Millions of Americans either skip or ration their medications because they can’t afford them. In fact, 2 out of 5 Americans say paying for their prescription drugs in the past year was difficult, even though most have health insurance, according to a recent survey from GoodRx. And that’s just one symptom of a market defined by misaligned incentives, which has stoked public outrage in recent months.
At a hearing held on Tuesday by the Ways and Means Committee, Mark Miller, Arnold Ventures’ executive vice president of health care, joined policymakers and experts to discuss the soaring costs of health care and possible interventions. Miller is a familiar face to the committee from his years as executive director of Medicare Payment Advisory Commission (MedPAC), which advises lawmakers on issues impacting Medicare.
Miller was joined by Rachel Sachs, associate professor of law at Washington University in St. Louis; Alan Reuther, legislative consultant for UAW Retiree Medical Benefits Trust; the American Enterprise Institute’s Joseph Antos, and Odunola Ojewumi, a patient from Maryland.
While bipartisan support for legislative and regulatory fixes is growing, as evidenced by recent hearings in the House Oversight and the Senate Finance Committees, policy solutions must be carefully assessed to ensure they are fair to patients and taxpayers.
Below are three key moments from the hearing, which is available to view in full here.
1. There is no silver bullet. A multi-pronged approach is needed to fix the system
If there’s one thing Congress agrees on, it is the complexity of what drives soaring prescription drug prices.
When asked if there was a single fix for this issue, Ojewumi – a double organ transplant recipient and cancer survivor who also suffers from a rare autoimmune disorder – demanded regulation on drug prices and price gouging caps. In her emotional opening statement, Ojewumi described how she would need to spend $10,000 a year out of pocket if she were to take all her medication. People with disabilities “are oftentimes viewed as a liability, not a contributing member of society,” she said. “I deserve the right to live.”
Legislation should be comprehensive, addressing patent abuses, restructuring the risks in Part D and Part B payments, and including additional pricing tools for drugs that don’t have competition. Miller said pieces of legislation such as the CREATES Act and pay-for-delay would strengthen control over public program costs, with the added effect of reducing commercial sector prices.
“I don’t think it’s a simple path to go down,” Miller said.
In his opening statement, Antos said, “The root cause of high drug prices is the protection of intellectual property – patent and market exclusivity rights that provide strong incentives but also create price power for the developers of those inventions.”
Antos described the market for Hepatitis C as a prime example where competition can bring down drug prices. He referenced the price tag for Sovaldi, which went from $84,000 per treatment in 2014 to $26,000 in 2017.
2. Medicare Part B and Part D are due for needed reforms
When the Medicare Part D prescription drug benefit debuted more than a decade ago, it was viewed as a unique public-private partnership that would cultivate healthy competition. But since that time, premiums have remained flat while private insurance plans benefit from patients being pushed past the catastrophic threshold – resulting in taxpayers covering the cost.
In his testimony, Miller said Medicare prescription drug plans should pick up 80 percent of the cost incurred.
“The catastrophic part of Medicare Part D is growing at a rate of 17 percent annually because of higher priced drugs,” Miller said. “Medicare Part B doubled since 2010 … and Medicaid spent $30 billion on drugs in 2017.” (Drug spending grew 50 percent since 2011).
Committee Chairman Rep. Richard Neal (D‑MA) suggested an inflationary rebate for Medicare Part B drugs, which would require manufacturers to pay additional rebates if their prices rise faster than inflation.
A number of Medicare Part B payment reforms could move away from incentivizing the use of high cost drugs and instead encourage the use of the most clinically appropriate product, regardless of price, or the use of lower-cost alternatives.
3. Combat complexity with creativity
Creative policy solutions will be required to lower drug prices. Examples:
- Binding arbitration, which could achieve fair prices for those drugs with limited competition.
- Competitive licensing legislation. (Rep. Lloyd Doggett (D‑TX) recently introduced the Medicare Negotiation and Competitive Licensing Act, which would allow Medicare to negotiate prices.)
- Reference pricing, which would set prices based on the clinical value of the drug to the patient.
The Senate Finance Committee will hear from drug industry executives on Feb. 26 in a much-anticipated hearing that will bring together CEOs from some of the world’s largest pharmaceutical companies.