If Donald Trump is serious about cracking down on drug prices, as he told Time Magazine, then he could start by beefing up Medicare’s bargaining clout in negotiating their bulk purchases of prescription drugs.
The Republican President-elect didn’t explain precisely what he has in mind, just as he was somewhat vague on the subject throughout the 2016 presidential campaign. “I’m going to bring down drug prices,” Trump said in the interview for Time’s “Person of the Year” issue released on Wednesday. “I don’t like what happened with drug prices.”
But policy experts and lawmakers say there are a number of things that a powerful new president and a cooperative Congress could do to rein in prices and crack down on industry gouging of consumers and the government. One of them is to empower Medicare officials to negotiate the prices of prescription drugs for 41 million beneficiaries – just as Medicaid, the Veterans’ Administration and other government health care providers are entitled to do.
When Congress approved the Medicare Part D subsidized prescription drug program for seniors in 2003, the drug industry was granted a provision that prohibited the federal government from negotiating rebates or lower drug prices for Medicare beneficiaries. That sweetheart arrangement subsequently provided major pharmaceutical companies with billions of dollars in windfall profits.
Indeed, a House Oversight and Government Reform study estimated that Medicare officials could have saved taxpayers as much as $156 billion over the past decade if they had been able to negotiate the price of drugs they purchase, according to Democratic Rep. Peter Welch of Vermont, an ardent advocate of granting Medicare officials bargaining authority. Welch told The Fiscal Times recently, “The whole essence of a free market is that willing buyers and willing sellers can negotiate prices and reach a market price. How in the world can one explain that the government actually passed a law saying that you can’t negotiate prices?”
Almost as if on cue, the Centers for Medicare & Medicaid Services yesterday released data on the price history of 5,000 prescription drugs under Medicare Part D over the past five years, documented the government’s problem of fast-rising drug prices.
The data was released by Andy Slavitt, the acting director of CMS, during Modern Healthcare’s 2016 Leadership Summit in Chicago. Slavitt told the gathering that the data wasn’t intended to be used as “a cudgel” to shame the pharmaceutical industry into restraining its marketing practices but “to get away from the world of anecdotes.”
Gilead Science’s nearly $1,000 a pill Sovaldi and Harvoni for treating victims of the hepatitis-C virus has become one of the biggest drains on the budgets of Medicare and Medicaid.
However, a generic version of the antihypertension drug Cozaar registered the biggest unit cost increase of any of the Medicare Part D drugs surveyed by CMS, according to a report by Modern Healthcare. The price of Losartan potassium skyrocketed by 491 percent between 2014 and 2015, from an average unit cost of $1.55 to $3.22.
At the same time, the average cost of carbamazepine, a generic version of anticonvulsant drug Epitol, jumped by 451 percent. And a generic version of the ACE inhibitor Zestril used in treating hypertension and congestive heart failure rose by 405 percent to an average cost per unit of $7.44.
According to a preliminary analysis of the data by Modern Healthcare, the average price of all Part D drugs sold in both 2015 and 2011 rose by 83.6 percent. However, for the most common drugs that are prescribed to more than four million beneficiaries, prices dropped by 23.6 percent.
Yet the prices of drugs that accounted for the biggest chunk of Part D overall spending – at least $1 billion annually -- increased by 59.1 percent. What’s more, the prices for many inexpensive drugs went up by more than 1,000 percent.
In fairness to the drug industry, the CMS Part D data doesn’t reflect manufacturer rebates and other price concessions that the government is prohibited from disclosing. However, if Trump is serious about doing something about rampant increases in drug prices, he might start by reopening the Medicare Part D law to strengthen government officials’ hand in dealing with drug manufacturers.
Trump first jumped into the drug pricing debate in September 2015 when he publicly attacked Martin Shkreli, the former hedge fund manager and CEO of Turing Pharmaceutical, for raising the price of Dataprim, a drug used to prevent malaria and treat a parasitic infection, by more than 5,000 percent. "That guy is nothing,” Trump said. “He’s zero. He's nothing. He ought to be ashamed of himself.”
Trump subsequently made drug prices an important element of his campaign agenda and offered a number of proposals – including allowing cheaper prescription drugs manufactured abroad to be sold in the U.S. He also said he favored requiring pharmaceutical companies to competitively bid to sell their drugs through Medicare and Medicaid, the health care programs for seniors and the poor.
His Democratic rival, Hillary Clinton, hit hard as well against the drug manufacturers. Clinton also advocated broadening consumer access to safe, high-quality generic and alternative competitors through the emergency importation of drugs from Canada and other countries. And last September, she proposed the creation of a government commission with the power to compete with or penalize pharmaceutical companies like Mylan, Valeant and Turing that for years have jacked up the prices of lifesaving drugs.
Since the Nov. 8 election, Trump had little, if anything, to say about drug prices. The president-elect’s transition health care agenda lists six top priorities, including limiting abortions, restructuring Medicare and Medicaid, and speeding up federal approval of new prescription drugs. But there is nothing specific about combating drug prices on the transition team’s website.
Trump’s silence on the matter was no doubt heartening to the drug industry and its lobbyists who have been attempting to tamp down talk on Capitol Hill about government intervention or even price controls. But that was before Trump’s comments to Time Magazine this week, vowing to “bring down drug prices.”
This latest effort at presidential jawboning comes on the heels of Trump’s public dressing down of Boeing for charging too much to develop a replacement for Air Force One and his criticism of the Indianapolis-based Carrier heating and cooling company and the Ford Motor Company regarding initial plans for sending jobs across the border into Mexico.
Trump’s salvo against soaring drug prices jolted the biotech and pharmaceutical industry and briefly sent shares of stock in Pfizer Inc., Johnson & Johnson and Merck & Co. tumbling on Wednesday.
Holly Campbell, a spokesperson for PhRMA, the drug industry’s main trade group, said in a statement that “Government mandates and interventions are not the solutions for patients” and that a more pressing challenge is reducing patients’ out-of-pocket health care costs.
“We look forward to working with the administration next year on solutions that will enhance the competitive private market and ensure we continue to deliver innovative treatments and cures,” she said.