What Joe Biden could do to bring down drug costs
Pharma is having its best moment in years. What does it mean for Biden’s health care agenda?
Just as Joe Biden prepares to take over the presidency, the pharmaceutical industry is having its best political moment in years. Numerous Covid-19 vaccines are on the verge of approval, promising an (eventual) end to the pandemic that has upended every American’s life for the last nine months.
Reducing prescription drug costs has long been a top priority for voters. But given the prospect of a divided government, the other health care issues likely to dominate the Biden administration’s attention, and pharma’s renewed political clout, lobbyists and health care experts are skeptical there will be significant action to rein in drug costs over the next few years.
“Now that it’s looking like we’ll have successful vaccines, drug companies could come out of this pandemic as heroes that saved us from the evil virus,” Larry Levitt, executive vice president at the Kaiser Family Foundation, told me. “That will make it harder to demonize the pharmaceutical industry in a fight over drug pricing.”
There are two kinds of drug pricing problems. One is the actual list prices set by drug companies, which most patients and health systems don’t actually pay, but still set the top line from which various discounts and rebates are applied. (And for the uninsured, that is their price unless they get some kind of assistance.) List prices are more difficult to control, without the more aggressive kind of price-setting that pharma and many lawmakers would balk at. The other issue is out-of-pocket costs, or what patients must pay under their insurance plan. That may be easier to fix; it’s just a matter of finding the money to improve, for example, the Medicare drug benefit so patients have smaller obligations when they fill a prescription.
There could be an opportunity for incremental improvements through Congress. A bipartisan Senate bill would serve as an obvious template for a compromise, if the Senate remains in Republican hands and with Democrats holding onto the House.
As one health care lobbyist told me, lawmakers are cognizant that after years of fierce partisan divisions that have stymied even small-bore improvements to US health care, “the voting public needs to see points on the board.”
But any legislating could still be difficult, as even small coalitions in the House and the Senate can make it hard for bills to move forward, and pharma still wields tremendous influence within the US Capitol.
As for President-elect Biden’s regulatory agenda, he will have to decide how much to prioritize drug pricing alongside improving Obamacare and reversing some of Trump’s actions on Medicaid. Pharmaceuticals are one area where the Trump administration has been more creative, but they also have failed to actually put many of their proposals in place. Biden could, in theory, pick up and build on some of the Trump initiatives. But many experts are skeptical he will.
Health care activists are still pushing for big changes. The US public still wants drug affordability addressed. But the context of the debate has shifted. On top of the vaccine news, drug prices have not been rising as quickly as in previous years, and the headline-grabbing price gouging appears to have subsided from the days when Martin Shkreli was briefly the face of the industry.
Taken together, experts have lowered their expectations about significant reforms happening any time soon, even though many Americans are still struggling to afford the medications they need.
“I think now, you don’t have all those stories about insulin and Epipen, plus you have positive stories about vaccines and other drugs,” Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, says. “You don’t have as fertile an environment for more extreme drug measures.”
There could be targeted action in Congress if everybody gets on board
A bipartisan bill introduced last year by Sens. Chuck Grassley (R-IA) and Ron Wyden (D-OR) and passed out of the Senate Finance Committee could be the initial template for drug pricing legislation under the Biden administration. As the lobbyist told me, if Senate Republicans and Senate Democrats can agree on a plan, that will put intense pressure on the House to come to an agreement.
The bill would penalize drug companies for any price hikes that are higher than inflation, requiring them to pay rebates to the Medicare program to make up the difference. For patients, the Finance Committee’s legislation would also redesign Medicare Part D benefits and cap patients’ out-of-pocket obligations at no more than $3,100 a year (and many would pay far less than that). The Congressional Budget Office projected that the bill would save beneficiaries a combined $20 billion over 10 years.
Both of those provisions are shared in concept, if not in all the details, with the major drug pricing bill passed by House Democrats in 2019, indicating they would represent a common ground between the two chambers if Republicans retain control of the Senate.
The Senate Finance bill didn’t get past the committee stage, partly because Senate Majority Leader Mitch McConnell was unenthused and President Donald Trump did little to apply pressure on reticent Republicans. Biden could try to use his bully pulpit to get a deal done.
