have seen with the introduction of competition. >> we are trying to send a signal without payment rules to help pull through lower cost options like bio similars. we are also and the questions that we are asking, about rebates, and about regulatory shenanigans and about patent tickets. getting to the answer that while some newer lower cost technology may not be taking hold in the marketplace. swimming my husband who is also
here today, and i, we attended a recent national academy workshop on combination therapy. at that conference, there was a statement from a member of the fda saying if assistance is getting established -- precedents is getting established for esa and the results of phase 1 and trials, and question for applications of combination therapy. for example, if a patent is starting to run out and another pharmaceutical companies trying to get together to apply for a combination drug, then the results from phase 1 would be evaluated without having them to go through phase 1. i found
it very informative and also wanted to mention that at that comment to the cost of going into combination therapy. >> this is what i was implying and i agree with ken. there has to be some real transformation if not reformation in the way that we actually conduct these trials, and accelerate some of this stuff. certainly in this day of data and data analytics, maybe things will be different. but your point is well taken. i think in japan, you actually can get gene therapy into approval after a phase 2 study. then, a provisional study following to see what happens, and you begin to apply it. there are creative ways of looking at this thing.
>> i would like to thanked the panel are taking on this extraordinarily important topic given the pressures that it has on our patients as well as those hospitals and facilities that take care of vulnerable populations. that is my question and specifically to senator cassidy and deputy assistant secretary o'brien, given the 340 b mac -- 340 b, and the current conversation around reform and cuts, and what they can do to these hospital systems that cannot take care of the animal populations, -- vulnerable populations, to senator kathy,
i did my residency at charity hospital, and saving that hospital is critically important to me. can give you that! give us some insight into what this administration is considering as it relates to reform around the 340 b drug pricing policy as well as possibly the opportunity to apply some different rules around it. i know senator that you mentioned there was some concern about fraud. >> i will let john talk about the administration, but i will say that anyone who recognizes the 340 b has a very important role. as originally intended, it was to bring lower-cost drugs to those which need it. in some hands, it has become a racket, and i mean that. the benefit is not getting to the patient in so much so that the patient who is uninsured will go and pay the full cash list price and not get the benefit of the 340 b pricing
and the delta goes back to the hospital. keep in mind this is structured on the inpatient population, it has nothing to do with outpatient. unlike at charity hospital where you and i train, the patient can come through the emergency room and come in, get treated and get sent back on, but now is when they need the medicine. i spoke earlier of evidence that there is less treatment for medicaid and uninsured in 340 b facilities relative to those which are not 340 b. i worked in the hospital for the uninsured, and 340 b made medicine available to those otherwise who would not have. on one hand, i see it as an incredibly important lifelike, but on the other hand, something that has been exploited for profit but not the original purpose. >> i don't know if i'm allowed to say the word racket without going through clearance. [ laughter ] >> i will certainly echo the
senator statement and recognize that the program has certainly grown by leaps and bounds in recent years. we ask some questions about the growth of that program, and whether or not it is continuing to function the way it was intended to function with the veterans health care act was tabbed without a conference report, which makes it difficult to understand everything about its intent at that time. what we have done is that we have certainly read all of the research and publications about the growth of this program and the concerns about the relationship to the program and the growth in medicare spending, and what others have stated about the acquisition cost of 340 b drugs and what medicare is reimbursing for those drugs for medicare and if the sherries. because they part b beneficiary
pays a coinsurance based on the cost of the drug or the service, we proposed and ultimately finalized a rule that would reimburse 340 b drugs at less than 22 and half % that's back 22.5% -- 22.5%. that policy will save seniors $320 million this year on out- of-pocket spending. that is not government spending but out of seniors pocket. what we also proposed in the budget of the president was to take the savings that are caused by the government spending less on low drugs, and redistribute those savings to the hospitals that are providing the greatest levels of charity care. we are continuing to see feedback on this topic so that we do get the right balance between a very important program and serving low income
uninsured at the institutions where that is happening, and what is being described as significant growth. >> from what i understand, the administration now tries to put a lot of emphasis on consumer choice, and that means a choice similar to a car, you can make decisions about pricing and what you want or you don't want. my understanding in healthcare is that we have a little bit of a different situation, and first of all with respect to the information that needs to be made to the patient, it needs to be understandable and clear. there is not a kelly blue book out there. second, price sensitivity is rather limited among patients because it is about their own life and about the life of their family members.
