by Edwin Quinabo
It has been decades in the making – consumer advocates and senior groups like AARP lobbying Congress and former presidents for Medicare to be able to negotiate drug prices and lower drug costs.
This year with a rare Democrat government trifecta – not seen since 2009-10 — politicos are saying it is the best chance to finally get the ball moving on prescription drug reform.
But even in this most Medicare-friendly political alignment, there have been stumbling blocks. Medicare price negotiation was included in President Joe Biden’s original Build Back Better Act (BBBA), then suddenly it was taken out due to an impasse between House Democrat leadership and less than a handful of holdouts. Then once again, a breakthrough in negotiations put prescription drug reform in the BBBA mix.
House leadership said they are at the homestretch, plan to finish a bill and send it to the Senate this week.
At the Senate at least one roadblock had been cleared two weeks ago. Senators Joe Manchin and Kyrsten Sinema (the lone Democrat holdouts in the Senate on this issue) agreed to support the Medicare negotiation proposal after being opposed to it since BBBA was introduced. Still, the pair maintain they have strong reservations on other items and will have to review the details in the anticipated House version.
BBBA covers a wide range of social safety net, health policy reforms, and climate change initiatives. Some analysts say the bill could be too broad and diverse – a political a gamble that could end in an embarrassing flop if major concessions are not made in the last rounds of talks.
In the Senate, Medicare prescription reform and BBBA most likely would be taken up after Thanksgiving break. Senate Majority Leader Chuck Schumer already indicated government funding and the debt ceiling — both set to expire in early December – will be priority this week.
Politicos anticipate should the House and Senate broker a deal, a final BBBA could be sent to the President for signing before the year ends.
Overwhelming Support for Medicare Price Negotiation
A poll from the independent Kaiser Family Foundation (KFF) released late last month finds large majorities support allowing the federal government to negotiate drug prices (83% total, 95% of Democrats, 82% of independents, and 71% of Republicans). This very high bipartisan approval rating on a proposed or existing policy is a rare occurrence, political analysts say.
Keali`i Lopez, state director AARP Hawai`i, told the Hawaii Filipino Chronicle, “AARP believes Medicare should be allowed to negotiate prescription drug prices. Drug prices should not rise faster than inflation. Medicare Part D prescription drug plans should include a cap on out-of-pocket drug costs.”
These are all included in the BBBA health policy segment. He adds that “prescription drug price transparency should be increased, and lower-priced generic drugs should get to market more quickly.”
Senator Mazie Hirono co-introduced with Senator Amy Klobuchar a bill in 2017 to allow Medicare to negotiate price.
At the time of introducing her legislation, she said “Our kupuna deserve to have access to affordable prescription medication.
“This commonsense legislation allows Medicare to negotiate directly with manufacturers to bring down costs for Hawaii seniors and their families,” she said.
Features of Medicare-related bills in BBBG (as of press time, subject to change in final bill)
The Medicare drug pricing proposal within BBBA includes a plan for Medicare to negotiate prices with drug companies that would set a ceiling for what Medicare would pay for certain medications: no higher than 120 percent of what several other wealthy countries pay. Pharmaceutical companies that do not participate in the negotiations would be subject to a severe excise tax.
The Department of Health and Human Services would be responsible for identifying the 100 high-cost drugs and choosing the 10 for price negotiations. That effort wouldn’t start until 2023, but the new prices would go into effect in 2025. Another 10 drugs could be added by 2028.
An example, insulin (drug for people with Type 1 diabetes and some with Type 2 diabetes) is very costly even though it has been around for decades.
Starting in 2023, the maximum out-of-pocket cost for a 30-day supply of insulin would be $35. The benefit would not be limited to Medicare beneficiaries. That cap is the same as one that was set in a five-year model program in Medicare. In it, the Centers for Medicare & Medicaid Services estimated that the average patient would save about $466 a year.
*The measure also allows for prices to be negotiated to a lower level for older drugs chosen for the program.
Gerard Anderson, a professor of health policy at Johns Hopkins’ medical school said, “In every other country, the price goes down over time, while in the United States, it is common for prices to increase.”
He said this legislation is in the right direction on this provision
.Drugs from smaller companies with sales under $200 million are excluded.
