Privately insured workers and families could save on prescription drugs thanks to an obscure provision in President Joe Biden’s vast social agenda bill. This is to break the cycle of annual price increases for commonly used drugs.
This provision will require pharmaceutical companies to pay Medicare benefits if they raise prices above inflation. Medicines sold to private plans will count towards the penalty, as will the price increase tax. The problem lies in the division of business groups in a bitter lobbying battle.
Corporate groups focused on affordable employee benefits want to keep the wording as-is to provide protection against price increases for companies and their employees, not just Medicare members. Other groups, such as the influential US Chamber of Commerce, support the pharmaceutical industry’s push to block pricing restrictions, including curbing inflation, saying they will stifle innovation.
On Friday, House Democrats passed a nearly $ 2 trillion social agenda bill and sent it to the Senate. The bill nullifies national priorities on issues ranging from climate to family life, and calls for closer scrutiny in this evenly divided chamber. Prescription drugs are just one ingredient, and much of the focus has been on Medicare’s provisions to reduce out-of-pocket costs for seniors and to allow the program to negotiate prices for a limited number of drugs.
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But curbing inflation will have far-reaching consequences for the 180 million Americans with private insurance.
“A lot of people don’t understand that the law applies to privately insured people and will help them,” said Sean Gremminger, director of health policy at Purchaser Business Group on Health. “But there’s no certainty about that. It will be so under the current structure. But we were worried and we continue to worry that this will change. ” His coalition represents some 40 major employers, covering more than 15 million workers, retirees and their families.
Inflation caps could “change the rules of the game,” said James Gelfand, vice president of ERIC, a group that represents large national companies as providers of employee benefits.
Earlier legislation would have based “inflation discounts” on sales to Medicare plans, but the House bill expands the formula to include private plans.
“If they raise prices in private markets faster than the economy grows, they will be required to return the money to the government,” Gelfand said. The goal is to keep pharmaceutical companies from raising prices excessively.
Polls show that Americans across the political spectrum are overwhelmingly supportive of government action to lower drug prices. The main cost concerns are high out-of-pocket costs for patients, high and rising list prices, and high starting prices for new drugs. Biden’s package will address the first two issues, but Democrats have been unable to agree to allow Medicare to negotiate prices for the new drugs.
Annual price increases for well-known prescription drugs generally outpace inflation, although there have been periods of moderation in recent years.
Gremminger said his group estimates the private insurance market could save $ 250 billion over 10 years under the inflation caps currently outlined in the bill. Without them, Gelfand estimates, employers could face an additional 3.7% annual increase in health care costs over regular health care inflation, as pharmaceutical companies could actually raise prices for privately insured patients to offset discounts. paid on behalf of Medicare members.
“It is true that not all business groups are in the same place,” Gelfand said of the disagreements in the business community. “If you look at the groups on either side of the issue, that is, the groups that defend the pharmaceutical business interests, and then there are the rest.”
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The main lobby group for the pharmaceutical industry, Pharmaceutical Research and Manufacturers of America, says inflation discounts will undermine post-drug innovation.
The generic drug industry wants its products to be tax-free. Dan Leonard, president of the Association for Accessible Medicines generic drug lobbying group, said he fears that his members will be punished for a dollar’s worth of price increases. “When generics are not released … they will fall into the stream of water,” he said.
In the Senate, Finance Committee Chairman Ron Weeden, Oregon, who has taken a lead role in the production of prescription drugs, maintains inflation margins for privately insured persons.
Opponents can submit a parliamentary challenge under Senate rules, arguing that the penalty for raising prices by one private company by another has nothing to do with federal budget issues. If successful, the cost of private insurance plans will be excluded from inflation benefits. The proponents of the caps say they do have a budget target because they will increase income and save Medicare.
Katie Mahoney, a leading health policy expert at the US Chamber of Commerce, said her organization is “very seriously concerned” that drug pricing regulations will undermine industry incentives to develop new drugs, and is pushing to do so in the Senate.
“We continue to point out the damage that such a policy could do,” she said. “We feel this message is spreading among senators and some members of Congress.”
When asked about other business groups supporting inflation control, Mahoney replied that they do not reflect private enterprise in general.
“When you look at these other organizations, firstly, they are much smaller and their policies are very narrow,” she said. “They do not represent business across the board, they represent a very restrained and narrow range of issues.”