The United States lacks “a real market for prescription drugs, ” Azar said in a speech at the conservative Heritage Foundation.
In the current market, if pharmaceutical companies cut their list prices insurers, employers and pharmacy benefit managers – all of which negotiate discounts on prices for health plans – together will make less money from the rebates offered by the drug companies, he said.
“We have the power to break up this arrangement ourselves through administrative action, because it relies on a loophole in federal law that allows these otherwise highly regulated entities to, essentially, double deal,” Azar said.
He said HHS will take steps that “may be unexpected” to give private negotiators and consumers more power to bargain with pharmaceutical companies, highlighting the Food and Drug Administration’s announcement last week to investigate the price-reducing potential of importing medicines from foreign countries when the sole manufacturer of a drug without patent protection hikes prices.
“This shouldn’t necessarily have been a surprise,” Azar added. “We are open to all solutions that put American patients first.”
Related: Drugmakers sure are eager to talk about drug prices lately
Pharmaceutical companies including Pfizer, Novartis and Merck recently announced they would pause decisions to increase drug prices or would cut prices this year. This signaled that drug makers have realized the government is “on the verge of significant reform,” Azar said.
Azar blamed the Obama-era Affordable Care Act, which expanded Medicaid program to cover 15 million new healthy adults, for choking the private insurance market.
“In a free market, young people can buy insurance for about one-sixth of what it costs older people, because younger people use fewer healthcare services,” Azar said. “But the ACA imposed a price floor: Younger Americans must be charged at least one-third of what older Americans pay.”
“Supporting legislation to undo those perverse incentives is a priority for this administration,” he said.