Author: Ebunola Aniyikaiye

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

A week after the presidential election, many Americans are wondering what a Trump presidency means for them.  More specifically, what does it mean for their health insurance? Three days after the election, more than 300,000 people have selected plans from the Exchanges.  The Exchange is the online marketplace where consumers can compare and buy individual health insurance plans.  However, an increase in premiums coupled with a Republican majority House, Senate, and White House places the Affordable Care Act (ACA) in jeopardy.  On the campaign trail, President-Elect Trump has called the ACA “unworkable.” However, in recent interviews, he has favored continued coverage for children on their parents’ insurance policies and prohibits discrimination for those with pre-existing conditions.

Dismantling the ACA
There are a few ways Republicans could dismantle the ACA.  First, Republicans can repeal the Act in its entirety.  This method of dismantling the ACA would require a 60-vote majority in the Senate. Further, this method is subjected to filibusters by Democrats, thus delaying voting.  As a general matter, this method seems highly unlikely given the Republicans hold 54 seats in the Senate.” The second way Republicans could dismantle the ACA is through a method called budget reconciliation.  Budget reconciliation would create revenue related challenges for the implementation of ACA.  For example through the budget reconciliation process, Republicans could remove premium tax credits for consumers. This method only needs a simple majority and does not have a filibuster option.  Budget reconciliation has a greater likelihood of undoing parts of the ACA.  However, this process would take at least two years for substantial change to affect consumers.

The New Plan
This leads to our next question, what do we replace the ACA with? President-Elect Trump hasn’t provided the public with substantial policy changes, however we can look towards the Republican’s plan entitled, A Better Way, to identify what may happen. There are three changes we can reasonably anticipate.  First, we can reasonably anticipate changes in Medicaid. Due to Medicaid expansion, the federal government covers about 90% of the costs related to covering childless adults.  A Better Way promulgates shifting to block grants for the states. This invariably means that states would receive lower funds and therefore may have to reduce coverage and may adopt plans similar to those seen in Indiana. In Indiana, Medicaid participants are required to pay into accounts in order to benefit from Medicaid. The amount could be as low as a dollar, but participants must pay into the program.  Additionally, it requires participants to pay copays, which can cost up to $25. These measures support the concept of individual responsibility.

The second substantial change we can anticipate is a decrease in coverage options. Currently, essential benefits require plans to offer specific coverage such as, maternity care, birth control, preventive screenings, and mental health. Republicans will most likely remove or decrease what some considered an essential benefit. This of course is in an effort to make coverage more affordable, but at the determinant of quality.  The third substantial change we can anticipate is the use of high risk pool plans. High risk pool plans cover individuals who have been locked out of the market by pre-existing conditions. However, traditionally, the premiums for those in high risk pool plans were twice high as those individuals who are healthy.

Although we are unclear about what will happen on January 20^th, we can anticipate substantive changes. Republicans promulgate to make changes on day one of Trump’s Presidency and Democrats will have to act in defiance or work with the Trump administration to salvage parts of the ACA.

Open enrollment for the Federal Exchanges is right around the corner and soon many Americans will be heading to the Exchanges for affordable healthcare options.  In an effort to increase access to care, the Exchanges provide subsidies for those unable to cover the full cost of premiums based on their percentage below the poverty level. The Affordable Care Act (ACA) has made great strides in providing care to those who normally would not have been able to receive coverage. However, this year highlights an unintended group of people with issues of access to care; those who pay full price. The Obama administration has confirmed a 22% average increase in premiums in 2017. Fortunately, families and individuals who qualify for subsidies through the Exchanges, will not feel the brunt of the increase. However, those who pay full price will have to prepare for the abrupt increase.

The rise in premiums is especially troublesome for residents in states such as Georgia and Tennessee. Blue Cross Blue Shield of Georgia, which is the only plan that covers the whole state, premiums will increase by 21%. Further, Georgia’s Humana plan is expected to increase by 67.5%.  BlueCross BlueShield of Tennessee anticipates a 62% premium increases and Cigna with an 46% increase. Insurers attribute the rise in premiums to a sicker population.  The ACA introduced an influx of new consumers who were costlier than anticipated. Outpatient spending continues to be the largest driver of premium increases. Contrary to belief, prescription drugs only account for 14.3% of premium increases which is down from 17.7% in 2015. The Center for Medicare and Medicaid Services has promulgated that there are many individuals who are eligible for subsidies on the Exchanges but have not taken advantage of the benefits. However, due to more costly than anticipated patients, insurers have left the Exchanges.  Thus, leaving potential users with fewer options for coverage and forcing many to change doctors based on network coverage.

As the Obama Administration comes to a close, the next president will have to address the rise of premiums especially for those who pay full price. Thus far, both presidential candidates have suggested solutions to help reduce the rise in premium costs. Donald Trump’s proposal includes allowing individuals to buy insurance across state lines and allowing payments toward healthcare premiums to be tax deductible. Additionally, he suggests working with states to establish high-risk pools for individuals who fail to have continuous healthcare coverage. Hillary Clinton proposes increasing premium tax credits in the Exchanges so that individuals and families do not pay more than 8.5% of their income on health insurance premiums. Further, she suggests creating a public option plan with states willing to do so and giving the Secretary of Health and Human Services the authority to modify or block unreasonable health insurance increases in states that do not have the authority. With the election less than two weeks away, we will soon see how the new administration will address the unintended consequence of rising premiums especially for those who pay full price.