Senate Finance Committee Chairman Ron Wyden (D-Ore.), who led the talks for the senators, said, “There’s going to be negotiation on the most expensive drugs: cancer drugs, arthritis drugs or the anticoagulants. And that’s a precedent, and once you set a precedent that you can actually negotiate, you are really turning an important corner.”
Other Medicare Health Policy proposals in BBBA (as of press time):
*Lowering Prescription Drugs. Place inflation caps on prescription drug prices for all insurance. Under the bill, manufacturers would have to report their prices to the HHS secretary, and if the prices increase faster than inflation, the drugmakers would have to pay a rebate to the government. Manufacturers that don’t pay the rebate would face a civil penalty of 125% of the value of the rebate. The provisions would apply to drugs purchased through Medicare and non-Medicare plans.
For decades, inflation of drug prices have exceeded general inflation. So the provision is designed to slow down drug cost inflation.*Medicare Part D Redesign. Limit Medicare beneficiaries’ annual out-of-pocket drug costs to $2,000. This would address the “doughnut hole” problem consumer groups have been talking about concerning the way prescription drug plans are calculated. And under the current system, a criticism is that there is no limit (cap) on how much a Medicare beneficiary spends.
For patients with serious diseases like cancer, this would be a tremendous help. Many beneficiaries with long-term diseases will spend thousands of dollars each year in out-of-pocket spending.
Community’s support for Medicare Drug Pricing Negotiation provision in BBBA
Oscar Ramelb, 56, Pearl City, has health insurance from his federal employer. He says because of his good health, he doesn’t spend much at all on prescription medicine.
“But I remember my mom would spend over $500 a month out-of-pocket on prescription drugs when she got older. She would take medicine for her diabetes and hyperthyroid condition. Later she also got liver problems, and eventually cancer, the disease she died from.
“I’m in full support of the Medicare changes. If they will put a cap on out-of-pocket spending, it would be a blessing. I’m sure my mom would have benefitted from a cap in her old age. It’s not good that seniors who have bad health must pay so much. They work hard all their lives. Many of them who have fixed income, they cannot afford their drugs,” said Ramelb.
“What are they supposed to do, just die even though there are drugs available that can help them? That’s not right.”
Rhea Alarin, Honolulu, executive director for a multi-clinic corporation in Hawaii, also supports Medicare drug pricing negotiations. “Brand name medications are too expensive, especially injectable meds like insulin.”
She pays $20-30 a month on prescription drugs. “I am blessed to have good insurance and a good-paying job to help me with my fixed expenses.”
Alarin realizes that for others who have tighter fixed budgets and must take prescription meds, budgeting is necessary.
“They have to choose medications vs putting food on the table.”
Dr. Jon Avery Go, internist, Waipahu clinic, echoes Alarin’s response (as most in the medical community) that brand-name prescription drugs are too expensive. He said generic drugs are reasonably priced.
High cost of prescription drugs.
According to AARP’s Rx Price Watch Report, retail prices for 260 brand name prescription drugs increased more than twice as fast as general inflation, “rising 2.9% compared to an inflation rate of 1.3%.”
In 2015, the average annual cost of one brand-name medication that was used regularly is $5,500. But last year, the average annual cost went over to $6,600.
Americans pay more than three times what people in other countries pay for the same medicines. Prices for prescription drugs keep rising. For example, the price of a cancer drug, Revlimid, increased by 44 percent from 2015 to 2020.
AARP Hawaii’s website gives examples of typical drug price increases for some health conditions:
*91,549 Hawaii residents diagnosed with cancer.
Revlimid treats forms of cancer, up from $185,574/yr to $267,583/yr
*89,499 Hawaii residents have diabetes.
Victoza treats diabetes, up from $7,936/yr to $11,300/yr
*80,642 Hawaii residents have asthma & or COPD
Spiriva Handihaler treats asthma/COPD, up from $3,886/yr to $5,289/yr
Lopez said, “The simple reason why prescription drugs are so expensive is that pharmaceutical companies are free to price gouge taxpayers. Unlike many other countries, the United States allows drugmakers to set their own prices with virtually no accountability or transparency.”
Debra Whitman, Executive Vice President and Chief Public Policy Officer at AARP, said “It’s inexcusable that even during a pandemic and financial crisis, brand name drug companies continued to increase their prices so much faster than the prices of other goods and services.”