how do you see this? how likely is it that consumer choice rule -- will really have an impact? >> first, obviously the drug market is not mono listed. that's back singular. within that, you have a great deal of variation. consumer reports sent out secret shoppers as if they was uninsured paying cash for madison park -- medicine. one drug at a price a consumer can pay ranged from $44 to $740. a generic drug. clearly the acquisition price is somewhere south of $44, and some people were getting charged $740. this in my mind is not right. this is where i think there needs to be, and you should
have consumer choice and you should push it out there and knock on the door and say i cannot believe it is $740 and i guess that is what they charge. when i was a kid and the newspaper had a listing of what everything costs, it should be like that in that generic space where the patient should know when she goes to the pharmacy or when she goes online, she is eber to comparatively shop. -- able to comparatively shop. there is a lot of savings to be achieved outside of that situation. going back and we will disagree, and you can look at the list price with rebate, and patients who are in a $6000 deductible are getting host -- hosed. you can argue that the
money goes back to subsidized insurance premiums, but what we are saying is the sicker patient paying for the more expensive drug is subsidizing those that are better off. >> there is actually two issues that i hear from patients. the first is the one that you talk about is that they don't get the benefit of the rebate. the other one is that often insurance policies requires them to pay as a percentage, a higher percentage of the drug costs, which of the -- is of the list price versus in network physicians. often, 15% of a list price rather than 3% of a net price. >> let me correct that because that it actually in our -- actually is in our policy. i can speak to what we do, and i am sure there may be other
choices, but we have been very clear, and for us, it is about total cost. >> thanks senator cassidy for his leading own price costing. we are also exploring other ways to get good information or better information out to consumers. the secretary believes you should know how much the drug is going to cost and how much it cost you long before you get to the pharmacy counter or get a bill in the mail. i think the rebate system is another system that we need to look into. site neutrality is another important part of our transparency effort. >> we will take two more questions. >> our solution on hepatitis c,
including ken and abby, who have been very resourceful and open to new solutions. there is hope perceived, but two problems and really job this is for you. one, the denial of massachusetts not to have drugs on their formula that is of low value compared to other drugs had a chilling effect on other states. what tools are we going to have if a drug is more expensive than the other or does not work as well. what are you going to give the states? second, there is a lot of market failures. two weeks ago, i was seeing a patient who had syphilis, and what i realized what was a five dollar drug penicillin, is now between 400 to $3200 because there is no generic and i cannot get it for this woman's partner and cvs will not stock
it. the only hormonal treatment for prematurity that has been around since the 1970s. so what do we do about this type of predatory pricing? finally, an area that was neglected for research because the company of ken is not going to make money on it. for example, contraceptives. no meaningful improvement in contraceptive since the 1970s. iuds have been around since then. they have been around a long time. so not a lot of innovation or sickle-cell disease. it has affected low income people who are vulnerable and never had the money to pay for them. so what we do about this market failures in areas where there are not in sentences --
incentives? >> you got a lot of question in the short amount of time. our budget proposed allowing five states to do the kind of testing that massachusetts sought to do and with the specific issue with massachusetts was related to whether not they wanted to hold on to the medicaid drug rebate in addition to any additional discount they was able to negotiate. i think there is some open questions that we had proposed to test, and i would love to talk more about that. 01 market failure that we are trying to correct, the secretary has directed fda for the single source brand or generic, in which there is no patent protection, to develop a mechanism by which we can import those drugs from other countries to be able to get after third the instances of that happening where people cannot get the drug because the price has essentially made it
unaffordable, and we met with you and your colleagues, and the governors and continued to hope to do so. all of the centers for research it is a real concern. let me start by saying, the philosophy is that we follow the signs. we do not just say we want to go after sickle-cell versus another area. but, we go into areas where frankly there is not much of a commercial opportunity. we are very proud of our ebola vaccine, and the impact that is
having in sub-saharan africa. that is not a commercial opportunity. that is simply that we are doing research in an analogous area in the vaccine research, researchers coming forward and saying, we simply can do something about ebola, and we put the money up to do it because that is how we get the next generation of scientists to come to your company. the other area is antibiotic research. right now, the work that we are doing on antibiotics we do fully knowing that if we are successful, as a matter of antibiotic stewardship, we should take the new antibiotics and put them into the medicine cabinet so that they will be a last line of defense, so that people have that research, and resistance that is growing. at an amazing rate around the world.>> what john was talking about of course, let me start over. on our website, we have something, ideas to help make healthcare affordable again. and, we have stuff, the importation of drugs, not
