The Takeaway: Battle Over Drug Prices Heats Up
Drug prices are continuing their upward spiral and there seems to be no end in sight. Lucky for the drug companies (and unlucky for us) that they have very deep pockets because it appears they are going to need them as the industry is now battling on many fronts. Last week, a coalition of groups under the banner of the Campaign for Sustainable Drug Pricing released their policy agenda. The group, which includes AARP and The American College of Physicians, as well as insurers and hospital associations, is focusing on a national strategy to promote transparency with respect to drug prices, to speed generic drugs to market and to ensure that more complete data on a drug’s clinical effects and associated risks is made available to the public. At the same time, congressional committees are continuing to investigate the industry and its pricing practices.
Meanwhile, tired of waiting for federal action, activists in a number of states are pushing their own initiatives to rein in drug prices. For example, a ballot initiative is moving forward in California that would limit the price the state pays for drugs to that paid by the Veterans Administration. But California is far from alone – numerous states are pressing forward with a variety of proposals
While PhRMA may be playing defense, they are far from beaten. The industry has already raised more than ten times as much money to fight the ballot question in California as proponents have. They’ve also recruited a whole host of allies to help them push back. And notwithstanding their scrutiny and harsh words, federal lawmakers from both parties have recently sent a letter to CMS criticizing the agency’s efforts to reduce spending on Medicare- covered drugs that are administered by physicians. Even the much-maligned Valeant seems to be doing OK. Although the CEO has admitted “mistakes were made,” the company’s stock price seems to be holding up fine.
Bottom line: While pressure on the drug industry is unlikely to abate any time soon, the fight to contain drug costs is certain to be a protracted one and, meanwhile, there is a lot of money to be made.
And Speaking of Price Increases…
The struggles of the insurance industry, led by UnitedHealth, to make a profit on their ACA Exchange business have been well documented. And while there is no doubt some carriers have underpriced their coverage relative to the risk pool, the industry also seems to be undertaking a concerted effort to soften up regulators in order to obtain rate increases. And of course, anything to do with the ACA carries a lot of political baggage, especially in an election year. But neither regulators nor the general public should take the insurance industry’s distress cries at face value. First of all, not all insurers are struggling. Some are making a profit or expect to in the near future. Secondly, at least some of the high cost associated with the new Marketplace risk pools has to do with pent-up demand – people who lacked insurance previously coming with a lot of unmet medical need once they gain coverage and present to the health system. As the risk pool becomes more mature, this pent-up demand will lessen. Finally, as CMS pointed out in a report a couple of weeks ago, the increases that most people actually pay are much lower than the initial rate increases proposed by the insurance industry. Rate review, shopping for alternative plans, and most importantly, tax credits that are available to most people on the Marketplaces, bring the actual price of coverage to the consumer way down.
Give the People What They Want
Recently the legislature in UT rejected an effort to close the coverage gap in that state. Instead of helping over 100,000 people and bringing in hundreds of millions of federal dollars, the legislature opted for a much smaller proposal that, if implemented, would cover an estimated 16,000 people. The people of Utah were unimpressed, however. Over half think the legislature should have covered all of the low-income uninsured while only about 20 percent thought the expansion was adequate. Clearly, the people of the state have more common sense than their elected representatives, who continue to oppose closing the gap in defiance of logic as well as compassion.