Two Threats to Our Medicare Prescription Drug Program

There are two threats to prescription drug accessibility and innovation that are once again threatening your health. These are not new threats, but they continue to be thrust forward as politically popular “solutions” to help reduce drug prices. These two threats are government “negotiation” and foreign importation. Inserting the government into the drug pricing equation through so called negotiations was mentioned in the President’s State of the Union speech. Importing drugs from foreign countries is not a new approach but it has recently been raised as a possible amendment to be added to proposed legislation. Before I discuss these two approaches in more detail, I’d like to remind you of some important facts concerning drug prices.

In 2021, the list price of drugs, the price that many of the patient’s out-of-pocket costs are based on, rose less than the Consumer Price Index (CPI) which measures inflation. There are many parts of our healthcare system that rose more than the CPI, but not the list price of drugs. Even more relevant is the fact that the net price of drugs, the amount the drug manufacturer actually receives, dropped by 1.2% in 2021. That’s right, the net price dropped! This is the 4^th year that the net price has dropped. If the drug companies were trying to raise prices so they would get paid more each year, they have failed miserably. In these days of 8% inflation, it seems crazy to increase government regulations on an industry where their net prices have dropped. Given this backdrop I’d like to discuss these two drug pricing proposals.  

The proposed insertion of the government into the Medicare prescription drug program, Part D, would involve repealing the non-interference clause in Part D and allow the government to get involved in setting the price of selected drugs. The government would calculate what they considered a fair price to be for a particular drug and present that to the manufacturer. If a manufacturer was not willing to accept the price the government calculated, they would be charged anywhere from 65% to 95% of their gross sales to continue to sell the drug in the U.S. No drug manufacturer could continue to sell their product if they had to pay 65% of their gross sales to the government. This is not a negotiation but a take it or leave it ultimatum which reduces the so-called negotiations to simply price fixing. History has shown that government price fixing never works.

Foreign importation of prescription drugs has thrust itself into the limelight because of a proposal put forth by Senator Bernie Sanders to include this sweeping change to Medicare Part D into the FDA user fee “must pass” legislation. I’ve talked about this “solution” to drug prices in previous blogs, explaining how it bypasses the safety net we now enjoy without any proof that the patient will see any savings while counting on Canada to implement a program that they have already said they can’t support. Because of the variation in foreign government laws and control of healthcare prices the price of prescription drugs can vary between different countries. While you or someone you know may have gone across either our southern or northern boarders to purchase medicine at a lower price, this is not what this proposal is about. This importation proposal is at a much higher-level involving suppliers and transporters and large volumes. Some states have passed laws allowing importation but none of them have yet been implemented. The non-partisan Congressional Budget Office, our government’s accountants, have studied this approach and said, “Even if this practice was made legal, however, unique aspects of the prescription drug market would limit the additional volume of prescription drugs reaching the United States. On the basis of its evaluation of recent proposals, the Congressional Budget Office (CBO) has concluded that the reduction in drug spending from importation would be small”. There have also been legal challenges asserting that the government can’t legally implement this proposal. In spite of the facts that the safety we now enjoy through FDA-approved drugs would be compromised, that Canada has said they won’t support importation, that any savings would be small, and that this idea may not even be lawful, Senator Sanders has chosen to ignore these facts and has proposed implementing this change in some must-pass legislation. Which brings me to what I think could be the worst part of this whole situation.

Adding this huge change to Medicare Part D as an amendment to User Fee legislation bypasses the discussion and debate that this huge change deserves. It’s an attempt to sneak this change into an unrelated piece of legislation which eliminates the chance for members of Congress to review the facts, for hearings to take place, and for stake holders to offer their input. It even bypasses the judicial branch from reviewing its legality. It’s not the way we should be doing the people’s business. This big of a change to our Medicare prescription drug program should be out in the open, analyzed and debated. I’m tired of politically expedient proposals that do nothing to make our healthcare better but will look good in some election ads and speeches. These proposed changes will affect real people for a long time, Congress should take the time to hear from the people these changes affect.

On that note I encourage you to write or call your members of Congress and tell them you want real solutions, not changes that need to be snuck in as an amendment to unrelated, must-pass legislation.

I also urge you to tune in on June 1 to our Facebook Live event where I will talk with Pam Traxel who leads the advocacy arm of the American Cancer Society. I’m sure some of the above issues will be discussed. You can tune in for the event by clicking here on Wednesday.

Best, Thair