WASHINGTON — For decades, as prescription drug costs rose, Democrats battled with the drug industry in pursuit of an elusive goal: legislation that could lower prices by allowing Medicare to negotiate directly with drugmakers.
Now they are about to pass a broad budget bill that would do just that, and in the process President Biden achieve a political victory that he and his party can deliver to voters in November.
Enabling Medicare to negotiate prices for up to 10 drugs initially – and more on that later – along with many other provisions aimed at lowering health care costs, would be the most fundamental change in health policy since the Affordable Care Act became law in 2010, affecting a large segment of the population. It can save some older Americans thousands of dollars in drug costs each year.
The legislation would extend, for three years, larger subsidies that low- and middle-income people received during the coronavirus pandemic to get health coverage under the Affordable Care Act, and allow high-income earners who became eligible for such subsidies during the pandemic to maintain them. It would also make drug makers absorb some of the cost of drugs whose prices are rising faster than inflation.
Significantly, it would also limit the amount Medicare recipients have to pay out of their pocket for drugs at the pharmacy to $2,000 per year — a huge benefit for the 1.4 million beneficiaries who spend more than that each year, often on drugs for serious illnesses like cancer and infectious diseases. Multiple sclerosis.
The lower prices will make a huge difference in the lives of people like Kathryn Horen, 67, a retired secretary and lung beneficiary from Wheeling, Illinois, who lives alone on a steady income of about $24,000 a year. Out-of-pocket drug costs are about $6000 per year. She digs into her savings, afraid of running out of money after so long.
“Two years ago, I was $8000 in the hole,” she said. “Last year, I was $15,000 in the hole. I expect to be more this year, because of inflation.”
The Congressional Budget Office found that between 2009 and 2018, the average price for a brand-name prescription drug more than doubled in Medicare Part D, the program that covers pharmacy dispensed products. Between 2019 and 2020, price increases exceeded the inflation rate for half of all Medicare-covered drugs, according to an analysis from the Kaiser Family Foundation.
The Budget Office estimates that the provisions of the Prescription Drugs Act will save the federal government $288 billion over 10 years, in part by forcing the drug industry to accept lower Medicare prices for some big sellers.
Opponents argue that the measure will discourage innovation and cite a new analysis from the Office of the Budget that expects, in fact, to drive up prices when the drugs are first brought to market.
With the midterm elections approaching, here is President Biden’s stance.
Medications for common conditions such as cancer and diabetes that affect older adults are more likely to be chosen for negotiations. Analysts at investment bank SVB Securities noted that the blood thinner Eliquis, the cancer drug Imbruvica and the drug Ozempic, which is given to manage diabetes and obesity, are three of the first potential targets for negotiation.
Until recently, the idea that Medicare, which has about 64 million beneficiaries, would be able to use its muscle to strike deals with drugmakers, was unthinkable. Democrats have been lobbying for it since President Bill Clinton proposed his controversial health care reform in 1993. The drug industry’s fierce lobbying has become a Washington tradition.
“This is like lifting a curse,” Senator Ron Wyden, D-Oregon and architect of the procedure, said of the Medicare negotiating clause. “Big Pharma is protecting the ban on negotiation as if it were the Holy Grail.”
David Mitchell, 72, is among those who will be helped. A retired public relations officer in Washington, D.C., learned in 2010 that he had multiple myeloma, an incurable leukemia. He pays $16,000 out of his pocket every year for just one of the four medications he takes. He also founded an advocacy group called Affordable Medicines Patients.
“Drugs don’t work if people can’t afford them, and a lot of people in this country can’t afford them,” said Mr. Mitchell. Americans are angry and exploited. They know that.”
However, the measure will not offer all the tools Democrats want to rein in prescription drug costs. Negotiated rates won’t take effect until 2026, and until then they will apply only to a small portion of the prescription drugs that Medicare beneficiaries take. Pharmaceutical companies will still be able to charge exorbitant Medicare prices for new drugs.
This is a disappointment for the progressive wing of the party. American Prospect, a liberal magazine, dismissed the measure as “too modest.”
Prescription drug prices in the United States are much higher than in other countries. A 2021 report by the RAND Corporation found that drug prices in this country were seven times higher than in Turkey, for example.
