Drug pricing is extremely complex. Any serious effort to change prices risks any number of unintended consequences, including affecting financial incentives to discover new drugs, patent laws, business competition, interstate commerce, and global trade relations.
President Trump’s American Patients First blueprint for lowering drug prices is, if nothing else, a lightning rod for the continued politicization of health care. Critics quickly noted the plan did not recommend giving Medicare the right to negotiate for lower drug prices – a dubious omission from the 2003 law that created Part D drug plans. Stocks of drug and pharmacy companies rose when it appeared that Big Pharma once again would dodge any serious bullets.
Trump’s secretary of Health and Human Services, Alex Azar, says these and other omitted items would not have worked anyway, and that critics are missing the point of the proposals. Since then, Trumpocrats have been out in force to make their case that consumers will be getting relief from high drug prices.
I don’t necessarily agree with their arguments, but I do think rushing to judgment is misguided. There are no quick fixes here, and while the Trump proposals are viewed as fatally flawed by many experts, they also include some worthy ideas. For that reason alone, you should read the Trump proposals.
You also should read them because health care will be a major battleground for the fall midterm elections and the 2020 presidential campaign.
Drug prices thus join Obamacare and Medicaid rollback efforts, along with democratic proposals for some version of “Medicare for all,” as topics that will be ideologically carpet-bombed over the next six months. Trying to separate out serious health-policy proposals from election campaign soundbites will be impossible unless you educate yourself about these issues.
Once you’ve read the president’s proposals, and the rationale behind them, you can google key phrases to see the spectrum-wide views of experts and pundits. If their opinions are serious, you also should see links to various reports and studies supporting their conclusions. These efforts also often reflect the political and social views of their authors, so you need to be careful. Facts can be a slippery and precious commodity.
Realistically, doing this work is a full-time job onto itself. Anyone willing to absorb such punishment is encouraged to tell me what you’ve concluded! More likely, we will continue to harbor our own sets of facts and either applaud or excoriate the president accordingly.
Pharmaceutical companies will continue to be villains to many, even though the realities of how drugs are invented, produced, priced, prescribed, and used defies the kinds of easy characterizations by people who seldom possess the knowledge to issue more than single-dimension critiques.
Taking a giant step backward from the current news about drug prices – including the appropriate stories of people whose lives have been ruined if not actually shortened because they could not get or afford a life-saving drug – has revealed three related realities, at least to me.
The first reality is that, for the next six months at least, the drug wars will not be about actual progress to lower prices but about creating the perception of progress among voters. Most of the president’s proposals will take a long time to implement, and many will require congressional approval. That’s not going to happen this year. But what politicians can and will do is tell you how much better or worse things will get.
The second reality goes back to what I said in the beginning: that steps to change drug prices, as with many other things about health care and Medicare, will trigger unintended and often negative consequences. So, while we should get on with the business of tackling the causes and cures for unacceptably high drug prices, we should do so with great care and with our eyes wide open.
The Trump plan, for example, envisions saving a lot of money by moving some Part B drugs into the Part D program. Government pricing rules mean that it pays more for Part B drugs – those administered in doctors’ offices and other out-patient settings — than for the same drugs under Part D rules. So, this idea could save a lot of money.
However, out-of-pocket costs to Medicare beneficiaries can be much lower for Part B drugs used by patients who also have Medigap supplement plans. And lots of Medicare enrollees don’t even have a Part D plan; many of these folks depend on getting drugs from their doctor that can be covered by Part B.
The third reality is that rising public resentment over high drug prices has uncorked powerful new informational tools about drug prices, who pays these bills, and who the “bad” guys are. Lifting the opaque curtain over medical prices is long overdue and promises to empower consumers and create pressure for congressional action. Everyone, it seems, wants to get on the “transparency” bandwagon.
High-deductible health plans have put the onus on consumers to make smart decisions about which drugs to buy and even where to get them. Insurance plans aren’t always the source of the best out-of-pocket deals. Even though Medicare’s Part D prescription drug plans provide helpful protection from huge drug bills, people are still on the hook for paying at least 5 percent of the cost of their medications.
In response to Trump’s announcement, the Centers for Medicare & Medicaid Services (CMS) recently published an update on drug price trends. CMS is highlighting prices and rates of price increases for specific drugs and the companies who make them.
“Publishing how much individual drugs cost from one year to the next will provide
much-needed clarity and will empower patients and doctors with the information they need,” CMS Administrator Seema Verma said in a prepared statement. “For years Medicare incentives have actually encouraged higher list prices for drugs, and this updated and enhanced dashboard is an important step to bringing transparency and accountability to what has been a largely hidden process.”
The agency unveiled dashboards for drugs prescribed in Parts B and D of Medicare, and for Medicaid. These are list prices, not the actual prices charged by Medicare drug plans. As such, they are of limited value to consumers. CMS also created a fourth dashboard showing rebates that drug manufacturers provide to Part D drug plan insurers.
Drug plans say they use these rebates to lower overall insurance costs for all Part D customers, but there is support for patients who use expensive drugs to get these rebates directly. Drug plans note this would raise premiums for all customers. The Trump plan includes proposals to direct rebates to people who must take very expensive medications.
CMS reports that in 2014 (presumably the most recent year where data are available) Part D prescription drug plans received rebates of nearly $16.3 billion from brand-name drug companies, amounting to 17.5 percent of the $93 billion costs of the drugs.
The dashboard for overall price trends on Part D drugs allows you to look up the date on prices, price changes, numbers of people using the drug, and average spending per beneficiary.
I found, for example, that one expensive drug that I take (Enbrel) jumped more than 22 percent in price between 2015 and 2016, with per-dosage spending rising to more than $972 from nearly $793. Annual price increases averaged more than 18 percent between 2012 and 2016. That’s a big ouch for the nearly 48,000 people who took the medication and spent, on average, nearly $33,000 each for the privilege.
Enbrel “only” ranked #4 on the CMS hit parade of drugs with eye-popping price increase histories. The agency publicized separate lists for Part B and Medicaid drugs. Pharmaceutical industry spokesmen noted in response that the CMS tables did not reflect price rebates provided to Medicare and Medicaid, but by then the PR damage already had been done.
Whether such public shaming is an effective tool remains to be seen. But it certainly is one of those efforts where government officials can claim to be making things better without necessarily changing anything.
Editor’s Note: Journalist Philip Moeller is here to provide the answers you need on aging and retirement. His weekly column, “Ask Phil,” aims to help older Americans and their families by answering their health care and financial questions. Phil is the author of “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil; and he will answer as many as he can.