Congress and Drug Pricing: Focus Is on the Obvious NOT the Root Causes

There are many reasons drug prices in the U.S. are higher than in other Western nations. A factor is that other western nations use price controls to limit their price at manufacturing costs, ignoring the outlays of drug development (Ref.1). Thus, this expense has been borne almost solely by consumers in the U.S.; certainly, this is unfair and should be addressed. Another major factor is our third-party system. We have middlemen, Pharmacy Benefit Managers (PBMs) to middlemen (insurance/government) that use kickbacks that in other industries would be criminal behavior (Ref.2).
    Instead of addressing these fundamentals which increase drug prices, the Inflation Reduction Act, passed in the Senate by budget reconciliation, forced its drug provision savings to apply only to Medicare. These savings will most likely be absorbed by the private sector as increased costs, similar to the private sector covering inadequate Medicare payments to hospitals and physicians (Ref.3). In effect those working, besides paying their Medicare taxes, are also subsidizing the program’s price fixed underpayments via higher health insurance premiums, which for employees is subtracted from their salary. With this bill, the political class can take credit for providing more benefits for the elderly, while keeping the increased costs to the succeeding generation indirect and opaque.
    A summary of the healthcare features of the bill includes extending the Covid-19 subsidies for the Affordable Care Act from 2022 to 2025. Other provisions are:
–  For the Medicare part D program, drug companies must accept government price fixed amounts for 10 drugs in 2023 that would go into effect in 2026, then 10 more to go into effect in 2028.
–  In 2028, price fixing will begin for part B drugs administered in physician offices. – Beginning in 2023 drugs covered by Medicare must not increase prices greater than inflation, if so that amount must be returned to the government.
– Also, in 2023 all approved vaccines will be free to Medicare, Medicaid, and Chip beneficiaries along with a $35/month Medicare beneficiary cap on insulin costs with a possible decrease in 2026.
– Beginning in 2025 out of pocket drug costs/year will be capped at $2000.00 for Medicare beneficiaries, while a year earlier 2024, total drug costs cannot exceed $7,050.
–  Also, in 2024 through 2029 premium increases for Medicare drug plans cannot exceed 6% (Ref.4,5).
     Not discussed is whether the savings on Medicare drug costs will offset the increased expenditures due to limiting beneficiary’s costs. If past performance is a guide, Medicare overall costs will increase; this is important as Medicare overall expenses has already reached unsustainable amounts (Ref.6).
    The question arises: do our politicians understand that drug prices in America are artificially elevated because of multiple middlemen and the need to fund drug development costs by the U.S. consumers? Or are politicians married to a fundamentally outdated system initiated in 1967 before the computer age for which they have tried multiple fixes that have all failed? Or is our political class so impressed with themselves that they cannot conceive how individual Americans can obtain better care at far less cost by controlling their healthcare dollars using their adequately funded expanded health account? They would pay cash for most care and purchase nationally available catastrophic insurance for high priced items.  Certainly, it is time to try this option of empowering the individual (Ref.7).

1. Elizabeth Whitman, How The U.S. Subsidizes Cheap Drugs For Europe, International Business Times, September 24, 2015, available at: https://www.ibtimes.com/how-us-subsidizes-cheap-drugs-europe-2112662  (accessed August 16, 2022)
2. Benjamin Daniels, The Battle Over Drug Pricing: First Shot Targets Pharmacy Benefit Managers, The National Law Review, August 16, 2022, available at: https://www.natlawreview.com/article/battle-over-drug-pricing-first-shot-targets-pharmacy-benefit-managers  (accessed August 16, 2022)
3. Editorial Board, Democrats Vote to Raise Drug Prices, WSJ, August 8, 2022, available at: – https://www.wsj.com/articles/democrats-vote-to-raise-drug-prices-11659909247  (accessed August 8, 2022)
4. Michael McAuliff, Inflation Reduction Act Contains Cost-Saving Changes For Older Adults, Fifty Plus Life, August 13, 2022, available at: – https://thefiftypluslife.com/2022/08/inflation-reduction-act-contains-important-cost-saving-changes/#:~:text=On%20the%20health%20front%2C%20the%20The%20Inflation%20Reduction,has%20long%20been%20opposed%20by%20the%20drug%20industry.  (accessed August 15, 2022)

   5.  Joseph Walker, Drug-Price Rules for Seniors Change With Passage of Climate and Health Bill, WSJ, August 14, 2022, available at:     https://www.wsj.com/articles/drug-price-rules-for-seniors-change-with-passage-of-climate-and-health-bill-11660471200 (accessed August 14, 2022) 

6. Mitch Daniels, Leon Panetta and Tim Penny, American Health Care: Health Spending and the Federal Budget, Committee For A Responsible Federal Budget, May 16, 2018, available at: https://www.crfb.org/sites/default/files/managed/media-documents2022-02/Health%20Care%20and%20the%20Federal%20Budget.pdf (accessed August 16, 2022)   

7.  Ken Fisher, M.D., Federally Dominated Healthcare: The Political Class’s Cash Cow, Authentic Medicine, August 10, 2022, available at: https://authenticmedicine.com/2022/08/federally-dominated-healthcare-the-political-classs-cash-cow/ (accessed August 10, 2022)