Life Science Compliance Update

January 16, 2018

Senate Confirmation Hearing for Alex Azar - Open Payments to Remain Open


On January 9, 2018, the Senate Finance Committee held a nomination hearing for Alex Azar, President Trump’s pick to lead the Department of Health and Human Services (HHS). The Committee is expected to vote later this month on whether to send Mr. Azar’s nomination to the Senate floor. Throughout the hearing, Azar spoke of his past experience in the Department of Health and Human Services (HHS) during the George W. Bush Administration, as well as expertise he gained during his time in the private sector with pharmaceutical company Eli Lilly.

Although Republican members thought his experience would lend itself to the position, Democrats held concerns that his ties to the pharmaceutical industry would affect his efforts to combat drug pricing and anti-competitive practices. Additionally, Democrat senators expressed alarm that he would potentially use the position to take aim at the Medicare and Medicaid programs. Azar assured the Committee he was committed to elevating the efficiency and effectiveness of the programs, and any reform would be focused on slowing growth.

Opening Comments

Chairman Orrin Hatch believes that Azar “has his work cut out for him,” bu thought the candidate’s experience and knowledge of the regulatory system would allow him to hit the ground running. He explained that Azar would be responsible for the ongoing effort to bring down costs, provide greater access, give patients more choices in coverage, and tackle the opioid crisis facing the nation. Hatch also addressed the opposition of some members to Azar’s history in the private sector, but highlighted how his knowledge of the pharmaceutical world could inform cost-cutting policies at HHS.

Ranking Member of the Committee Ron Wyden questioned why President Trump nominated Azar after stating that the "price hiking drug companies were getting away with murder" because Azar is a former drug company executive with a “documented history" of raising prescription drug prices. The ranking member then went on to name four drugs which doubled in price during Azar’s time at Eli Lilly, and claimed the nominee had yet to offer a real solution to tackle growing costs. Senator Wyden did note, however, that he was pleased Azar had agreed to reinstate regular bipartisan meetings and calls with Congress.


During his statement testimony, Azar noted that he was intent on delivering on the mission of HHS to enhance and protect the health and well-being of every American through innovation. He said that marshalling and leading the resources of HHS requires never being satisfied with the status quo and anticipating and preparing for the future. He also highlighted his experience with the HHS during the Bush administration, noting that he has the skills necessary to lead the agency. Four areas that Azar believes need critical attention are: high drug prices, affordable healthcare, Medicare reform, and the current opioid epidemic. He asked for Congress to work with him to develop and implement solutions in those four areas, if confirmed.

Connections to Industry

As was somewhat expected, Azar's past work with Eli Lilly was a topic of conversation throughout the hearing. Azar spoke about it in a positive light, saying it would allow him to bring valuable insight to the position due to his familiarity with the way the system works and different incentives that may help to lower prices. He specifically pointed to generic, branded, and biosimilar competition as a way to combat higher prices, as well as efforts to prevent gaming and exclusivity.

Current Healthcare System

Another hot topic of discussion was the current healthcare system, including the impending reauthorization of the Children's Health Insurance Program (CHIP), which Azar noted his commitment to. Azar also noted – in response to a question by Senator Ben Cardin – his commitment to increasing the access to the highest quality of care throughout the country and that he would also work to maintain the Office of Minority Health and Health Disparities.

Senator Tim Scott asked Azar about how he would expand consumer choice, to which he responded by expressing his interest in creating affordable and "real insurance" options for consumers and individuals that do not have access to the so-called individual market.


Senator Chuck Grassley and Azar had a conversation about the Physician Payments Sunshine Act, of which Senator Grassley co-authored. In the hearing, Senator Grassley asked Azar whether he would be committed to continuing to collect and post all the data currently available on the Open Payments website. Azar responded, "Yes, Senator Grassley, as you know I am a big supporter of the 'Sunshine Act' and your work there and supported it at the time that you had first proposed it. I think that transparency is extremely helpful."

Medicare and Medicaid

Senator Grassley also asked Azar about his plans to fix the Medicaid program, to which Azar noted that he would work with the Centers for Medicare and Medicaid Services (CMS) to accomplish that task while reducing lost taxpayer funds. Azar also responded to a question from Senator Michael Enzi about a 1115 Waiver that Wyoming has been waiting for for two years by expressing his concern and that he would work to ensure that the government was a helpful and timely partner to state innovation.

