Recent Congressional Actions Bring Drug Pricing Debate Back Into National Spotlight
In late October, Sen. Bernie Sanders (I-VT) and Rep. Elijah Cummings (D-MD) introduced the Medicare Drug Price Negotiation Act of 2017 (S. 2011; H.R. 4138), which would allow the Department of Health and Human Services (HHS) to directly negotiate for lower prescription drug prices in Medicare, as Medicaid and the Department of Veterans Affairs are currently permitted to do. The legislation would also strengthen the patient appeals process and restore rebates for low-income beneficiaries under the Medicare Part D program for patients, and would use formularies to establish a fallback price, based on what other federal agencies and foreign governments pay, to take effect if negotiations are unsuccessful. This legislation is significantly more comprehensive than many previously introduced bills that only permit HHS to negotiate drug prices for Medicare Part D without other provisions, and the Sanders/Cummings legislation has garnered significant press attention and even White House meetings on the subject.
While it may seem that Democrats face an uphill battle to pass these bills, they may find an unlikely ally in their quest to lower prescription drug costs: President Donald Trump. On the campaign trail, the President heavily criticized the pharmaceutical industry for soaring prescription drug costs. After taking office, the President continued to lambaste “outrageous” drug prices and promised to develop a “fair and competitive bidding process” to bring down prices for consumers. The introduction of these bills highlights a key issue on which Democrats believe they may be able to find common ground with President Trump, an issue that has gained renewed attention with Congress’ consideration of Alex Azar to replace former HHS Secretary Tom Price.
A Popular Issue
Prescription drug prices have increasingly become a highly salient political issue. Highly publicized cases of exorbitant drug price increases, such as with certain insulin products and HIV medications, have shifted the issue into popular discourse. Recent polls indicate that nearly eight in ten Americans believe prescription drug costs are unreasonable, with six in ten stating that lowering drug costs should be a priority for President Trump and Congress.1 And for good reason, too: the growth in spending on prescription drugs has continually outpaced that of all other parts of the health care sector, and by 2020, net spending on pharmaceuticals will reach $400 billion, up from $310 billion in 2015.2 Studies have found that escalating drug costs have left consumers with higher insurance premiums, increased out-of-pocket costs, and reduced access to treatment. Taxpayers must also foot the bill for increased drug costs in the form of spending increases to public programs such as Medicare and Medicaid.3
In August 2016, researchers at Harvard Medical School undertook a comprehensive examination of the reasons for the rapid rise in drug prices. Their findings, published in the Journal of the American Medical Association, highlighted several key factors behind rising drug costs.4 For example, unlike in countries with national health programs that can negotiate drug prices or decide not to cover highly expensive drugs, drug manufacturers in the U.S. generally set their own prices. Additionally, they found, abuse of the patent system and other regulatory boundaries may hinder generic drugs from being brought to the market that would offer consistent price competition. Research from the Pew Charitable Trusts also indicates that a growing share of expensive “specialty drugs,” which are used to treat complex, chronic conditions like cancer and HIV, are entering the market.5
Policymakers have taken note of this growing concern. Food and Drug Administration (FDA) Commissioner Scott Gottlieb has committed to expediting the approval of cheaper generic drugs and combatting anti-competitive behaviors that some pharmaceutical companies have utilized to prevent generics from entering the market. On social media and during rallies, President Trump has criticized “ripoff” drug prices, likening the profit margins of pharmaceutical companies to “getting away with murder.” In June and October of this year respectively, the Senate Health, Education, Labor, and Pensions (HELP) Committee held hearings to discuss the causes of and solutions to rising prescription drug costs, and members of Congress have introduced over 25 bills to tackle the issue with varying solutions.
Lawmakers have introduced an abundance of bills to address the rising costs of prescription drugs. In addition to permitting Medicare negotiation, one set of proposals revolves around the importation of drugs from Canada. The Affordable and Safe Prescription Drug Importation Act (S. 469; H.R. 1245), introduced in February, would direct HHS to publish regulations that would allow entities, including wholesalers and pharmacies, to import “qualifying prescription drugs” from certified Canadian sellers. The legislation also allows HHS to open up importation of drugs from other foreign countries after two years with proper certification. More focused bills, such as the Safe and Affordable Drugs from Canada Act (S. 92; H.R. 1480) allows limited, per-patient importation from Canada. While importation bills such as these are gaining bipartisan steam, some in Congress have alleged that such a system could infiltrate the U.S. medicine supply with counterfeit or adulterated products.
