WASHINGTON — For decades, as prescription drug costs soared, Democrats battled the pharmaceutical industry in pursuit of an elusive goal: legislation that could lower prices by allowing Medicare to negotiate directly with drugmakers.
Now they are on the verge of passing a sweeping budget bill that would do just that, and in the process hand President Biden a political victory that he and his party can take to voters in November.
Empowering Medicare to negotiate prices for up to 10 drugs initially — and more later — along with several other provisions aimed at lowering health care costs would be the most significant change in health policy since the Affordable Care Act became law in 2010, affecting a large part of the population. This could save some older Americans thousands of dollars in drug costs each year.
The legislation would extend for three years the larger premium subsidies that low- and moderate-income people received during the coronavirus pandemic to get health coverage under the Affordable Care Act and would allow those with higher incomes who have been entitled to such subsidies during the pandemic to hold them over. It would also force drugmakers to absorb some of the cost of drugs whose prices are rising faster than inflation.
Significantly, it would also limit the amount Medicare recipients have to pay out-of-pocket for pharmacy drugs to $2,000 a year — a huge boon for the 1.4 million beneficiaries who spend more than that each year, often on prescription drugs. serious diseases such as cancer and multiple sclerosis.
Lower prices would make a huge difference in the lives of people like Kathryn Horain, 67, a retired secretary and lung recipient from Wheeling, Illinois. She lives alone on a fixed income of about $24,000 a year. Her out-of-pocket drug costs are about $6,000 a year. She dug into her savings, worried that she would soon run out of money.
“Two years ago I was $8,000 in the hole,” she said. “Last year I was $15,000 in the hole. I expect it to be more this year because of inflation.”
Between 2009 and 2018, the average price more than doubled for a brand-name prescription drug in Medicare Part D, the program that covers pharmacy-dispensed products, the Congressional Budget Office found. Between 2019 and 2020, price increases outpaced inflation for half of all drugs covered by Medicare, according to an analysis by the Kaiser Family Foundation.
The budget office estimates that the bill’s prescription drug provisions will save the federal government $288 billion over 10 years, in part by forcing the drug industry to accept lower Medicare prices for some of its big sellers.
Opponents say the measure would discourage innovation and cite a new CBO analysis that predicts it will actually lead to higher prices when drugs first hit the market.
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Medicines for common diseases such as cancer and diabetes that affect the elderly are most likely to be selected for negotiation. Analysts at investment bank SVB Securities named the blood thinner Eliquis, the cancer drug Imbruvica and the diabetes and obesity drug Ozempic as three of the first likely targets for talks.
Until recently, the idea that Medicare, which has about 64 million beneficiaries, would be able to use its muscle to cut deals with drugmakers was unthinkable. Democrats have been pushing for it since President Bill Clinton proposed his controversial health care reform in 1993. The pharmaceutical industry’s fierce lobbying against it has become a Washington tradition.
“It’s like lifting a curse,” Sen. Ron Wyden, Democrat of Oregon and architect of the measure, said of the Medicare negotiation provision. “Big Pharma Defends Bargaining Like It’s The Holy Grail.”
David Mitchell, 72, is among those who will be helped. A retired public relations officer in Washington, D.C., he learned in 2010 that he had multiple myeloma, an incurable blood cancer. He pays $16,000 out of pocket each year for just one of the four medications he takes. He also founded an advocacy group, Patients for Affordable Medicines.
“Drugs don’t work if people can’t afford them, and too many people in this country can’t afford them,” Mr Mitchell said. “Americans are angry and they are taking advantage of them. They know it.”
Still, the measure wouldn’t provide every tool Democrats would like to contain prescription drug costs. The negotiated prices won’t go into effect until 2026, and even then they will only apply to a small fraction of prescription drugs taken by Medicare beneficiaries. Pharmaceutical companies will still be able to charge Medicare high prices for new drugs.
This is a disappointment to the progressive wing of the party; The American Prospect, a liberal magazine, dismissed the measure as “extremely modest.”
