Here's What Washington Could Do to Combat High Drug Prices

  • Proposals for Canada imports, Medicare negotation are stalled
  • Some Democrats pushing for hearings, nothing scheduled yet

On the campaign trail, Hillary Clinton is proposing to force pharmaceutical companies to spend more on research. In California, the push is on for a law to contain government spending on drugs. And on the front pages of national newspapers, stories keep appearing about high medicine prices.

And in Washington, there’s little sign that Congress is ready to advance any of the initiatives sprouting up to address the cost of medicine:

  • Health insurers are advocating proposals such as requiring drugmakers to disclose how they set their prices and shortening the 12-year period in which makers of biologic medicine can keep their data secret.
  • A bill introduced last month in the Senate, co-sponsored by presidential candidate Bernie Sanders, would allow Medicare to negotiate with drugmakers and would let pharmacies import drugs from Canada.
  • A health department official floated the idea earlier this month of coming up with ways to pay for a medication based on how well it works.

At a separate event last week, Jason Furman, the chairman of the Council of Economic Advisers, said prescription drug spending has been accelerating with the arrival of "costly, though often effective, new therapies." While drug spending continues to represent about 10 percent of total health-care spending, "trends in this area have raised concerns about access and affordability," he said.

Clinton and Sanders both said at Tuesday night’s Democratic presidential debate that they would set themselves apart from the Obama administration by challenging drug companies. Neither expanded on their plans.

Drugmakers have argued that regulation isn’t needed. Prices haven’t risen as much as they appear because insurers and government programs pay much less than the list price for medications after negotiations. They also note that drug prices haven’t risen as a portion of overall U.S. health-care spending in recent years, staying steady at about 10 percent.

Drug and device makers spent about $230 million on lobbying last year, led by the Pharmaceutical Research and Manufacturers of America, which deployed $16.6 million, according to the Center for Responsive Politics. Health insurers spent about $72.8 million in the same period.

Public Support

In an August poll by the Kaiser Family Foundation, 86 percent of respondents said they supported the idea of requiring drug companies to release information on how they set drug prices. While 72 percent said the costs of prescription drugs are unreasonable, 72 percent said they can easily afford their own prescriptions.

"While there’s been some signs of interest in this from people on both sides of the aisle, obviously it’s no great secret to say it’s very hard to do anything in Congress these days," said Jack Hoadley, a research professor in the health policy institute at Georgetown University.

The House Oversight and Government Reform Committee is working on a drug-pricing hearing Democrats requested months ago, but that process is likely to take time. The House is mired in the process of selecting a new speaker, with deadlines approaching in the next two months to raise the debt ceiling and pass a government spending bill. Jason Chaffetz, the Utah Republican who leads the oversight committee, is a candidate for speaker of the House. "We are still working on details for the hearing," said MJ Henshaw, a spokeswoman for the committee.

If Congress wanted to act to bring down the cost of prescription medicine, the simplest way would be to allow the Centers for Medicare & Medicaid, the insurance programs for the elderly and poor, to negotiate prices, said Niam Yaraghi, a fellow at the Center for Technology Innovation at the Brookings Institution. That’s a measure Obama has requested annually in his budget, only to withdraw it in negotiations.

That idea, and a measure to let pharmacies import drugs from Canada, have been proposed in legislation introduced by Sanders, an independent senator from Vermont, and Representative Elijah Cummings, a Maryland Democrat and the House Oversight and Government Reform Committee’s ranking member.

Obama has said little on the topic of drug pricing. A White House spokeswoman pointed to his budget proposal asking to let Medicare negotiate with drugmakers. His administration, however, is looking for alternative ways to address the issue.

Older Drugs

While prices for new, breakthrough treatments for cancer and hepatitis C have drawn scrutiny, companies like Valeant have come under fire for acquiring older drugs and raising their prices. Valeant Chief Executive Officer Michael Pearson told the Financial Times last week that such transactions are less attractive now. Pearson wasn’t available for comment to Bloomberg News.

The Food and Drug Administration is barred by law from considering a medication’s expense in the approval process. That’s different from organizations in countries like the U.K., where the National Institute for Health and Care Excellence assesses drugs for cost-effectiveness and can refuse to pay for those it deems too expensive.

The Obama administration is focused on reforming the way drugs are delivered in the U.S. to speed innovation and reduce costs, said Richard Frank, assistant secretary for planning and evaluation at the Department of Health and Human Services. He said the president has proposed:

  • Reducing the length of market exclusivity given to biotechnology drugs, which would require cooperation from Congress.
  • Simplify payment for the biosimilar medicines that would compete with biotech drugs that lose patent protection. That could be done with rulemaking.
  • Exploring ways to negotiate drug prices at certain times when there is limited competition.

Officials are reviewing measures being pursued in states, including bills in Massachusetts and California, to make companies disclose a range of information around drug development, including research, manufacturing and marketing costs, Frank said at a Pew Charitable Trusts conference on paying for value.

Value-Based Pricing

A process already under way at the Department of Health and Human Services may be the most likely measure to make a dent in the cost of medicine. Some health-care services are now being paid with a lump sum for treating a specific condition rather than for each individual service performed. The agency also is focused on value-based pricing, paying based on a drug’s ability to achieve the desired results rather than the treatment itself, Frank said.

"There is a lot of work to be done before we figure out how this might actually be put into practice and who the various partners would be in such a venture," Frank said. "It seems like this is too important a possibility and has too much potential to not pursue pretty aggressively."