Another set of proposals seek to increase the competitiveness of the pharmaceutical marketplace. For instance, the bipartisan Lower Drug Costs Through Competition Act (H.R. 749) would incentivize companies to develop generic drugs by creating a new generics Priority Review Voucher, which would be awarded to manufacturers that bring a drug to market where there is a monopoly or drug shortage. Similar voucher programs have drawn mixed reviews in attempts to spur drug development for tropical and pediatric rare diseases. Other legislation, such as the bipartisan Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act (S. 974), would target two tactics used by manufacturers to delay entry of generic drugs to the market; specifically, sample sharing and shared safety protocols. These bills pinpoint particular issues within the prescription drug market, but critics argue that the federal government should play a more active role in regulating drug costs.
Such critics have introduced their own set of legislative solutions. These include the Stop Price Gouging Act (S. 1369; H.R. 2974), which would require drug companies to report and justify drug price increases to the Inspector General of HHS, with the promise of financial penalties for noncompliance, and the Prescription Drug and Medical Device Price Review Board Act (H.R. 6501), introduced last Congress, which would establish a national review board that would review drug prices could take enforcement action against manufacturers that charge consumers excessively.
Other attempts are less targeted. Sen. Al Franken (D-MN) and Rep. Janice Schakowsky (D-IL) have introduced a seemingly “catch-all” solution to lower prescription drug costs. The bipartisan, but almost solely Democratic-led, Improving Access to Affordable Prescription Drugs Act (S. 771; H.R. 1776) seeks to comprehensively address what many of the aforementioned bills attempt to do singularly. The bill includes a broad range of proposals, including allowing Medicare to negotiate lower drug prices in Part D, restoring rebates on drugs covered under Part D for low-income beneficiaries, permitting the importation of prescription drugs, capping out-of-pocket costs for drugs in private insurance plans, and reducing monopolies for brand-name drugs. While many of these proposals lack broad political support, they may serve as markers to generate conversation around the drug pricing issue that may distill down into bipartisan proposals in the future, provided both Congress and the Administration see eye to eye.
Although public support for a solution to high prescription drug prices remains strong, several obstacles stand in the way of a legislative fix. The bills described above span the ideological spectrum, and coming to a compromise on the substantive details of a legislative solution may be difficult to achieve. Advocates of a stronger federal role in lowering drug costs may reject competition-based bills as weak, short-term solutions, while advocates of limited government and market-based approaches may stress the federal overreach of the more expansive proposals. Indeed, many of these ideas have been introduced in bills during previous Congresses without success.
Additionally, with tax reform, immigration, the budget, and other “must-pass” bills such as a reauthorization of the Children’s Health Insurance Program (CHIP) on the minds of congressional leadership, it is unlikely that either chamber will take the initiative to dive into a prescription drug cost bill anytime soon. And although the President has issued strong statements against the drug industry, his administration has invested little political capital in the issue. Indeed, a leaked draft of an executive order designed to bring down drug prices earlier this year was roundly considered industry-friendly and unlikely to substantially decrease drug costs.6 Furthermore, President Trump’s nominee for HHS Secretary, Alex Azar, has been criticized in Democratic circles because of his close ties to the pharmaceutical industry. If movement on the issue occurs, it will likely begin with proposed modifications to existing programs, such as recent proposals to amend the 340B Drug Pricing Program, and while market-based approaches may certainly be viable in this political environment if Republicans retain a majority in Congress, negotiation and implementation of such approaches can be unpredictable, solutions may be potentially costly depending on cost-shifting and other factors, and there will likely be push-back from numerous influential parties. Thus, while prescription drug prices and public pressure to solve the issue remain high, a quick solution is likely not on the horizon any time soon given competing congressional interests and implementation issues.
This article was co-written with Daniel Wassim, Intern with Holland & Knight’s Public Policy and Regulation Group.
1 Kirzinger A. et al., “Kaiser Health Tracking Poll - Late April 2017: The Future of the ACA and Health Care & the Budget,” April 26, 2017.
4 Kesselheim A., Avorn J., Sarpatwari A., “The High Cost of Prescription Drugs in the United States: Origins and Prospects for Reform,” Journal of the American Medical Association, August 2016; 316(8):858-871.
6 Kaplan, S., Thomas, K. “Draft Order on Drug Prices Proposes Easing Regulations,” June 20, 2017.