Prescription drug prices in the United States are much higher than in other countries. A 2021 report by the RAND Corporation found that drug prices in that country are more than seven times higher than in Turkey, for example.
The pharmaceutical industry spends far more than any other sector to advance its interests in Washington. Since 1998, it has spent $5.2 billion on lobbying, according to Open Secrets, which tracks money in politics. The insurance industry, the next biggest spender, spent $3.3 billion. Drug makers spread their money around, giving to Democrats and Republicans in roughly equal amounts.
At a media briefing last week. Stephen J. Ubl, the executive director of PhRMA, the drug industry’s main lobbying group, warned that the bill would reverse progress on the treatment front, particularly in cancer care — a high priority for Mr. Biden, whose son died of a brain tumor.
“Democrats are about to make a historic mistake that will devastate patients desperate for new drugs,” Mr. Uble said, adding: “Fewer new drugs is a high price to pay for a bill that doesn’t do enough to make the drugs more accessible.”
But Dr. Aaron S. Kesselheim, a professor of medicine at Harvard Medical School and Brigham and Women’s Hospital, said he believed the measure would spur innovation by “encouraging investment in important new products rather than encouraging drug companies to try to continue to push the same product and delay the entry of generics for as long as possible.
In 1999, after his health care plan failed, Mr. Clinton revived the idea of Medicare prescription drug coverage. But this time, instead of suggesting Medicare negotiate with the companies, he suggested leaving it up to the private sector.
“At this point, what we were trying to do was accept the recognition that Republicans are staunchly opposed to any kind of government role,” said Tom Daschle, a former Senate Democratic leader.
But it took a Republican President George W. Bush and a Republican Congress to push the prescription drug benefit over the finish line.
Medicare Part D, as the benefit is known, had the support of the drug industry for two reasons: the companies convinced themselves they would win millions of new customers, and the bill contained a “non-interference clause” that expressly prohibited Medicare from negotiating directly with drug manufacturers . Repeal of this clause is the basis of current legislation.
The architect of the benefit was a colorful Republican congressman from Louisiana, Billy Tauzin, who chaired the House Energy and Commerce Committee at the time. In Washington, Mr. Tauzin is best remembered as an example of drug industry influence: He left Congress in January 2005 to lead PhRMA, drawing accusations that he was being rewarded for doing the companies’ bidding — an allegation , which Mr. Tauzin insists is a false “narrative” created by Democrats to paint Republicans as corrupt.
Joel White, a Republican health policy consultant who helped write the 2003 law that created Medicare Part D, said the program is designed for private insurers, pharmacy managers and companies that already negotiate discounts for plan sponsors Medicare to use their leverage to drive down prices.
“The whole model is designed to encourage private competition,” he said.
In the years since Medicare Part D was enacted, polls have consistently shown that overwhelming majorities of Americans in both parties want the federal government to have the right to negotiate drug prices. Former President Donald J. Trump embraced the idea, if only during his campaign.
The new legislation targets widely used drugs during a certain phase of their existence — when they have been on the market for several years but do not yet have generic competition. The industry has come under fire for deploying patent extension strategies such as slightly altering drug formulations or striking “pay-for-delay” deals with rival manufacturers to delay the arrival of cheap generics and “biosimilars,” such as generic versions of biotech drugs are named.
Drugmaker AbbVie, for example, racked up new patents to maintain a monopoly on its blockbuster anti-inflammatory drug Humira — and has raked in roughly $20 billion a year from the drug since its main patent expired in 2016.
Ten drugs will be eligible for negotiation in 2026, with more to be added in subsequent years. The bill outlines the criteria by which drugs will be selected, but the final decision would rest with the health secretary – a provision that Mr White, the Republican consultant, warned would lead to an “incredible lobbying campaign” to include drugs on the list or keep them away from him.
Analysts say the bill will hurt drugmakers’ profits. Analysts at investment bank RBC Capital Markets estimated that most companies affected by the measure would bring in 10 to 15 percent less revenue annually by the end of…
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