Senator Robert Casey expressed concern about some of the discussion around entitlement reform targeting Medicaid. Azar responded to Senator Casey by stating that he understands Medicaid is "vital" for many families and will work to make the program as effective, accessible, and efficient as possible for all populations. He also noted that he would ensure Medicaid is funded and supported so that it can better serve the disabled population that heavily rely on it for necessary care. Senator Bill Nelson asked Azar several times for his opinion on entitlement reform, to which Azar responded by making clear that he was not a participant in the discussion surrounding any legislative agenda and that President Trump himself has pledged not to cut funding. Azar did mention considering raising the eligibility age for Medicare, but again reiterated his commitment to ensuring the sustainability of Medicare.

Next Steps

The Senate Finance Committee has scheduled an executive session to consider Alex Azar's nomination to serve as Secretary of Health and Human Services. The executive session will occur Wednesday, January 17th during a Finance Committee hearing for trade nominees Dennis Shea and C. J. Mahoney.

While Mr. Azar has been met with skepticism by some Democrats over his ties to the pharmaceutical industry, his nomination appears to be on the right path for confirmation 

Two Democratic senators (Sens. Joe Manchin (D-WV) and Heidi Heitkamp (D-ND) ) have announced their intention to support Azar’s nomination, and Republicans so far have been united in backing him.  


January 09, 2018

HHS OIG Releases Report on Potential Drug Misclassifications


A report recently released by the Department of Health and Human Services (HHS) Office of Inspector General (OIG) found that manufacturers may have misclassified as many as 885 drugs in the Medicaid rebate program in 2016. In September 2016, Congress asked OIG to evaluate the accuracy of manufacturer-reported drug classification data in the Medicaid rebate program, and the extent to which CMS oversees drug classification data submitted by manufacturers. In response to the congressional request, this study evaluates drug classification data submitted to the Medicaid rebate program and CMS’s policies and procedures to ensure appropriate oversight of this data. This report is the result of that request.

Although this number of misclassifications only accounts for three percent of the approximately 30,000 drugs within the program, ten misclassified drugs could have resulted in up to $1.3 billion lost in base and inflation-adjusted rebates for Medicaid over the last four years. The highest total reimbursement came in 2016 from these drugs. Congress had originally asked the OIG to look into drug misclassifications within the Medicaid rebate program due to outcry over rising EpiPen prices and the way Mylan had classified the drug and device as a generic under the program since 1997.

The Centers for Medicare & Medicaid Services (CMS) does not have the legal authority to require manufacturers to change their classification, and therefore must ask manufacturers to change their own data when they determine it may be incorrect, though CMS does work with the manufacturers to assist them in correcting the errors. Additionally, CMS does not track or maintain a central database of potential errors or their resolutions and investigators had no way to determine which drugs CMS had identified as potentially-misclassified or what steps were taken to address the potential errors in data. By classifying their drug as a generic, manufacturers are able to obtain a lower base rebate and are not subject to penalties if their drug’s price increases faster than inflation.

CMS routinely seeks to identify potential misclassifications and takes action when they are identified. To identify potential misclassifications, CMS compares Medicaid drug classifications reported by manufacturers to FDA data on a quarterly basis. If CMS identifies any errors in manufacturer-reported data, CMS stated that it typically contacts the manufacturer to request that the manufacturer correct the reported information. CMS may terminate a manufacturer from participation in the Medicaid rebate program for good cause. 8 If a manufacturer does not correct errors in reported data, CMS could potentially determine that the manufacturer is subject to termination for good cause.

A majority of the identified misclassifications were labeled as Generics under Medicaid, yet classified as brand-name drugs by the United States Food and Drug Administration (FDA). The report found that fifty-four manufacturers may have potential misclassifications, but it was four companies alone that were responsible for more than 50% of the errors in classification.

In conclusion, the report recommended that CMS (1) follow up with manufacturers associated with potentially-misclassified drugs identified in this report to determine whether current classifications are correct, (2) improve its Drug Data Reporting for Medicaid System to minimize inconsistent data submissions and track potential classification errors for follow up, and (3) pursue a means to compel manufacturers to correct inaccurate classification data reported to the Medicaid rebate program. CMS concurred with all three recommendations.

December 01, 2017

Trump Nominates Alex Azar to Head HHS 


A few weeks ago, President Donald Trump nominated Alex Azar to lead the Department of Health and Human Services (HHS), following in the footsteps of Tom Price. The nomination – announced where else other than Twitter – said “Happy to announce, I am nominating Alex Azar to be the next HHS Secretary. He will be a star for better healthcare and lower drug prices!” 