The pharmaceutical industry spends far more than any other sector to advance its interests in Washington. Since 1998, it has spent $5.2 billion on lobbying, according to Open Secrets, which tracks money in politics. The insurance industry, the second largest spender, spent $3.3 billion. Drug makers spread their money around the world, giving Democrats and Republicans roughly equal amounts.
At a media briefing last week, Stephen J. Ople, chief executive of PhRMA, the drug industry’s main lobby group, warned that the bill would reverse progress on the treatment front, particularly in cancer care — a high priority for Mr. Biden, whose son died of a tumor. in the brain.
“Democrats are on the cusp of making a historic mistake that will wreck patients desperate for new treatments,” Ople said, adding, “Reducing new drugs is a heavy price to pay for a bill that isn’t enough to make the drugs affordable.”
But Dr. Aaron S. Kesselheim, professor of medicine at Harvard Medical School and Brigham and Women’s Hospital, said he believes the measure will spur innovation, by “encouraging investment in important new products rather than encouraging drug companies to try to keep pushing the same product and delay general introduction as long as possible.”
In 1999, after his health care plan failed, Mr. Clinton revived the idea of covering prescription medications from Medicare. But this time, rather than suggesting that Medicare negotiate with companies, he suggested leaving that to the private sector.
“At that point, what we were trying to do was internalize the recognition that Republicans were in full swing in opposing any kind of government role,” said Tom Daschle, the former Democratic leader in the Senate.
But it took a Republican president, George W. Bush, and a Republican Congress to push the benefits of prescription drugs to the finish line.
Medicare Part D, as it’s known, had the drug industry’s backing for two reasons: companies became convinced they would win millions of new customers, and the bill contained a “no-interference clause,” which expressly forbids Medicare from negotiating directly with drugmakers. Repealing this provision is at the heart of the current legislation.
The architect of the entitlement was Republican Congressman from Louisiana, Billy Tausen, who led the House Energy and Commerce Committee at the time. In Washington, Mr. Tauzin is best remembered as an example of the pharmaceutical industry’s influence: He left Congress in January 2005 to run PhRMA, making accusations that he was being rewarded for corporate bidding — an accusation Mr. Tauzin insists is a bogus “narrative” devised by Democrats to portray Republicans as are corrupt.
Joel White, the Republican health policy advisor who helped write the 2003 law that created Medicare Part D, said the program is designed for private insurers, pharmacy benefit managers and companies that already negotiate rebates for Medicare plan sponsors to use their leverage to lower prices. .
“The entire model is designed to enhance private competition,” he said.
In the years since the introduction of Medicare Part D, polls have consistently found that the vast majority of Americans from both parties want the federal government to be allowed to negotiate drug prices. Former President Donald J. Trump embraced the idea, albeit only during his campaign.
The new legislation targets drugs that were widely used during a particular stage of their existence – when they have been on the market for a number of years but still lack general competition. The industry has been criticized for publishing strategies for extending the patent term, such as making minor adjustments to drug formulas or reaching “pay-for-delay” deals with competing manufacturers to delay the arrival of cheap generics and “bio-alternatives,” as generic versions of biotech drugs are called.
Drug maker AbbVie, for example, has amassed new patents to maintain its monopoly on its massive anti-inflammatory drug Humira — and has earned nearly $20 billion annually from the drug since its main patent expired in 2016.
Ten drugs will be eligible for negotiation in 2026, with more to be added in subsequent years. The bill sets out the criteria by which the drugs will be selected, but the final decision will rest with the health secretary – a provision that Mr White, the Republican adviser, has warned would lead to an “incredible lobbying campaign” to get the drugs on the list or keep them off the list.
Analysts say the bill will hurt pharmaceutical companies’ profits. Analysts at investment bank RBC Capital Markets estimated that most companies affected by the measure would bring in 10 to 15 percent less revenue per year by the end of the decade.
But while PhRMA has warned that a drop in revenue will make drug makers less willing to invest in research and development, the Congressional Budget Office has predicted that over the next 30 years, the number of drugs will hit the market with just 15, out of an estimated 1,300 expected in this time.
The Senate is expected to consider the bill on Saturday, then send it to the House of Representatives. If it passes, as expected, Leslie Dutch, founder of Protect Our Care, an advocacy group, said, it would pierce the aura of power in Washington’s drug industry, opening the door for more drugs to become subject to negotiations.
He said, “Once you lose your indomitable power, it will be easier for people to take the next step.”
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