Reducing Prescription Drug Prices

President Trump has publicly announced that pharmaceutical companies “are getting away with murder” with their drug price offerings. Prominent examples include, Mylan’s six fold price increase for EpiPens, Daraprim’s overnight increase from $13.50 a tablet to $750,  and Marathon Pharmaceuticals announcement that charging $89,000 a year for a drug that’s widely available abroad for about $1,000 a year.  With that said, there has been bipartisan support in curbing costs of prescription drugs. With the repeal of Obamacare on the Republican agenda and consumers displaying outrage at town hall meetings, lawmakers will have to face the task of reducing drug prices in effort to please their constituents.  This article will discuss different ways Congress and the President can work together to reduce drug prices. Specifically, it will discuss the pros and cons for each solution.

Negotiating Medicare Drug Prices

Lawmakers are discussing the option of negotiating drug prices for Medicare Part D. The Kaiser Family Foundation conducted a study where 82% of the public were in favor of allowing the federal government to negotiate drug prices for Medicare beneficiaries.  Further, Democrats (92%), Republicans (68%) and Independents (85%) all support the negotiation of Medicare drug prices. The only problem with this solution is that under the non-interference clause, Health and Human Services (HHS) is prohibited from negotiating drug prices with drug companies for Medicare Part D.  The Medicare Modernization Act of 2003 (MMA) included the non-interference clause to address concerns about CMS using their leverage in purchasing power to pay less for drugs. In response, the non-interference clause was used a bargaining chip to attract market-oriented republican votes.

Although, even if there was a change to the current law, the Congressional Budget Office (“CBO”) asserts that the authority to negotiate prices alone would have a “negligible effect on federal spending”. The CBO suggests that savings can be achieved in defined circumstances. Specifically, CBO recommends establishing a formulary that includes some drugs and excludes others and to impose other utilization management restrictions. However, stakeholders would take issue with the process of HHS deciding what drugs would be included or excluded.  In 2014, HHS proposed a process that included and excluded drugs from a protected list but failed due to backlash. At the time, House republicans were concerned about CMS “disrupting care” and “unnecessarily interfering” with a successful program. The lack of political feasibility may make this solution hard to implement despite its recent support.

Drug Importation

Drug importation is the process of importing drugs from other industrialized countries because their drug price offerings are typically cheaper than the United States. Senator Bernie Sanders is a huge proponent of drug importation and more specifically from Canada. For example, EpiPens cost more than $600 in the U.S. while it costs $290 in Canada.  In January, Bernie Sanders proposed a bill that would allow pharmaceutical distributors and pharmacists to import cheaper prescription drugs from Canada.  On January 17, the bill lost by a 52-46 vote, but not along party lines. Opponents of drug importation often argue drug importation presents numerous safety concerns. For example, other countries may not have a comprehensive drug approval process like the U.S.  and could thus subject Americans to harm.  Another mechanism to import drugs is allowing Americans to personally buy drugs from Canada.  Senator Klobuchar and Senator McCain introduced, the Safe and Affordable Drugs from Canada Act that would allow Americans to order personal prescriptions from Canada creating another option to import drugs to the United States.

Cost Transparency

Lastly, transparency can be used to reduce drug prices. In Maryland the legislature proposed a bill that aims to prevent price gouging by requiring manufacturers to disclose the cost breakdown of drugs that have  $2,500 or more annual price tag, including costs associated with marketing and promotion.  In turn, this would create public pressure on the pharmaceutical industry to lower costs on life-saving medications. However, there are complications with this method because pharmaceutical supply chains are complex.   The supply chain includes many actors who affect the cost of drugs. These actors include pharmacies, wholesalers, distributors, health insurance plans, and the pharmacy benefit managers.

Decisions

Lawmakers have quite a few options to curb the costs of pharmaceutical drugs. Additionally, PhRMA has a strong lobbying arm and could affect lawmaker’s choices. Nonetheless, with any policy decision, negative externalities and unintended consequences should be reviewed and evaluated. Only time will tell what option lawmakers choose to reduce drugs

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