The legislation “just lacked the push from the president,” Gellad said. Under Biden, “I think you might actually see a push from the president.”
Other policies cracking down on anti-competitive practices by drug makers have earned support from lawmakers in both parties. For example, a bipartisan Senate bill from Grassley and Sen. Amy Klobuchar (D-MN) and a plan sponsored by a group of House Republicans would bar brand-name manufacturers from making “pay for delay” payments to generic drug companies. Those arrangements currently can push back the introduction of generic competitors — one of the main tools in the US health system for limiting drug prices after the monopolies granted to new drugs expire — for months or more.
But more direct negotiations between Medicare and drug companies, a popular campaign talking point for Biden and other Democrats, are likely off the table unless Democrats can win both Georgia Senate runoffs, and with them a narrow Senate majority. Republicans not named Donald Trump have never warmed to the idea.
The health care lobbyist told me that a deal agreed to by Biden, McConnell, and Senate Democrats should be able to get through the House, too, even if the left and right wings balk.
“Pelosi can’t say no. McCarthy can’t say no,” the lobbyist said. “They can bring enough of their guys.”
Biden will have to decide whether to press on with any of Trump’s executive actions
The Trump health department has been busy on drug prices. They’ve authorized drug importation from other countries and released a bevy of proposals to bring American drug prices more in line with other countries.
The trouble has been in their lack of follow-through, which means the Biden administration will largely be left to decide whether to pick up Trump’s policies and run with them or start from scratch on their own.
But if nothing else, Trump’s aggressive posture toward the pharma industry may give Biden more leeway to be ambitious during his own presidency.
“Despite the Trump Administration’s failure to implement its most ambitious drug pricing policy goals, the administration’s rhetoric has been successful in normalizing and making the case for these bold reforms,” Rachel Sachs, a law professor at Washington University in St. Louis, wrote in Health Affairs shortly after the election.
International reference pricing has been the calling card of Trump’s agenda, though his administration’s attempt to finalize it has been done in a legally shoddy, last-minute way that experts think leaves it vulnerable to the legal challenges already filed by the drug industry. In brief, under this “most favored nation” proposal, Medicare would not pay a higher price for drugs than other similarly wealthy countries do.
Sachs suggested in her article that Biden’s team could reevaluate the referencing pricing model, but refine it to make it less administratively complex. They could also shift the focus from automatic price controls to an independent review board that would take the foreign prices into account while setting its own recommended prices for Medicare.
Biden could also revisit the Obama administration’s plan to change how Medicare pays physicians for certain drugs, which was introduced too late to be fully implemented before Obama and Biden left office, Levitt said.
The federal government theoretically has expansive powers to try to curb drug prices. Progressives argue the federal government could use existing authorities to effectively revoke patents issued to drug makers if their medicines were developed through substantial public investment. It is an idea with a lot of purchase on the left and something even Biden’s newly announced nominee to lead the Department of Health and Human Services, Xavier Becerra, has sounded receptive to under certain circumstances.
Activists argue that the urgency of reducing drug costs for Americans has become only more apparent during the Covid-19 pandemic, even if pharmaceutical companies try to use their success with vaccines to their political advantage.
“If there is anything that this pandemic should have taught us, it’s that something should be done. We shouldn’t allow ourselves to think it’s not possible,” Dana Brown, who promotes drug pricing reform for the Democracy Collaborative, told me. “Can we literally afford the status quo? For me, the answer is no.”
Progressives will try to keep the pressure on Biden to go big. But there is a belief among savvy DC observers that drug pricing may be crowded out by other health care priorities. As Rob Smith, an analyst at the investment advisory firm Capital Alpha, wrote in a note in the days after the election: “We think drug pricing will fall to a third or fourth tier issue for the next administration.”
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Author: John Hanno
Born and raised in Chicago, Illinois. Bogan High School. Worked in Alaska after the earthquake. Joined U.S. Army at 17. Sergeant, B Battery, 3rd Battalion, 84th Artillery, 7th Army. Member of 12 different unions, including 4 different locals of the I.B.E.W. Worked for fortune 50, 100 and 200 companies as an industrial electrician, electrical/electronic technician. View all posts by John Hanno