Walking into the White House to find his predecessor had no plan for dealing with one of the greatest pandemics in history, President Joe Biden has declared conquering Covid-19 to be his “first, second and third” priority. Close behind will be an attempt to lower prescription drug prices.
Health care and prescription drug costs hit seniors harder than any other segment of the population.
For decades, prescription drug costs have climbed higher and higher, to the point that where they are a significant burden to many older Americans.
While there have been several proposals to limit prescription drug price increases to the rate of inflation, Biden wants to go a step further.
Last year, a bill was introduced to change Medicare Part D, prescription drug coverage, that would have required insurers to pay more into the plan. The saving for seniors was estimated at $72 billion in out-of-pocket costs. Medicare would save more than $94 billion over 10 years, according to the same estimate.
Using government leverage to negotiate lower drug prices
The president proposes making changes in the law that allow the government to directly negotiate prices with the pharmaceutical companies.
The Congressional Budget Office estimates that Medicare would save $456 billion over 10 years if the government negotiated drug prices. The out of pocket savings for seniors could be around $300 million.
Biden is proposing the US Department of Health and Human Services (HHS) establish a division to assess the value of new specialty drugs. This agency would set the price for these drugs, leaving a reasonable profit for pharmaceutical companies but reducing costs to consumers. If the drug is already available in other countries, its price would be aligned with international pricing - again leaving a profit for pharmaceutical companies and savings for consumers.
The president also proposes allowing private health insurers in the state exchanges, and the individual market at large, to benefit from the prescription drug prices established at HHS.
Further, Biden wants to impose a limit on the amount pharmaceutical companies can increase the price of their brand-name and biotech drugs to the rate of inflation. This limit would also apply to over-priced generics.
Competitive international pricing
As another method of helping people get prescriptions filled at an affordable price, Biden also proposes opening up consumer purchases from other countries. To be allowed, the drug purchases outside the United States would have to be approved by the government as safe. Not only would this move enable consumers to get their prescriptions at lower prices, but it would put more pressure on big pharma to make its domestic pricing more competitive.
To get an idea of what your prescriptions cost in other countries, check out PharmacyChecker’s, a website that monitors drug prices from verified pharmacies in other countries.
Biden also proposes improving the supply of generic drugs.
Ending big pharma’s tax break
And finally, the president wants to end the tax deductions pharmaceutical companies traditionally receive on their advertising spending. Each year, big pharma writes off billions of dollars in advertising.
This is an issue that has been championed by various members of the House and Senate over the past couple of years as pharmaceutical companies have shifted their advertising efforts from physicians directly to consumers.
A report in the Journal of the American Medical Association reported this shift with marketing and ad spending increasing from $17.7 to $29.9 billion from 1997 to 2016. Direct to consumer advertising for prescription drugs accounted for the majority of that increase. The same report stated, “the number of advertisements … increased from 79,000 (including 72,000 television commercials) in 1997 to 4.6 million (663,000 television commercials) in 2016.”
In addition to advertising, pharmaceutical companies spend heavily on campaign contributions. It remains to be seen if that spending will stand in the way of the reforms President Biden is championing.