The cost of prescription drugs is too high, plain and simple. It’s a chorus we hear repeatedly from our constituents in Indiana and Iowa. If you ask any of our colleagues in the Senate and House of Representatives, you’ll almost certainly hear the same thing.
The Kaiser Family Foundation released a poll in March that found among Americans currently taking prescription drugs, one-fourth of adults say it’s difficult to afford their medications. Worse, 29 percent of all adults taking prescription drugs reported not taking their medicines as prescribed by their physicians at some point in the past year due to the high costs of the drugs. In a Senate Finance Committee hearing earlier this year, one witness testified that her son, worried about the financial burden his monthly $1,700 insulin prescription was putting on his parents, began rationing his treatments. This should never be the case. Sadly, it’s a reality for too many Americans.
Why are prices so high? There are a lot of factors, but it boils down to the fact that the process of getting a drug from its manufacturer to the patient is too complex, opaque and expensive. The pharmaceutical supply chain is wrought with special interests that too often prioritize profits over patients.
We’ve spent a lot of time looking into the drug pricing process and didn’t like what we found. Unfair payment disparities put patients and taxpayers at a significant disadvantage.
The way it works is this: Drug manufacturers produce a prescription drug and set its list price. From there, the drug is purchased by wholesalers and retailers, like pharmacies. Pharmacy benefit managers, known as PBMs, are the “middlemen” of prescription drugs. They act as a go-between for health care insurers to negotiate drug prices with manufacturers, health plans and pharmacies. While PBMs can often decrease the cost of drugs, they don’t always pass those savings on to consumers. That has real-life consequences to millions of patients and taxpayers.
The practice of spread pricing is another a way for PBMs to game the system in their favor. This is when PBMs buy prescription drugs from wholesalers at one price and sell it to pharmacies at an inflated price. This increases over-the-counter costs for patients and milks the taxpayer, who foots the bill for drugs that are distributed through the Medicaid program.
According to reporting by Bloomberg News, private Medicaid plans in Indiana spent more than $800 for a 30-day supply of hepatitis B medication that cost pharmacies less than $140 to purchase. This puts Indiana taxpayers on the hook. The same report cited a case in Iowa in which a PBM charged nearly $200 for a drug, yet the pharmacy it was working with was being reimbursed for less than $6.
The current system has created incentives for middlemen to hide behind complicated maneuvers that increases their own profits at the expense of patients and taxpayers. Negotiated rebates and spread pricing are just a couple examples. Congress needs to shine a light on unfair drug pricing practices to ensure costs go down for the people who depend on these medicines.
As U.S. senators, we’ve both talked to President Trump and have also worked across the aisle on solutions to these issues. Between the two of us, we’ve introduced and supported dozens of bills that increase transparency and aim to reduce drug prices. Most notably is the Prescription Drug Pricing Reduction Act (PDPRA).
Passed by the Senate Finance Committee in July, PDPRA increases transparency and holds drug manufacturers more accountable to federal taxpayers while applying pressure to lower list prices and report more accurate calculations of their rebate obligations. It includes measures to prevent spread pricing and gaming in the Medicaid program by PBMs to ensure that patients and taxpayers are getting the best deal possible on prescription drugs.
Importantly, the Prescription Drug Pricing Reduction Act (PDPRA) saves patients and taxpayers money. A lot of money.
The Congressional Budget Office estimates that the PDPRA will save more than $100 billion over 10 years. In addition, it will save $25 billion in out-of-pocket costs and $6 billion in premiums for Medicare beneficiaries. Taxpayers will save $85 billion in Medicare and $15 billion in Medicaid.
In addition to legislation from Sen. Lamar Alexander, who chairs the Senate Health, Education, Labor and Pensions (HELP) Committee, the PDPRA is one of two bipartisan bills that can pass Congress and be signed into law.
Hoosiers, Hawkeyes and Americans across the country are demanding relief from high drug prices. The PDPRA is the solution. Congress must act now.
• Chuck Grassley is a Republican U.S. senator from Iowa. Mike Braun is a Republican U.S. senator from Indiana.