Dan Gorenstein: Last week, President Biden used his State of the Union address to tell seniors he feels their pain.

President Biden: I get it. I get it. We pay more for prescription drugs than any major nation on earth. 

DG: And he assured them he’s doing something about it.

Biden: With the Inflation Reduction Act that I signed into law, we’re taking on powerful interests to bring health care costs down.

DG: But standing up to drugmakers’ potential gaming, lobbying and lawsuits is easier said than done. Today, a conversation with the woman leading the charge to turn this historic law into ironclad policy.

Meena Seshamani: I tell my team the things that I wish I had in life: a crystal ball, a magic wand and a superhero cape.

DG: From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein. This is Tradeoffs.

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Meena Seshamani, MD, PhD, director of Medicare

DG: Meena Seshamani runs Medicare, oversees a team of 790 people. She knows how big this moment is.

MS: It is the opportunity of a lifetime for I think many of us to be able to implement this law.

DG: As a doctor, she’s seen firsthand how high drug prices affect the 64 million seniors and people with disabilities who Medicare covers.

MS: Like there’s one woman in particular who was on Medicare where we would pull out our smartphones and get on GoodRx to try to find a drug that I could prescribe for her that she could afford.

DG: Now Meena’s in charge of tackling this drug price problem head on with new policies, including a pair of unprecedented powers that target the companies setting these high prices.

The first — something called the inflation rebate — lets Medicare claw back money from drugmakers who hike prices faster than the rate of inflation. The second lets Medicare directly negotiate with drugmakers over the prices of some of the country’s costliest drugs.

Together, this pair of powers is projected to save Medicare $170 billion over the next decade.

MUSIC

Congress has given Medicare less than a year to start delivering those savings and that’s put the pressure on Meena’s team. To get through it, she says she tries to keep things…fun…ish.

MS: Sometimes we’ve used graphics in our PowerPoints just, you know, to bring a little levity to things, you know, break up the monotony of bullets on a slide deck. 

DG: Meena, a fruit and veggie fiend, has even embraced an ironic nickname her team has conjured: the potato chip boss.

MS: I was leading one of our senior staff meetings and I was eating I guess too close to my computer. One of my team members was then, like, chatting with others. “Is Meena eating potato chips?” And then someone else is like, “No, no, it’s just grapes.” [laughter] 

DG: And when grapes or chips don’t cut it, Meena reminds her team why they’re here.

MS: Ultimately we are all people, right? We go into health care because we care about serving others, about improving health. So, you know, we regularly try to make sure that we are tapping into that as we’re tackling thorny issues and thinking through complex problems. And really being able to connect in that way, I think, enables us to do better at all of our jobs.

DG: In a wide-ranging conversation earlier this week, Meena and I got into those thorny issues and complex problems that her team is tackling. They released what’s called guidance — details on the first of their two big pricing reforms — last Thursday. The public now has 30 days to comment, and details on the second reform are expected out in the coming weeks.

So Meena, first question. Let’s talk a bit about the inflation rebate guidance that came out last week. We know some drugmakers have avoided paying similar refunds to Medicaid, the other big federal insurance program. How are you trying to guard against that sort of gaming?

MS: Yeah, absolutely. And thank you for that question, Dan. In the inflation rebate guidance that we put out, for example, we are asking for comment on the drug shortage provision. So this is a provision where, you know, if there is a drug shortage…

News Montage: The supply chain disruption now pouring into your medicine cabinet // The FDA has listed over 110 medications that are in short supply // A hurricane in Puerto Rico caused a shortage and a price increase 

MS: You want to make sure that manufacturers have the resources to be able to address that shortage. And so we have the ability to reduce the amount of rebate that the manufacturers have to pay. 

And we want to make sure that that’s not taken advantage of? Should we be thinking about different shortages differently, right? And so this is why it’s so important for us as we are implementing this law, that we are engaging with everybody so that we can implement this law in the most thoughtful way. 

DG: So among health policy folks and people advocating for more affordable drugs, there’s a lot of enthusiasm about this new rebate power to deliver some serious savings, something like $70 billion over the next decade. At the same time, experts have flagged that drugmakers could react by jacking up launch prices of new drugs or charging private insurers higher prices. How concerned are you about those sorts of responses from industry? 

MS: I can’t speak to, I don’t have my crystal ball. I ordered it from Amazon. It still hasn’t arrived. But I will say that one of the things that we do talk about are what are the kinds of data and analytics that are available now, and that we collectively — not just CMS — but that others also can and should be developing to make sure that we are tracking how the market continues to develop.

DG: And I’m glad you brought up data, Meena, because there are just so many pieces to this law. On top of rebates and negotiations, you’re also capping what seniors pay for insulin and other drugs. What are one or two data points you’ll be monitoring to know what impact all of this action is having on both people and the drug prices? 

