If we truly want to lower prescription drug prices for all Americans, the number one solution is allowing Medicare to negotiate directly with Big Pharma. While it’s true that there are several commendable proposals to address the problem — including greater transparency, regulating Pharmacy Benefit Managers, promoting more generic competition, and importing drugs from Canada – Medicare must be empowered to engage in price negotiations with drug-makers. It’s an idea President Trump supported during the 2016 campaign, but has yet to embrace in office.
I was honored to join four U.S. Senators who are pushing hard for Medicare price negotiations at the U.S. Capitol on June 12th. Senator Debbie Stabenow (D-Mich.), Sen. Amy Klobuchar (D-Minn.), Sen. Patty Murray (D-Wash.) and Sen. Chris Murphy (D-Conn.) took to the podium to demand that the president and their GOP colleagues get behind this solution.
The federal government is Big Pharma’s biggest customer. In fact, the Veterans Administration already negotiates prices with pharmaceutical companies, paying 40 percent less than Medicare does. Nearly twenty percent of Medicare’s overall spending goes toward prescription drugs.
It’s time for Medicare to harness the bargaining power of the 43 million Americans in the Part D prescription program to compel pharmaceutical companies to lower drug prices. The AARP has estimated that Medicare could have saved $14.4 billion on prescription medications in 2016 alone if it had been allowed to negotiate prices. As Senator Klobuchar pointed out, lower drug prices for Medicare patients would have a spillover effect benefitting all consumers.
The statistics are becoming all too familiar. From 2008-2016, the price of the most popular brand-name drugs rose a whopping 208 percent. The 20 most-prescribed medications for seniors rose at ten times the rate of inflation from 2013-2018. Millions of Medicare beneficiaries living on fixed incomes spend more than three thousand dollars per year on prescriptions.
Those who can’t afford the ever-growing price of drugs must sometimes choose between medication and other essentials — like rent or groceries. Worse yet, high costs often compel patients to ration pills, with potentially deadly results.
While its customers suffer under excessive prices, the pharmaceutical industry continues to revel in record profits. In the third quarter of 2018, 14 drug-makers realized profits of over $1 billion. Meanwhile, pharmaceutical industry CEO pay has climbed to $18 million a year at the same time as one in five Americans confronts health care debt. Big Pharma can certainly afford to sit at the negotiating table with Medicare to work out fairer price points for consumers.
Republicans have worked with Democrats on legislation aimed at lowering drug prices, but so far have balked at bills to allow HHS to negotiate with pharmaceutical companies. Sena. Klobuchar has introduced a bill to do just that, garnering more than 30 cosponsors in the Senate, but nary a Republican has signed on. “I thought Republicans believed in free markets, negotiation, and competition,” Sen. Klobuchar chided during the June 12th event. As for President Trump, Sen. Murray said that the White House has offered “a lot of bluster, but little meaningful action” on drug prices.
Of course, simply empowering Medicare to negotiate would not guarantee that Big Pharma will agree to competitive prices. That’s why various proposals under consideration in Congress would give the government powerful new tools to compel manufacturers to price products fairly – and to take remedial action if they don’t. These measures include:
- Creating a default price (e.g., what the V.A. pays) for certain medications.
- Adopting a national formulary (a list of drugs the program will cover), which would allow Medicare to bargain with drug makers in exchange for placement on the formulary.
- Empowering Medicare to issue a license to another manufacturer to produce the drug for a reasonable fee if the original drug-maker won’t agree to a competitive price.
Lawmakers have not yet agreed on exactly which of these are the best mechanisms to adopt. We are looking forward to continuing, good faith debate, followed by effective legislative action. As Sen. Stabenow declared, the current pricing regime is “the ultimate example of a rigged system.” It needs to be unrigged to lower drug costs for all Americans.