Think the drug-pricing debate addresses patient costs? Think again.
Drug pricing is now inching to the top of Congress’s agenda as that unimaginable issue upon which President Trump and Nancy Pelosi actually agree. But even if bipartisanship does break out on this issue, it won’t do a thing to relieve pain at the pharmacy counter. Without explicit requirements to pass along savings to patients, none will be.
Health-care voters did not cast their ballots for price controls that would lower drug costs for insurance companies, drug middlemen like pharmacy benefit managers, and the government — certainly not at the expense of investment in new cures. Patients want their costs lowered, and rightfully so. No one should be denied the medicine they need because they can’t afford their treatments.
{mosads}A week before the election, Trump announced his plan to lower drug prices in Medicare by tying what our government pays for injectable drugs to what European countries pay under single-payer health-care systems. One of the benchmark countries being used to calculate U.S. drug costs is Greece, which is literally bankrupt.
The biotech markets reacted to the president’s plan with their worst day in seven years, losing $100 billion in an especially bleak day for the genomic medicine revolution. Importing foreign price controls will take a wrecking ball to our global leadership in drug innovation. It may save some money for Uncle Sam, but it’s going to make it harder for your uncle Sam to access new medical breakthroughs.
The president and Speaker-in-waiting are both conflating a drug’s list price with a patient’s out-of-pocket costs. Health plans historically have used flat co-pays to make a patient contribute nominally to their drug costs. But over the last decade, insurers have shifted their approach, forcing patients to pay much higher up-front costs. Half of all patient cost-sharing is now through high up-front deductibles, according to a recent Peterson-Kaiser study.
Government price controls help insurers, not patients. If an insurance company requires a $3,000 deductible, it doesn’t matter if the government cuts the price of a $10,000 drug down to the $5,000 paid by Greece. Patients will still have to cough up $3,000 at the pharmacy counter before they get a dime of help.
Yes, newer medicines are expensive before they go generic and prices plunge. Only 10 percent of medicines in development ever see the pharmacy shelf. Investors require a return commensurate with those long odds or they won’t invest. Arbitrarily capping prices on the few dozen new drugs that make it to market each year will squeeze investment out of the life sciences like a wrung cloth and slow medical progress.
{mossecondads}If the government wants to assert its power in this space, it should control the costs borne by patients.
Holding insurers accountable for tactics that pad their bottom lines at the expense of patients will require the attention of policy makers, state regulators and the judicial system. However, Congress alone has power to restructure Medicare so 43 million seniors in the Part D program can afford their medication.
When I represented the Philadelphia suburbs in Congress, I helped pass Medicare Part D. It’s a lifesaving program that has benefited millions of seniors. But it wasn’t pretty watching that sausage get made.
Most Democrats in Congress opposed the plan, because the benefit was to be administered by insurers rather than a government bureaucracy. Many of the most fiscally conservative Republicans opposed the creation of a costly new entitlement. To garner their votes, GOP leaders required beneficiaries to pay deductibles, coinsurance and 5 percent of drug costs when they hit the “catastrophic” level.
These coverage gaps were designed to limit the costs of the program and to require beneficiaries to have some “skin in the game.” Today, more than 1 million seniors must pay between $2,000 and $10,000 every year in catastrophic, out-of-pocket drug costs, according to a Kaiser Family Foundation analysis.
Car insurance companies require skin in the game, so drivers won’t keep rear-ending cars or backing into their garage doors. Health insurance is different, though. If a person gets cancer, their oncologist is likely to prescribe an innovative medicine. Skin in the game won’t help patients avoid that awful diagnosis; imposing thousands of dollars in out-of-pocket costs creates real financial hardship — and can jeopardize a patient’s health and even their life.
If lawmakers want to protect their constituents from unaffordable drug expenses, they should cap seniors’ out-of-pocket costs at a reasonable level under Medicare. That would give health-care voters the kind of relief they sought at the ballot box this month, without destroying the innovation ecosystem that has allowed the U.S. biopharmaceutical industry to innovate more new drugs than the rest of the world combined.
Congress should finish the job it started with Part D. That would be a health-care accomplishment that’s actually responsive to voter concerns – and one that legislators of both political parties could be proud to deliver.
Greenwood is CEO of the Biotechnology Innovation Organization. He represented Pennsylvania’s 8th district in the U.S. House of Representatives from 1993 to 2005.