MS: Yeah, so by we, I said “collectively” for a reason. I think there are things that we as CMS can do. For example, we are now starting to look now that we have implemented the $35 copay cap, you know, recommended vaccines at no cost sharing. What is the impact that we see in Medicare utilization? So there’s that. And there are many academics who have been working in this space for many years where they will continue to look at market dynamics and factors that manufacturers take into consideration as they are determining things like launch prices.

DG: When we come back, how Medicare’s preparing to meet drugmakers at the negotiating table…and Meena’s recruiting pitch for the government’s new drug pricing team.

MIDROLL

DG: We’re back talking with Medicare director Meena Seshamani about the sweeping set of drug price policies her team is sprinting to finalize this year. Last week, they released draft guidance outlining how they’ll use one of their two major new drug pricing powers: the inflation rebate. Soon, they’ll release plans for the other — their new new authority to negotiate the prices of some big ticket treatments directly with drugmakers. 

Okay Meena, let’s turn to drug price negotiation. We’ve been talking to sources connected to industry, and it seems like the million … or I guess, billion … dollar question is this: Is this gonna be a true back and forth negotiation or is Medicare basically gonna say, this is the price, take it or leave it?

MS: Yeah, definitely, this is a negotiation. Negotiation is not new. [The] commercial market does negotiation, you know, VA, Indian Health Service. There are things that we can learn. What has worked well? Where are there opportunities for improvement? And one of the things we put out, we put out a timeline for implementation of the drug negotiation program. And importantly, we flagged in advance here are gonna be areas that we are going to want to get input from all of you. 

DG: When you sit down with the drugmakers, Meena, what’s the most common concern they have raised with you?

MS: I mean, I wouldn’t say that it’s necessarily a concern, but I think a common theme is we want to have a thoughtful negotiation process, right? We want to be able to give input. Remember, there are also a lot of operational pieces associated with implementation and being able to engage on that as well.

DG: There may be some people out here, Meena, who hear you sitting down with these drugmakers trying to understand their needs and they may wonder, “Why is she sitting down with the enemy? We just need drug prices lower, full stop.” So Meena, why are you talking with drugmakers? What’s the value? 

MS: There is value because we need to implement this program. We want to make sure we are leveraging this historic authority that we have been given. And just nuts and bolts of operations even — we’re going to have to collect data from the manufacturers that we are using to do negotiations. You could ask for data in a vacuum and you were too vague and people didn’t know what you were talking about. So I am sitting down with everyone. I am not just sitting down with one group and I am also making that clear to everyone who I engage with: You’re not the only one that I am listening to.

DG: Meena, it seems to me that at the heart of all these drug price policies is this tension. You want to make prescription drugs cheaper. At the same time, you want companies to stay in the market, keep making genuinely new and innovative treatments. From the outside looking in, that sounds like trying to hold water. It must be difficult to try to balance keeping drugs affordable without squashing innovation.

MS: Dan, you’re right. I think it is a balance and you know, the outreach that we’re doing, all of the comments that we want to get are so that we can make sure that drug prices are affordable and that we have innovation for cures that people need. You know, one of the things that I say is I’m hearing from everyone, which means there are going to be things that not everybody’s going to be happy with, right? And that is the nature of when you’re tackling a thorny, complex issue. 

DG: It’s been reported, Meena, that you’re trying to hire like 100 people in a hurry to staff this brand new drug price team within Medicare. I’m really curious, what’s the pitch that you’re making as you try to hire people into these roles?

MS: There is an incredible opportunity to do something historic and to be able to be part of that where the work that you do has such a tangible impact on the lives of people. Every day I’m honored and privileged to lead the Medicare team because I really think that that is at the heart of a lot of what they do every day. It is thinking about how are we serving people? Cause there are, you know, more than 63 million people who rely on our program.

DG: And so it sounds like what you’re saying is that at least as it comes to being a recruiting tool, there’s a powerful message that you have to share that you can say to people right now, “Hey, you’re interested, you’re concerned about the high price of drugs and the impact that that has on human beings. We can do something about that in a way our federal government’s never been able to do that before. Get on board.”

MS: Thank you for your recruiting call just there, Dan. [laughs]

DG: And all the grapes you can eat. 

MS: Or potato chips!

DG: Not if they’re eating with you it sounds like, Meena. I don’t think you’re bringing the chips. You’re bringing the grapes.

Meena, thank you so much for taking the time to talk to us on Tradeoffs.

MS: Thank you, Dan.

DG: The public has until March 11 to comment on Medicare’s new inflation rebate plan. And more drug policies are in the pipeline. This week, federal health officials announced a trio of pilots to lower spending. That includes a $2 generic drug list for common chronic conditions and new ways to pay for million-dollar gene therapies.

I’m Dan Gorenstein. This is Tradeoffs.