Azar has a history of involvement in the pharmaceutical world, including serving as HHS General Counsel and Deputy HHS Secretary under President George W. Bush. Mike Leavitt, the HHS Secretary when Azar was Deputy had kind words about his former colleague, noting, “He’s precise, highly motivated, he has high standards for performance for himself and for other people. He had full responsibility as deputy secretary for the regulatory processes at HHS.” 

As HHS general counsel, Azar worked on the administration’s response to the 9/11 terrorist attacks and the ensuing anthrax attacks, stem-cell policy and the advent of the Medicare prescription drug benefits. During his tenure as deputy secretary, he pushed for greater disclosure of prices associated with medical services to help foster competition and contain costs. He also backed converting medical records to electronic form. He was confirmed for those previous positions by unanimous voice vote. 

Azar recently spent five years at Eli Lilly, which makes several blockbuster medications, including the antidepressant Cymbalta and several forms of insulin. Insulin prices have drawn widespread ire because they keep spiraling higher, even though insulin has been around almost a century. During his tenure at Lilly, Azar sat on the Board of Directors of the Biotechnology Innovation Organization (BIO).  

"Drug corporations have undue influence over health policy in America, and they use it to make money on the backs of patients and taxpayers," said Ben Wakana, executive director of Patients For Affordable Drugs, an advocacy group. Even still, Wakana supports Azar and believes that he has a good history, "Mr. Azar is well-qualified and has the chance to stand up for patients because he knows exactly how our drug pricing system is broken. If he wants to take meaningful action to lower drug prices, we want to help him." 

Azar currently serves on the board of HMS Holdings, a Texas company that helps health insurance companies cut costs, and runs his own biotech and health insurance consulting company, Seraphim Strategies. 

Congressional Reaction 

Senate Majority Leader Mitch McConnell: “Alex brings a wealth of private and public sector knowledge that will prepare him well for this crucial role. The Secretary of HHS oversees some of the nation's most important programs, including Medicare and Medicaid in addition to safeguarding public health at the Centers for Disease Control, advancing cures at The National Institutes of Health, and working through the Food and Drug Administration to get those cures to patients. I look forward to meeting with him soon to discuss his outlook and vision for the department, particularly the opioid epidemic that has hurt so many Kentuckians and so many Americans across the country.” 

Speaker of the House Paul Ryan: “Alex Azar is an experienced and highly capable leader who knows what it takes to tackle big challenges in health care. The Senate should swiftly confirm him as our next @HHSGov secretary.” 

Advocacy Groups in Support 

There are many advocacy groups and commentators who support Azar’s appointment. A few are sampled below.  

American Hospital Association President and CEO Rick Pollack: “We welcome the nomination of Alex Azar to be Secretary of the Department of Health and Human Services (HHS). We are confident that his extensive background in business, health care and medicine distinguishes him as a uniquely qualified candidate for the vacancy. The expertise garnered from his career in the private sector and prior public service at HHS as Deputy Secretary will prove to be particularly valuable in addressing the serious challenges facing our nation's health care system today. We look forward to working side-by-side with him to achieve our mission of advancing the health of the patients and communities we are privileged to serve.”  

Politico Healthcare Editor Adriel Bettelheim:“Azar built a reputation as a pragmatist during stints as HHS deputy secretary and general counsel in the George W. Bush administration.” 

Doctor Roger Klein:“I applaud President Trump’s nomination of Alex Azar to lead the Department of Health and Human Services. As a former Deputy HHS Secretary and attorney with extensive private sector business experience, he brings the necessary skills and expertise to confront the disruption and dislocation the Affordable Care Act has caused. Alex Azar’s appointment will add stability to HHS, and help improve healthcare for millions of Americans.” 

 What Does the Future Hold 

Republicans predicted that, if confirmed, Azar would pursue Trump’s goals to tilt health-care policies in a more conservative direction through executive action. Leading Democratic health policy experts, while not sharing Azar’s views, said he is well qualified for the post.   

In today’s world, predictability is sparse, but based on past comments and statements, it is possible that Azar will attempt to move authority to the states over Medicaid, turning over the program to the states to make them “better stewards of the money.” He has previously alluded to a path forward by having HHS use its regulatory powers to allow states to customize the rules around Medicaid. Seema Verma, the CMS Administrator, also favors giving states waivers to create their own Medicaid Systems.   

However, where Azar stands on the issue that has just about everyone all riled up – drug prices – is much less clear. While drug prices were a hot topic during the 2016 presidential campaign, President Trump has not made it a priority this year. Interestingly, he did mention drug prices when announcing Azar’s nomination on Twitter.  

The White House believes that Azar’s combination of public and private sector experience will serve him well at a time when the administration is seeking big changes to Obamacare and regulatory agencies like the FDA.  


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