The Democrats’ stumble on drug prices shows the power of industry
The House Democrats who formulated the health provisions of their major social spending bill had lofty goals: new coverage for poor, uninsured Americans; additional subsidies for people buying their own insurance coverage; and new dental, hearing, and visual services for older Americans through Medicare.
In order to pay for this, they also set themselves high goals when it came to lowering drug prices. A measure that would tie the prices of certain prescription drugs to prices paid overseas was designed to save the government enough money to offset the cost of these other priorities. It is estimated that the House of Government approach could save around $ 500 billion over a decade, with that money flowing out of the pockets of the pharmaceutical industry.
But it is risky to bet against the pharmaceutical companies.
Three House Democrats on a key committee voted against the measure on Wednesday. There are still opportunities for House leaders to keep the provision in the final bill, but the majority of Democrats in the House are so small that, if determined, these three lawmakers could be a significant barrier to the broader package being passed .
The dynamic is familiar to lawmakers who have dealt with health issues: health industries are big and powerful lobbies, and they don’t enjoy having their revenues cut. As with measures that could reduce payments to hospitals, doctors, and insurance companies, the House’s attempt to take a bite out of drug companies has sparked a backlash.
“I just don’t think it’s really the right way to pay for a lot of things through crippling investments in life sciences,” Scott Peters, a California Democrat, told my colleague Emily Cochrane on Tuesday. “Losing your pharmaceutical investment is too high a price to pay.” (Kurt Schrader of Oregon and Kathleen Rice of New York are the other House Democrats who voted against the measure.)
Mr. Peters’ neighborhood in the San Diego area includes tens of thousands of medical research and drug development employees. Some could lose their jobs if pharmaceutical profits shrink, research investment declines, or companies close their doors. Mr Peters has co-sponsored a competing drug pricing bill that he believes would better target inefficiencies and market failures. The budgetary impact of this bill has not been measured – and the House Committee did not vote on it Wednesday – but it resembles a Senate bill that would save an estimated one-fifth that much.
Without determining drug prices, Democrats will have a hard time funding their other priorities. They pass their law through a special budget process to avoid a Republican filibuster. But this process means that your bill must meet certain budget targets. When the money saved by regulating drug prices is reduced, the pot of money that can be spent on other goals also decreases. The Democrats have already abandoned plans for other revenue-generating measures such as a wealth tax.
The United States pays higher prices for prescription drugs than its competitors – about 250 percent of the average price paid by other countries to the Organization for Economic Cooperation and Development, according to a recent report by RAND Corporation. And these high costs run through the federal budget and the economy, increasing insurance premiums and making life-saving drugs out of reach for some patients.
Democrats in Congress want to lower the drug prices paid by Medicare and other insurers, both to provide a means of paying for other things and to help general consumers and businesses.
But lowering drug prices involves compromises. Drug company business is based on the assumption of high margins in US markets, and investors in early stage companies make their decisions based on their expectation that an effective drug will make a big payday. The Congressional Budget Office – the same bipartisan agency that told the House of Representatives that such a policy could save the federal government a lot of money – recently released a report indicating that significant drug price cuts would have a corresponding negative impact on the number of in the future developed new drugs.
Of course, the pharmaceutical industry is not happy with the prospect of big price cuts. Steve Ubl, the CEO of the industrial trading group PhRMA, described the measure as “existential” for his industry last week. He also said it was unfair for pharmaceutical companies alone to be asked to bear the cost of such a major expansion in healthcare. “We are being asked to pay a disproportionate share of the bill,” he said.
The pharmaceutical industry has spent years donating to political campaigns, lobbying members of Congress, and developing allies in the business world. You are now taking advantage of these relationships urgently. PhRMA announced a “seven-figure” ad purchase on Wednesday and posted an open letter in several Washington publications adding the television commercials on national news and football broadcasts.
It’s a game book that other powerful health lobbies have used. Groups representing doctors, hospitals and private equity firms launched a massive campaign in 2019 to break bipartisan legislation banning the practice of surprise medical billing. Their efforts halted the ban, though Congress finally passed a more industry-friendly version a year later.
Senate leaders have signaled that they want to take their own approach to regulating drug prices. It remains to be seen whether their measure will differ in the fine print of politics or in the amount of the reduction in pharmaceutical profits. But the house was generally perceived as more aggressive on this issue. His troubles this week could signal a gentler approach and perhaps a smaller budget for Congress and the White House’s other lofty goals.
Emily Cochrane and Alicia Parlapiano contributed to the coverage.