WASHINGTON — When titans of the pharmaceutical industry met here last week at the opulent Mandarin Oriental Hotel, Trump administration officials issued a blunt warning to the chief executives on the soaring prices of their medicine.
Eric D. Hargan, the deputy secretary of Health and Human Services, told the board of the Pharmaceutical Research and Manufacturers of America that the Trump administration strongly favored free-market solutions. But, he said, a continuation of aggressive price increases could invite remedies they would find far more distasteful.
“During the debate over the Affordable Care Act,” huge insurance premium increases “played no small part in building the momentum for federal rate review of insurance premiums and other new federal regulation of health insurance,” he told about 30 CEOs meeting behind closed doors.
“That is the kind of outcome you get when major players in an American industry stop reflecting intelligently about the public good and don’t look beyond their immediate bottom line,” Hargan warned, according to a person with knowledge of the meeting. “I fear we’ve been seeing some of that kind of behavior in parts of the pharmaceutical industry.”
Just to make sure drugmakers got the message, federal officials announced a flurry of actions and plans to coincide with the PhRMA board meeting.
The commissioner of the Food and Drug Administration, Dr. Scott Gottlieb, announced that he was forming a work group to study how to import prescription drugs from other countries if a sharp price increase made a particular drug inaccessible to consumers in the United States.
The White House Office of Management and Budget disclosed that it was reviewing a proposed rule that would upend pricing practices in the drug industry by restricting the payment of rebates blamed for high drug prices.
The administration said it would make more prescription drugs available over the counter. And it unveiled plans to speed the approval of more affordable versions of biotech drugs, which now account for most of the growth in drug spending.
Last May, in a highly anticipated speech in the sun-drenched White House Rose Garden, President Donald Trump laid out his long-awaited plan to lower drug prices. Democrats dismissed the proposals as toothless and well short of the president’s campaign promises to allow the government to negotiate drug prices for Medicare while promoting the importation of medicines from abroad.
But chief executives of drug companies are not so sanguine.
Administration officials “want a win, they want a victory,” said a person at the PhRMA meeting, who reported that the administration “went ballistic” when Pfizer increased prices a few weeks ago. Pfizer deferred the price increases after Trump criticized the company and put pressure on its chairman and chief executive, Ian C. Read.
Another person who attended the PhRMA board meeting described the message from the Trump administration this way: “You guys have got to get on board. You are not being particularly cooperative or helpful. We are watching you. You better not be out there increasing prices.”
Robert A. Bradway, the chairman and chief executive of Amgen, who is also the chairman of PhRMA, presided over the board meeting. Amgen says it has not increased or decreased the prices of any of its products since Trump issued his blueprint to lower drug prices in May. Bradway is likely to be asked about Amgen’s plans when the company releases its quarterly earnings report on Thursday.
“It’s not just business as usual,” an industry insider said, recounting the board meeting. “The clear sense is that the administration is serious and wants to tackle this issue in a way that it hasn’t been tackled.”
Stephen J. Ubl, the president and chief executive of PhRMA, said, “Our message to them was that we are equally serious about constructively engaging with the administration on these subjects.”
Among the administration officials who dropped by the PhRMA board meeting were Hargan; John M. O’Brien, a deputy assistant secretary of Health and Human Services; and Daniel M. Best, who is coordinating federal efforts to lower drug prices. Hargan told the pharmaceutical executives: “The president watches drug prices like a hawk. He loves to read the newspaper, and every time he sees that one of you have raised your prices, he lets us know.”
“I shudder to think what the president might have said if the Daraprim price hike had happened on his watch,” Hargan added. The price of Daraprim, which treats a life-threatening parasitic infection, was increased overnight to $750 a pill, from $13.50, in 2015. The move transformed the young CEO of the company that acquired the drug, Martin Shkreli, into the new face of Wall Street greed.
Hargan’s statements, like remarks and Twitter posts by Trump, suggested that drug prices were a big political issue for the administration.
Members of the PhRMA board may create a work group to formulate a response to Trump’s demands. But they said they were hamstrung because, under federal antitrust law, a trade association cannot control or suggest prices of members, and lawyers advised them to avoid even discussing prices with competitors.
Trump has suggested that the FDA could require drug manufacturers to include the list prices of drugs in their ads — showing, for example, that cancer drugs like Keytruda and Opdivo can cost more than $13,000 a month.
PhRMA rejected this idea. “Such a requirement,” it said, “could confuse patients since the list price often does not represent what they would actually be required to pay.” Moreover, it said, the undiscounted list price may be so high that its inclusion in advertisements “could deter patients from seeking care.”
In recent days, Novartis, Merck and Roche have joined Pfizer in deferring price increases, and Merck announced with fanfare a 60 percent cut in the price of a hepatitis C drug which, in point of fact, recorded no sales in the United States in the first quarter of this year. But Alex M. Azar II, the secretary of Health and Human Services, told Fox Business: “Their voluntary actions are not what we’re counting on. We are driving swift, firm regulatory action, legislative action, that’s going to create every incentive to bring prices down.”
As drugmakers and politicians swapped ideas in Washington, consumers turned to Twitter to describe their struggles in trying to find insulin at affordable prices for people with diabetes.
“I just bought 2 vials of insulin for my daughter cost me $524,” one woman wrote. “With a discount card. All I could buy. I left the pharmacy and sat in My car and cried.”
Azar has firsthand knowledge of the problem. He was a senior executive at Eli Lilly at a time when the prices of its insulin products steadily increased.