FDA's Gottlieb blames industry 'Kabuki drug pricing' for high costs

WASHINGTON (Reuters) - U.S. Food and Drug Administration chief, Scott Gottlieb, criticized pharmacy benefit managers, health insurers and drugmakers on Wednesday for “Kabuki drug-pricing constructs” that profit the industry at the expense of consumers.

FILE PHOTO: Dr. Scott Gottlieb testifies before a Senate Health Education Labor and Pension Committee confirmation hearing on his nomination to be commissioner of the Food and Drug Administration on Capitol Hill in Washington, D.C., U.S. April 5, 2017. REUTERS/Aaron P. Bernstein /File Photo

The comments, made at a conference organized by a leading U.S. health insurer lobbying group, stoked speculation over what steps the administration of U.S. President Donald Trump may take to rein in lofty prescription drug costs.

“Patients shouldn’t face exorbitant out-of-pocket costs, and pay money where the primary purpose is to help subsidize rebates paid to a long list of supply chain intermediaries,” Gottlieb said at the meeting of America’s Health Insurance Plans (AHIP). “Sick people aren’t supposed to be subsidizing the healthy.”

The remarks surprised meeting participants and spurred new accusations between leading members of the drug supply chain. Shares of top pharmacy benefits managers CVS Health Corp and Express Scripts Holding Co fell 1.4 percent and 2.4 percent, respectively.

He criticized the health industry for failing to promote access to so-called biosimilar versions of drugs, and for pricing practices that harm consumers.

Biosimilars are copies of original drugs that are supposed to be as effective but cheaper. Kabuki is a form of Japanese theater characterized by dramatization and elaborate costumes.

Gottlieb said practices in the healthcare industry “obscure profit taking across the supply chain that drives up costs” and discourage competition.

As FDA commissioner, Gottlieb has prioritized approving more generic drugs to help lower prices, allowing more than 1,000 copycat drugs into the market last year, he said.

Still, while the agency has approved nine biosimilar therapies to date, only three have reached the market, Gottlieb said. The rest have been mired in legal challenges brought by drugmakers such as AbbVie Inc to protect its multibillion-dollar rheumatoid arthritis treatment Humira.

Trump has vowed repeatedly that his administration will take more steps to lower drug costs, and included some potential actions in a proposed budget made public last month that Congress is not likely to accept.

Other regulatory actions could come directly from Health and Human Services Secretary Alex Azar, a former drug company executive, and through the department’s Centers for Medicare and Medicaid Services. Azar is scheduled to deliver remarks at the AHIP conference on Thursday.

Gottlieb noted that the top three pharmacy benefit managers - CVS, UnitedHealth Group Inc and Express Scripts - control more than two-thirds of their market. The top three wholesalers - AmerisourceBergen Corp, Cardinal Health Inc and McKesson Corp - control more than 80 percent; and the top five pharmacies more than 50 percent, he said.

AHIP responded by saying drug manufacturers were to blame for the high cost of prescription medicines. The Pharmaceutical Care Management Association, which represents pharmacy benefit managers, also said it was unfair to place blame on payers who cannot control the prices drugmakers set.

Editing by Bernadette Baum