She gives an example of the high cost of drugs. If an older American is taking four to five prescription drugs per month, the annual cost of their medication in 2020 would have been more than $31,000 which is way over the average annual income of $26,000 for Medicare beneficiaries.
“No one should be forced to choose between paying their bills and paying for the medicine they need to stay healthy. Our leaders need to take action now to lower drug prices,” Whitman said.
AARP asserts that consumers all across America have to choose at times between filling life-saving prescriptions and paying rent, buying food and affording other critical essentials.
Government Savings from Medicare Price Negotiation Proposal
The non-partisan Congressional Budget Office (CBO) estimates Medicare negotiations would save the federal government upwards of $500 billion, in the range of $700 billion over the next decade.
Spending by Medicare Part D enrollees will save $117 billion between 2020 and 2029 including a reduction of $102.6 billion in cost sharing for people who use drugs covered under Part D that are subject to negotiation.
Medicare beneficiaries would see premiums for their Part D plan fall by 10-15% under such a plan, according to a Kaiser Family Foundation estimate. The new lower prices would also be available to private insurers, which could lower premiums for those plans too.
CBO also said premiums that beneficiaries pay for Medicare Part D coverage should be lower with the proposed cap. Collectively, the reduction is estimated at $14.3 billion in Part D premiums.
Savings to go toward expanding Medicare coverage (plan as of press time, subject to change)
The money saved from price negotiations will be used to expand dental, vision and eye benefits to Medicare enrollees; and to help pay for the added beneficiaries (proposal to reduce Medicare eligibility from 65 to 60).
The total cost for expanded Medicare benefits and new enrollees is estimated at $600 billion, less than what’s projected in savings.
Currently, traditional Medicare program doesn’t cover those benefits; Medicare Advantage, a growing private alternative, usually does. Due to high cost of dental services and dental coverage not being included in traditional coverage, = about half of enrollees have not seen a dentist in more than a year. Nearly half of Medicare beneficiaries (47 percent, 23.6 million people) don’t have dental coverage.
Traditional Medicare has always been criticized for not being comprehensive enough and must be supplemented by additional private insurance. Legislators say the idea for added coverage addresses some of these gaps to make traditional Medicare closer to being comprehensive.
Pharmaceutical industry opposes Medicare changes
The pharmaceutical industry is lobbying against the Medicare proposals in BBBA. Representatives say the changes could lead to less investment in research and development (R&D) to find innovative drugs.
In 2019, the pharmaceutical industry spent $83 billion dollars on R&D. Pharmaceutical companies spent, on average, over 25% of revenues on R&D in 2018 and 2019. The pharmaceutical industry spends more on R&D than any other industry.
Critics of the pharmaceutical industry make two arguments on that point. First, why would drops in profit go towards cuts to R&D, specifically? And not on the billions they spend on advertising and marketing or the huge sums paid to their CEOs or army of lobbyists? Second, the US government contributes significantly toward R&D of drugs, but the industry reaps most or all the benefits, and still set brand name drugs at a very high price.
Data from ongoing surveys by the National Science Foundation (NSF) show that federal agencies provided 44% of the $86 billion spent on basic research in 2015.
The federal share of R&D has been decreasing. It topped 70% throughout the 1960s and ’70s, stood at 61% as recently as 2004 before falling below 50% in 2013.
The US government’s involvement in R&D of drugs goes through the National Institutes of Health (NIH) and the Defense Advanced Research Projects Agency (DARPA). It also provides grants to universities where R&D takes place.
Thomas Caskey, M.D., Director and Chief Executive Officer and Chief Operating Officer of the Brown Foundation Institute of Molecular Medicine for the Prevention of Human Diseases at the University of Texas Health Science Center, said “The principal investors in drug development differ at each stage. While basic discovery research is funded primarily by government and by philanthropic organizations, late-stage development is funded mainly by pharmaceutical companies or venture capitalists.”
Ramelb said, “Unless you work for the government or a big company, when you retire you will not be able to get your employer’s health insurance. You need to rely on Medicare with your fixed income. And big companies also are phasing out retirement benefits like discounted health insurance.
“We need to improve Medicare, cost and coverage because more of us will be relying on it,” he said.
by Edwin Quinabo