The United States spends $3.2 trillion on healthcare every year, with the majority of that going to drugs. Medicare is one of the largest purchasers of prescription drugs in the country, spending more than $100 billion a year on medications.
The medicare drug price list is a website that provides information about Medicare’s drug prices.
WASHINGTON— Much of the discussion on Capitol Hill over whether Medicare should be allowed to directly bargain with drug firms revolves around one question: how government involvement would impact drugmakers’ capacity to research new medicines.
The plan is a critical component of the Democrats’ broader healthcare, child care, education, and climate change package. A provision like this is popular with the public, and it would save the federal government hundreds of billions of dollars, which Democrats want to use to expand other health-care programs. Even among Democratic legislators, though, it is divisive, since they must achieve near unanimity if they are to approve legislation opposed by all Republicans.
Pharmaceutical firms claim that the move would significantly reduce their income, limiting their capacity to spend in research and attract outside funding to develop new prescription medicines. Supporters of enabling Medicare to bargain argue that the business is misrepresenting the effect and using an emotional appeal to divert attention away from its pricing.
“Their argument has always been that Western civilization would die,” Senate Finance Committee Chairman Ron Wyden (D., Ore.) told reporters last week if Medicare can bargain. “That isn’t even close to what is going on.”
Senator Ron Wyden (D-Ore.), chairman of the Senate Finance Committee, is dubious of drugmakers’ criticisms of the plan.
(Bloomberg News/Stefani Reynolds)
Republicans and some Democrats are concerned that lowering medication revenue would make businesses and investors more hesitant to invest in the discovery of new medicines.
Sen. Bill Cassidy (R., La.), a gastroenterologist, said in an interview last week that “venture capital has a choice where to invest their money to achieve a higher rate of return—it doesn’t have to be for a new cancer treatment.” “We take it for granted that they do,” says the narrator.
According to the impartial Congressional Budget Office, legislation identical to that proposed by House Democrats would result in two fewer new medicines being launched in the first decade, 23 fewer drugs in the second decade, and 34 less drugs in the third decade, a decrease of approximately 8%. The Food and Drug Administration has authorized between 22 and 59 new medicines each year during the last decade.
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“We cannot and will not support rules that limit patient access while simultaneously destroying our capacity to create the next generation of breakthrough new medicines,” David Ricks, chairman and CEO of Eli Lilly & Co., told reporters last month.
The House Democratic plan would enable Medicare to negotiate rates with drug corporations for a list of the most costly and widely used medicines, as well as insulin, that are not subject to competition. Those negotiated rates could not exceed 120 percent of the drug’s average price in a group of six industrialized nations, which are usually less expensive than the United States. If businesses fail to negotiate or agree on a price, they will face an excise tax of up to 95% of the drug’s sales.
Senate Democrats are developing their alternative strategy, which, according to Mr. Wyden, would nonetheless help drugmakers create new medicines and could be phased in over time. Mr. Wyden has published principles that will guide his strategy, but no specifics.
According to healthcare experts, it’s unclear what sort of pricing Medicare would be able to negotiate, how that will influence drugmakers’ research and development choices, and which medicines will never reach the market.
“There’s no denying that reduced costs come with a cost,” said Larry Levitt, senior vice president for health policy at the Kaiser Family Foundation, a health-policy think tank.
According to Mr. Levitt, the government is more inclined to drive a hard bargain on medicines that don’t provide much extra value to patients than on genuinely new drugs. “It’s doubtful that the federal government would drive down the price of a new life-saving medication to the point where the manufacturer withdraws it from the market.” That would be “politically insane” on the federal government’s side, he added.
Democrats in both houses intend to approve the larger package, which includes a massive expansion of the social safety net, via a budget-related procedure that enables them to pass the Senate with a simple majority rather of the 60 votes required for most legislation. However, they must achieve near-unanimous agreement on its contents in order to do so, since they can only afford three defections in the House and none in the equally divided Senate.
The idea on medication price has sparked debate in both houses. Five House Democrats presented their own pricing proposal, and several members of the committee voted against it, citing worries about the bill’s impact on research and development.
In an interview last week, Sen. Robert Menendez (D-N.J.) stated, “We have to be careful to guarantee that innovation, whether it be in the pharmaceutical sector or any other, is maintained, because you want the lifesaving, life-enhancing medicines that they create.” “It’s a problem that has to be taken into account.”
However, many Democrats in Congress argue that pharmaceutical firms are already very lucrative and prefer to distribute a large portion of their earnings to shareholders rather than investing in research. According to a July study by Democrats on the House Oversight Committee, the top 14 pharmaceutical firms spent more than $577 billion on stock buybacks and dividends for investors between 2016 and 2020, $56 billion more than they spent on research and development.
‘We must exercise caution to guarantee that innovation, whether in the pharmaceutical or other industries, is maintained,’ says the author. Sen. Robert Menendez (D-N.J.) said the following.
photo: Reuters/pool
Some patients worry that if pharma companies cut down on research, medicines for rare illnesses that impact fewer people may be the first to suffer.
“There aren’t as many of us, so it’s clear the priority for R&D would be extremely low,” said Sumaira Ahmed, 32, who was diagnosed with neuromyelitis optica, a rare inflammatory illness affecting the optic nerves and spinal cord, seven years ago.
Ms. Ahmed, a volunteer patient advocate with Voters for Cures, which works with the drugmakers’ trade group PhRMA, said, “It already feels like that, to be honest, but these types of provisions would further underscore the sentiment that rare diseases would be at the bottom of the list, and that’s frightening.” Tax credits, a remission of the application cost that drug firms normally pay the Food and Pharma Administration, and a guaranteed term of market exclusivity are all available under current federal law to encourage drug companies to develop medicines for rare illnesses.
Some believe the industry’s warnings are designed to evoke an emotional reaction from the public, and lawmakers admit that they want to protect drugmakers’ freedom to develop new medicines.
“The fear from pharma is that if we do anything to make price fair, the person we love will not be able to obtain the medication they need,” Rep. Peter Welch (D., Vt.) said last week in an interview. “It preys on our collective apprehension.”
—This article was co-written by Peter Loftus.
Kristina Peterson can be reached at [email protected].
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The medicare formulary (drug list 2020) is a list of all the drugs that Medicare covers.
Frequently Asked Questions
What is Medicare drug called?
Medicare Part D is the name for the part of Medicare that provides drug coverage.
Is Medicare Part D for drugs?
Medicare Part D is a program that provides health insurance for people with low incomes, the elderly, and people with disabilities. It is not a program that pays for your drugs.
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