President Trump‘s health chief is struggling to show that the administration is serious about taking on drug companies after its proposals for lowering prices last week left big companies relieved and even spurred an uptick in their stock prices.
Secretary of Health and Human Services Alex Azar insists that the companies are misreading the administration’s plan and that it will bring down drug prices.
Yet drug stocks rose after Trump’s plan did not include most of the immediate actions that the industry had feared.
The proposal left out two big ideas that Trump previously supported when he was running for president: Medicare directly negotiating drug prices and allowing the importation of drugs from abroad.
Azar is trying to show that Trump is not backing off from his campaign promises to take on the drug industry, even though the plan no longer includes those big ideas, which Azar says would not work anyway.
Asked about critics who say the plan lets drug companies off the hook, Azar said on CNN: “They can’t read and they can’t listen and they’re not understanding.”
But many analysts view the plan as underwhelming.
“There was little in the President’s speech or in the blueprint that took direct aim at industry, despite the president’s tough talk against pharmaceutical company pricing practices,” Rachel Sachs, a drug pricing policy expert at Washington University in St. Louis, wrote in Health Affairs.
Ian Spatz, a former top lobbyist at Merck who now consults for the industry, said drug companies were “anticipating there might be some more immediate changes and when it became clear that there was nothing that would happen [immediately] I think there was an exhale.”
Unhappy with the reaction to the plan, Azar, a former drug company executive himself, has been pushing back hard at the critics.
“I’ve been a drug company executive — I know the tired talking points: the idea that if one penny disappears from pharma profit margins, American innovation will grind to a halt,” Azar said in a speech on Monday. “I’m not interested in hearing those talking points anymore, and neither is the president.”
Industry observers have taken note of Azar’s ramped-up rhetoric.
“The initial reaction was tepid because you couldn’t find specific actions, but the rhetoric this week certainly has called attention,” said Rodney Whitlock, a former GOP congressional staffer who is now a lobbyist for the Campaign for Sustainable Rx Pricing.
However, Whitlock noted, “they need to match the rhetoric with action.”
“The reaction to Friday’s announcement was not what they were looking for, and therefore there has been a desire to ramp up the rhetoric to demonstrate the commitment they have to making changes,” Spatz said.
Spatz, who is now a senior adviser at Manatt, Phelps & Phillips, said there are proposals in the plan that could harm industry down the line, but much depends on the final details.
While drug companies dodged a bullet when the plan left out the big ideas of Medicare negotiation or importation, there are still some proposals in the plan that they oppose.
For example, Azar this week highlighted that he plans to take action to move some drugs that are currently covered under Medicare Part B — a system that has been criticized for lacking competition and driving up prices — into Medicare Part D, where private insurance plans have more power to negotiate prices down.
That proposal has the potential to hurt drug companies’ bottom lines.
Lori Reilly, an executive vice president of the Pharmaceutical Research and Manufacturers of America, said on Tuesday that the group has “serious concerns” about that proposal, saying it could harm patient access to drugs.
Alex Gorsky, the CEO of the drug company Johnson & Johnson, similarly warned on CNBC this week that the move could have “unintended consequences.”
But overall, he expressed confidence that his company would not be harmed by the president’s plan.
“I think we’ll be able to find a way to navigate through,” he said.