Congressional Democrats are desperate to find ways to pay for their proposed $3.5 trillion budget bill currently before Congress. One cost-saving provision they’ve offered as a pay-for is using the government to set prescription drug prices for Medicare Part D. Estimates indicate that such price-setting could save $500 billion over ten years.
Yet these cost savings would come at a high price for seniors, and indeed all patients with rare and chronic diseases, whose access to lifesaving medications would be threatened as a result. Moderate Democrats, who voted against moving forward on this price-setting plan this month, are right to reject it and should maintain their opposition in an upcoming showdown vote that may come this week.
Under Democrats’ proposals, the Department of Health and Human Services would have the power to exclude new drugs from Medicare formularies that don’t comply with government prices. Sen. Ron Wyden (D-OR) proposes using the Veterans Affairs price-setting approach, which relies heavily on eliminating innovative and effective drugs from formularies as a way to drive costs down. As a result of this blunt approach, the VA covers only 52% of the top 200 Medicare Part D brand drugs compared to an average of 75% for Part D overall.
In recent years, health plans have excluded more new medicines from their coverage. According to recent research by GoodRX, the proportion of available drugs covered by the average Medicare Part D plan fell from 73% to 56% between 2010 and 2019. Such reduced medication coverage is the most significant source of burdensome out-of-pocket drug costs. Democrats’ price-setting plans would exacerbate this patient burden by requiring patients to pay higher retail prices for medications not covered because they can’t meet government prices. (To the extent that patients are forced to avoid needed medications due to the resulting costs, expensive hospitalizations will increase, raising overall Medicare costs.)
According to the nonpartisan Congressional Budget Office, Democrats’ drug pricing plans will result in between 21 and 59 fewer medications brought to market. For those with rare and chronic diseases who depend on the prescription drug pipeline of new medications to save their lives and livelihoods, this outcome is unacceptable. The best hope for patients and caregivers like Dorothea Lantz from Miami, whose son has a rare disease known as Prader-Willi syndrome, is a breakthrough medication. Price-setting would make such new treatments less likely.
Democrats claim price-setting would only exclude medicines that an independent panel of experts would decide aren’t cost-effective. Yet a study by Columbia University economist Frank Lichtenberg found that between 2000 to 2005 limiting the use of new drugs deemed cost-ineffective in the VA system may have reduced the life expectancy or mean age of death of VA patients by about two months.
More recently, the VA followed recommendations from a third party – the Institute for Clinical and Economic Review (ICER) — to restrict hepatitis C cures to patients with very advanced diseases. As a result, the VA hep C cure rate was 67 percent compared to 95 percent in clinical trials.
Price-setting negotiation also causes life-denying delays. The average time to determine a government price for a drug is about a year. In Europe, a 12- to 15-month price determination for two new cancer drugs (ipilimumab for melanoma and abiraterone for advanced prostate cancer) significantly delayed patient access, potentially costing 30,000 life years, according to a major study.
A study Robert co-authored found that such negotiations and ICER-like cost-effectiveness determinations would increase R&D costs for new medications by 50 percent of Phase 3 clinical trials costs. These costs would reduce R&D spending by more than $32 billion over ten years and cost Americans over 81 million life-years.
Recognizing these unacceptable consequences of prescription drug price setting, some moderate Democrats oppose this proposal. Three House Democrats voted in a key committee hearing this month to block this provision from advancing as part of the broader budget effort. “I just don’t think paying for a lot of things by crippling investments in life sciences is really the way to go forward,” said Rep. Scott Peters (D-CA) in explaining his opposition.
Yet House Democrat leaders are moving forward anyway and daring them to vote no again when this provision is voted on as part of the broader budget package as soon as next week. To kill this penny-wise, pound-foolish proposal for good, more legislators should stand up for their patient constituents and heed this warning about the high price of artificially low-cost drugs.
• Robert Goldberg is co-founder and vice president of The Center for Medicine in the Public Interest. Terry Wilcox is the executive director of Patients Rising. They are the cohosts of the Patients Rising Podcast.