CVS Health CEO 'surprised' by Azar's comments on drug prices

BY JESSIE HELLMANN - 07/03/18 04:13 PM EDT 23

CVS Health says it is not standing in the way of lower drug prices, pushing back on comments Health and Human Services Secretary Alex Azar made last week.

Larry Merlo, president and CEO of CVS Health, wrote in a letter to Azar that he was "surprised" to hear him say pharmacy benefit managers (PBMs) — companies that manage insurance plans for employers and insurers — are standing in the way of lower drug prices in order to protect their bottom lines. 

"I want to assure you that this is not the case for CVS Health," Merlo wrote Azar in a letter dated Friday. 

Azar said he's spoken with drug manufacturers who want to lower the list prices for their drugs, but have faced pushback with the PBMs they work with who allegedly threaten to remove them from a list of drugs insurers cover — called a formulary — or give their competitors bigger discounts. 

This is because PBMs get a percent of a drug's list price. If the list price goes down, PBMs also get less.

Azar did not specifically mention CVS Health, or other companies, in his remarks. 

But Merlo told Azar that CVS Health's PBM has not told drug manufacturers not to lower list prices. 

"We do not instruct manufacturers on how they price their products," Merlo wrote. 

"Consistent with that practice, we have not as part of the current dialogue or in any other circumstance, instructed manufacturers not to lower list prices." 

He added: "To be clear, we support the administration's efforts to address high drug costs." 

Merlo said CVS Health has kept drug price growth at a minimal 0.2 percent, despite manufacturer brand increases on drugs near 10 percent. 

Azar's comments last week were not the first time the administration has been critical of PBMs. 

President Trump himself has criticized some PBM practices as a "total rip off."

Azar's comments also caught the interest of Sens. Elizabeth Warren (D-Mass.) and Tina Smith (D-Minn.).

In letters to nine PBMs and drug distributors, including Merlo of CVS Health, the senators called Azar's allegations "extremely disturbing." 

"If they are true, these allegations suggest that PBMs and drug distributors are acting to maintain high list prices in order to maintain high profit margins, potentially raising antitrust concerns," they wrote.

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