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Five Takeaways from the First Senate Hearing on Drug Pricing

Experts, including Arnold Ventures’ Mark Miller, tell lawmakers what fixes could help lower rising drug prices.

Sen. Chuck Grassley, R-Iowa, right, chairman of the Senate Finance Committee, is joined by Sen. Ron Wyden, D-Ore., the ranking member, during a bipartisan hearing on the high price of prescription drugs on Capitol Hill Tuesday, Jan. 29. (The Associated Press/J. Scott Applewhite)

In 2016, the U.S. spent $471 billion on prescription drugs – a number expected to rise to $584 billion by 2020.

As Americans struggle to pay these bills, political momentum for change is finally picking up. (More than a few politicians elected in the 2018 midterms centered their campaigns on health care reform.)

The Senate Finance Committee on Tuesday held its first hearing to address the issue. The panel, led by Sens. Chuck Grassley, R‑Iowa, and Ron Wyden, D‑Ore., heard from Kathy Sego, a mother whose diabetic son almost died after rationing insulin, along with three leading experts in health care and policy: Mark Miller, Arnold Ventures’ executive vice president of health care; Douglas Holtz-Eakin, president of the American Action Forum; and Peter Bach, director of the Memorial Sloan Kettering Center for Health Policy and Outcomes and a grantee of Arnold Ventures.

Here are five takeaways from the hearing, which is available to view in full here.

1. Access to insulin shouldn’t be a matter of life or death

Americans are putting their lives on the line for health care they need but can’t afford. Sego’s testimony brought the point home: She was forceful yet vulnerable as she recounted how four years ago, her then-teenage son fell ill and lost 20 pounds in two weeks because he began rationing the insulin he used to treat his type 1 diabetes.

I’m heartbroken to know that my son felt he was a financial burden to us,” Sego said. Money over life is not the choice we want him to make.” 

To add insult to injury, Sego later learned during a trip to Hungary (which Sego pointed out was paid for by family friends) that the same insulin vial that costs her family $487 out of pocket costs $10 there.

I wanted to stockpile it; I wanted to buy every vial, but I couldn’t.”

Sego concluded her emotional testimony by adding, We don’t want a handout or a free ride. We want to keep those 7 million Americans alive without having to do what my son thought was his only option.”

WATCH: Laura and John Arnold talk to NBC Nightly News about the broken drug market

2. Finding policy solutions that balance innovation and affordability is possible

There is no doubt that a strong research engine is needed to develop new treatments and save lives. But these drugs only work if patients can afford to take them.

New life-saving treatments are launching at increasingly unsustainable prices that are not justified by their research and development costs,” according to Miller’s written testimony. He cites several examples: A life‐​extending cystic fibrosis treatment costs nearly $300,000 a year; A hepatitis C cure costs tens of thousands of dollars per treatment; and CAR‐T therapy can exceed $500,000.

America can and should remain at the vanguard of medical research while also ensuring fruits of this research are affordable.

Lowering drug prices without threatening innovation is possible,” Miller told the committee. There is a fair amount of headroom between the prices that are being charged and paid and how much is being spent on R&D. I think you can go after prices and go after spending and not immediately threaten innovation.”

3. Increasing transparency throughout the drug delivery system is top of mind

Ensuring transparency around prices includes understanding how money flows from manufacturers to physicians and others in the system. Sen. Maggie Hassan, D‑N.H., asked specifically about drug company payments and how they influence patients and prescribing.

Miller emphasized the need for clear reporting of payments by manufacturers and went a step further, recommending changing the Sunshine Act to include tracking contributions to patient groups as well.

There should be line of sight for drug and device companies’ contributions to physicians and others in the system,” Miller said. Payments to patient groups are not tracked and should be added.”

4. Misaligned incentives in Medicare Part D are driving drug spending

The flawed benefit structure of Medicare Part D promotes the use of high-cost drugs even when lower-cost options are available. More people end up in the catastrophic” range, where taxpayers pay 80 percent of the cost. 

The solution? To restructure Part D benefits in way that maximizes the incentives of PBMs (pharmacy benefit managers, or the middlemen between insurers, manufacturers, and pharmacies) to negotiate their prices, and then, Miller said, go outside and for those set of drugs that are extremely expensive and don’t have competition, consider things like reference pricing or binding arbitration while there are no competitors for those drugs, and bring them back into the negotiation once you have competitors.”

Miller’s testimony focused largely on potential fixes to Medicare and Medicaid, including a series of reforms to Medicare Part D’s payment structure to increase pressure on the plans to more aggressively negotiate drug prices, for example, by requiring that the plans pick up 80 percent rather than the 15 percent of catastrophic drug cost.”

5. Government-granted monopolies drive up prices

Miller concluded his opening testimony by urging policy makers to curb the anti-competitive behaviors of manufacturers and inject competition back in the marketplace.

Manufacturers benefit from taxpayer-funded NIH research and government-granted monopolies, and naturally, they devote resources to protecting those monopolies,” Miller said. The government’s responsibility is to intervene on behalf of taxpayers when the market fails.”

Miller added that any change would entail difficult tradeoffs between manufacturers, PBMs, taxpayers, and patients, as well as stiff resistance from the status quo.

Sticking with the status quo is always an option, but we know what it will produce: anti-competitive behaviors, high prices, and higher spending for Medicare and Medicaid.”