Prescription Drug Price Inflation

Finance: Prescription Drug Price Inflation: An Urgent Need to Lower Drug Prices in Medicare, March 16, 2022

These concerns have been with us for decades. They still demand attention. PhARMA and AARP have put so much money into advertising on both sides that something must either be done, or loudly ignored. The advertisements on both sides have, to date, provided more heat than light - which was to be expected. Let us try to move to the facts so that we might find solutions.

The decision to not allow Medicare Part D to follow the Department of Veterans Affairs and negotiate down drug prices helped end the balanced budget that President Bush inherited from President Clinton. 

This bill also pushed Bruce Bartlett out of the Republican Party and prompted the writing of the book that sealed the deal. The passage of that legislation was fishy, from leaving the vote open unto the wee hours of the night to future hiring of the law's author by big PhARMA. 

While the Affordable Care Act helped ameliorate the worst feature of Part D, the coverage gap in the middle, it did not eliminate it. Perhaps competition will allow that gap to be filled.

PhARMA relies, in part, on claims that negotiation will lead to cost shifting. The dirty little secret in this debate is that single-payer solutions in the rest of the OECD have already resulted in cost shifting, where the rest of the world shifts its cost to the United States. Most people with insurance don’t notice this. Single payer healthcare, either through a public option or Medicare for All, will further bury this. For now, allowing drug price negotiation will give drug companies leverage to renegotiate their deals with the rest of the world.

PhARMA also relies on the claims that new cures for pandemics and subsidizing the development of orphan drugs and new therapies requires the right to charge the most the market can bear. This ignores the fact that most basic research comes through government grants and contracts, not drug company profits. The latter fund commercial, not scientific, development. 

(Comments to Finance on Organ Transplants)

In comments to Ways and Means,, House Budget and this Committee in 2019 and 2020, we discussed how to fund orphan drugs and new treatments so that no one remains untreated due to insurance coverage.

A main problem with high cost drugs, especially orphan drugs, is the high development costs and the cost of small batch manufacturing. This could drive the need to raise drug prices for mature drugs in order to subsidize the orphans, although some hikes are undertaken because no one can stop them. The solution for this is for NIH and the FDA to own the rights to orphan drugs and to contract out research and development costs as it does basic research, as well as testing and production.

PhARMA would still make reasonable profit, but the government would eat the risk and sometimes reap the rewards. NIH/FDA might even break even in the long term, especially if large volume drugs which were developed with government grants must pay back a share of basic research costs and the attached profits, as well as regulatory cost.

Universal coverage, starting with a public option under the Affordable Care Act, with eventual evolution to some type of single-payer system is inevitable. Unless we start building negotiation into the system now, we will give the drug companies a reason to oppose reform later. 

A public option will only pass if pre-existing condition reforms are abolished with public option enrollment being automatic upon rejection. The public option must be subsidized, replacing Medicaid for the disabled and those not requiring long-term nursing care. Long-term care should be removed from states and replaced with a new federal Medicare Part E.

The profit motive, with the need to constantly increase profits to attract Wall Street investment or keep stock prices growing will lead to an ever increasing number of people who will be considered uninsurable, thus relying on the public option.

Most healthcare systems will provide services to both comprehensive insurance beneficiaries, the retired, the disabled and those with the public option. In other words, Medicare for All is our future, with the only exception being firms abandoning the system and providing their own doctors while making arrangements with local hospitals and specialists - essentially creating local HMOs. 

The major issue here is funding, although more efficiency will reduce prices. Costs are already minimized by the for profit and by governmental medical care (which often uses for profit networks). To repeat, with a shout THE ISSUE IS PRICE, NOT COST!

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