What’s driving the rise in prices and can politicians really influence those costs?
By Julie Rovner
In this year’s presidential campaign, health care has taken a back seat. But one issue appears to be breaking through: the rising cost of prescription drugs.
Democrat Hillary Clinton just issued a lengthy proposal to address what her campaign calls “unjustified price hikes for long-available drugs.” That’s in addition to a broader proposal to address high drug prices the campaign put out last fall.
Republican Donald Trump, meanwhile, has said little about health care since announcing his candidacy in 2015, but he has several times called for a change in law to allow Medicare to negotiate drug prices for the population it serves.
Here are five reasons why this issue is back — and why it is so difficult to solve.
There are multiple, often unrelated reasons that drug prices are going up.
One is the introduction of brand-name blockbuster drugs, such as Sovaldi and Harvoni. They effectively cure hepatitis C — but at a total cost of more than $80,000. Federal statisticians singled out the hepatitis C medications as a key reason prescription drug spending increased by 12.2 percent in 2014, up from 2.4 percent the year before.
That is separate from the price hikes coming from companies set up specifically to buy up older, generic drugs and reap as much profit as they can. The poster child for these efforts, which have gained attention during the past year, is Martin Shkreli. His firm Turing Pharmaceuticals purchased Daraprim, a drug used to treat toxoplasmosis, a disease caused by a parasite that can be life threatening for people with compromised immune systems, and hiked the price from $13.50 to $750 per pill. In the case of EpiPen, the treatment for life-endangering allergic reactions, the drug itself is actually inexpensive and long off-patent. But the company has almost literally created a monopoly by patenting the simple-to-use delivery mechanism.
The drug price debate is far from new.
It seems every time drug prices spike up, policymakers pay attention.
Congress first addressed the issue of rising drug prices in 1984, when it passed a bipartisan bill that made it easier for generic copies of brand-name drugs to be approved. But lawmakers also gave brand-name drugmakers more time without generic competition by allowing them to keep their products on their patents longer to make up for often years-long approval process at the Food and Drug Administration.
In 1990, concern about rising medication costs to the Medicaid program, the joint federal-state insurance coverage for low-income residents, led to a law requiring drugmakers to provide significant discounts.
During the late 1990s and early 2000s, Congress repeatedly debated the idea of lowering drug prices by allowing consumers to purchase drugs that were brought in from other industrialized countries that impose price controls. A few such “reimportation” proposals were passed into law. But the laws required certification by federal health officials and both Democratic and Republican administration officials blocked the efforts, which they said threatened the safety of the U.S. drug supply.
Advocates for seniors, who use more prescription drugs on average than younger people, raised concerns about that time also that drug prices were hurting their ability to purchase their medicine. So in 2003, Congress passed a law creating a Medicare prescription drug benefit.
A dramatic increase in use of generic drugs for the next several years helped keep the cost of the new Medicare benefit in check, and kept drug prices mostly off the political front burner.
But now, not only are prices rising again, but many people also have insurance that requires them to pay more out-of-pocket for drugs. Those patients complain, in turn, to lawmakers, who feel the need to address the issue.
It is not clear what would work to fix drug price problems, but it is pretty clear what would NOT.
Both Clinton and Trump have endorsed a change in the law to allow Medicare to negotiate drug prices, a practice that is currently banned.
But analysts agree that negotiations alone could not reduce overall costs by very much, unless Medicare was also allowed to grant preference to some drugs that offer good discounts, which is what most insurance plans do. In Medicare, however, that would be extremely controversial. And Medicare, like other insurers, would have trouble negotiating lower prices for drugs that have no competition. Thus, the Congressional Budget Office has said, repeatedly, “broad negotiating authority by itself would likely have a negligible effect on federal spending.”
Another popular proposal, included in Clinton’s drug plan and already in effect in several states, seeks to cap the amount individual consumers have to spend out-of-pocket on prescription medications.
While that would clearly help protect the individuals affected, it would do nothing to actually lower drug costs. In fact, by passing most of the cost back to insurers, the proposal would likely increase insurance premiums for everyone.
In California, meanwhile, voters this fall will face a proposal to ban state health programs from paying any more for drugs than the price at which they are sold to the Veterans Health Administration, which gets large discounts, but also covers only a limited list of drugs. The proposal is strongly opposed by the drug industry, but even some likely supporters have raised questions about whether it would work.
Addressing drug prices is very popular with the public.
The public is clearly ready for some action on the issue. Poll after poll finds large majorities of those surveyed think drug prices are too high and the government should do something to lower them. The public is also decidedly negative in its opinion on the drug industry overall. It’s no surprise politicians are feeling pressure to act.
Politics are spurring interest, but also impeding progress on addressing drug prices.
On the other hand, the pharmaceutical industry remains one of the most powerful forces in Washington, not to mention many state capitals. Drug industry lobbying has blocked efforts to allow people to buy cheaper drugs from overseas, ensured that the Medicare prescription drug benefit did not allow the federal government to set or negotiate prices, and kept efforts to rein in drug prices out of the Affordable Care Act.
As a result, wrote three Harvard Medical School researchers in a comprehensive look at the drug price issue in the Journal of the American Medical Association, “prescription drugs are priced in the United State primarily on the basis of what the market will bear.” Attempting to set prices or otherwise constrain industry profits, they added, “would have major marketplace ramifications and is not at present politically feasible, in part because of the power to the pharmaceutical lobby in Washington, D.C.”
This story originally appeared in Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente. KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.