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The most important news in healthcare: Friday, September 17th
Did you miss us? We’re back after a brief summer hiatus. Today, we’re boosting a story that has been mostly lost in a sea of COVID-19 booster conversations. Speaker Nancy Pelosi’s drug pricing bill failed to advance to a full House vote on Wednesday. We’re breaking down why the bill’s failure hurts Americans, who continue to pay higher pharmaceutical prices than their global counterparts.
Today’s Pulse is 800 words, or a 7 minute read.
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Drug pricing bill loses key vote in the House
The pulse:
Three House Democrats joined House Republicans in opposing Pelosi’s drug pricing bill H.R. 3 this week, making it difficult for the bill to survive in Congress.
The bill:
It’s important to understand the basics of the bill itself, which mostly focuses on allowing Medicare, the government run health insurance for Americans above 65, to negotiate with pharmaceutical companies. While many health systems around the world allow for such negotiation, under the US system, Medicare is unable to. As a result, Americans pay drug prices that are, on average, 250% higher than the prices paid by citizens of similar countries.
This system is untenable for many. Take insulin, for example, one of the most commonly prescribed drugs worldwide. In 2018, the average price of insulin in the US was $98.70, compared to $6.94 in Australia, $12.00 in Canada, and $7.52 in the UK.
In a country where insulin is readily available in any pharmacy, it is not unusual for American patients to skip doses of insulin or to try to “save” their insulin to cut down on their out-of-pocket costs. Unsurprisingly, Americans also have worse health outcomes than similar peer nations, despite the exorbitantly higher spending.
Cue Speaker Pelosi’s bill, which is certainly not the first attempt to cut drug prices. In brief, the bill attempts to:
Allow Medicare to negotiate drug prices with pharma companies.
Make these negotiated lower drug prices also available to patients with private insurance (which about 67% of the population has).
Limit the maximum price for any negotiated drug to the average price in similar countries.
Create a $2,000 out of pocket limit on prescription drug costs for Medicare holders.
Reinvest the savings from lower drug prices in research and innovation in the pharma space.
Speaker of the House Nancy Pelosi
Those against:
Republicans unanimously voted against the bill, as did three Democrats: Representatives Scott Peters of California, Kurt Schrader of Oregon, and Kathleen Rice of NY. Their biggest argument is a pretty classic one that has been used for years to push back on similar bills – that lower drug prices equate to less incentive for innovation in pharma. Representative Peters said the bill would “immediately halt funding of drug discovery and development.”
Ah, the classic “R&D defense”. The meat of this argument essentially rests on the idea that there should be no ceiling to what pharma can reap for their products, as the profits made from American drug sales are reinvested into research and development. There are numerous problems with this argument, primarily that it’s not entirely true. In reality, pharmaceutical companies are not using all of this excess profit to find new breakthroughs. In fact, a study published in Health Affairs showed that the pharma industry spent about $40 billion less on R&D than its actual profit from the US price premium. It has been reported that much of this excess profit goes towards stock buybacks for companies. And of course, some profit undoubtedly goes to the very same Congress members who work alongside pharma to stifle bills like H.R 3. For example, in the two days after Representative Peters published a letter to Nancy Pelosi critical of the bill, he received close to $20,000 from pharmaceutical CEOs and lobbyists. He’s in good company – over two-thirds of Congress gladly accepted pharma funds for the 2020 election, Democrats and Republicans alike. This alarming statistic is a routine and widely accepted practice in American politics.
Even if it were true that the pharma industry was reliant on excessive drug prices in the US, this shouldn’t be the case. As Express Scripts’ chief medical officer Steve Miller said in a 2015 interview with Bloomberg, “We can no longer sustain a system where 300 million Americans subsidise drug development for the entire world.” It’s a system that has left many struggling Americans forced to ration or completely forgo necessary medications.
And all in favor:
Pelosi’s bill would allow Medicare to negotiate with pharmaceutical companies, likely drastically reducing their drug prices closer to global averages. A study by the Congressional Budget office found that H.R.3 negotiations would lead to an average discount of nearly 55% on the initially negotiated drugs. Over the next 10 years, the office estimates these changes would save the federal government approximately $500 billion, which could be reinvested to promote biotech innovation.
Bottom line it for me:
It’s important to question the “R&D” defense for why drug prices in the US remain so high. If Americans still cannot afford basic medications like insulin, who is the current system really helping?