reimportation, but, an acknowledgment that many of the u.s., going to india or china, secure supply chain that would bring it to germany as well to the u.s. and so, why can't the u.s. company go and buy from london? as opposed to just have a price taker? again, eu, the fda, with an ml you, inspecting a plant in india, the other setting the inspection. and so, just it is logical that we should have a global market for some of these drugs. so, i like that john, going after that. the generic molecules as an example, but as a regard to sickle-cell i think it is also something where there needs to be symbiosis between those. aside from just tragedy, it is the blessedness, and, if you can do gene therapy and find
one gene, for a big victory, >> [ laughter ] >> telling me, you know, there's really very small gene that could be replaced, in the genome of a single patient making a difference. talk about something where compassion meets the value- based purchasing. so, the degree to which we can do that i think should be opportunities for that directive research. >> and that is being carried out, that is for sure, last question, george? >> [ laughter ] >> my name is george hill, from vanderbilt university, and, i want to come back to what they said, as we wrap up, and that is, the patients, throughout today we talked a lot about and referred a lot about the disparities that occur with one population versus another,
racial disparities. and i wonder for the congressman, or for the senator, and for ken frazier, and, representatives from hhs, and, i am thinking in terms of somebody on market street in philadelphia or canal street, or new orleans, or camden, what is it that you would say to individuals who say that the issue of health disparities and issues of difference, in terms of healthcare, or incidence of disease, is not something that individuals like yourself think about. >> how would you respond to that? >> first of all, i think that it is all of our collective responsibility. we put a lot on the government, my own philosophy is just a word that we use in our society to decide what other things
that we want to do together. i do not think that it is just these officials it is what we care about as a company, we think that those are major issues, one example is that we have spent in the past three years and the next two years we have committed half of $1 billion to doing something about maternal mortality in new york city an african-american woman is 12 times more likely to die of childbirth than a white counterpart, it does not matter what the education level as it does not matter what the economic situation. that is a crime, if you look at heterosexual transition of hiv in the black community, i always say, i do not want to be inappropriate, but if that was happening in another community and will be on the front pages of the newspapers the same way now that the opium and opioid probably is on the front page. so we think that we have a responsibility as a pharmaceutical company to work
with the government, and others, to deal with those healthcare disparities, because we are all americans, and our lives are all equally valued.>> [ applause ] >> thank you, so, some last words?>> i am encouraged from today's discussion, and of course everyone of you, certainly you capture it well, and we want to do the right thing. and, there is certainly a lot of activity and actions being taken. but, also, some of this about how complex the issue is, fixing one piece at a time. right? you know? something tells me that it needs a total transformational system fix. but, can we get there? maybe if i can ask one of you to just say one word, what do you want to do and how can we get there? >> with all due respect, i am not so arrogant to think that i
would come up with one thing to fix it all i am comfortable seeing what happens, and, adjusting after that. i think that is a good way to get to a system, but the principal should be market forces, transparency, not opaqueness, and making sure that the patient and the taxpayer care ford -- is cared for as opposed to those exploited. >> we are going to have to move very quickly, because what you see is, these issues, really, heading up to what you want to respond to, right? >> yes. >> so, this will take eight teen , upside down. so, i think that we have a president to move quickly. >> very quickly. >> and i think simple answers are copout, these are complex issues we are going to have to engage across multiple people, to get the answer, but i think that there is one thing that i
would say, what is good for the patient? >> thank you. >> i will concur, i will say that it is way too complex i think that we can get greater simplicity, i think that we can also get holistic pronouncements , they do not just cut it, i think that transparency is critical and we need to establish value because someone ultimately is making choices because of the cost of the system, and i think that again dealing with certain issues does not solve it so i think that we need to have transparency and total cost, and really, the conversation about it is not so much value, but it is outcome, with very specific patient population. >> the other panelists and the secretary said it, reiterating the testimony, that there is no single silver bullet that is going to solve this problem there is no one stakeholder that is to blame, we are going after were working with, everybody, and, we have a president who is passionate about this topic.
demanding action, doing more than any president, encouraging us that we have all options at the table that we need. >> i would just differ that as a nation we spent 18% of our gdp on healthcare, 17% of that 18% is on pharmaceuticals. pharmaceuticals have the highest growth rate within the healthcare program except for administration. the next highest nation in the world spends 11%, and if you look at what we could buy as a nation with 7% of the budget there is enormous opportunity cost here. the important of patients, i just think that the academy is great for putting this on the table and devoting her personal effort for it. >> thank you very much. [ applause ] >> thank you. thank you. thank you.
to american history tv, showing you programs on the civil war, historian and author peter carmichael describing public reaction to the carnage in 1852, and how it was depicted in the photos, illustrations, and letters that the soldiers sent home. also reunions, and clara barton's role at the battle. shepherd university, in west virginia. >> next on the civil war, historian peter carmichael talks about how violence at the battle of