The Senate and the House passed the Inflation Reduction Act (IRA) and President Biden signed it into law six days ago. As I’ve said before (in this blog) it has some good things and some bad things. It was passed on a purely partisan vote, with the 50 Democrat Senators voting yes and the 50 Republican Senators voting no, and Vice President Harris voting yes to break the tie. It was a party line vote in the House with 220 Democrats voting yes and 207 Republicans voting no. Once again, our government chose to pass a purely partisan piece of legislation that will have a huge impact on seniors in this nation. I’ve written previously about the evils of partisan governing here. It’s not good when a small majority can pass such important legislation.

So, before we get into the new law, I’m going to rant a little. Maybe some math will highlight the reason for my displeasure. The vote was 50 for and 50 against the bill in the Senate so, from the Senate perspective 50% of us had Senators that were against the IRA. There were 13 more House members (all Democrats) that voted for the IRA than voted against it. The average size of a House district is 761,000 so the difference in citizens represented by the 13 yes votes was 9,893,000. With the population of the United States at 329.5 million the ratio of those 9,893,000 yes votes to no votes of citizens represented was 3%. That 3% made the difference and they were all in districts of Democrats. A bill of this magnitude should not pass on such a slim majority. Somehow, our country needs to figure out how to work together to develop laws that are bipartisan.

Ok, let’s talk about this new law. I’m only going to talk about the healthcare portions of the law and only those that affect older Americans. I’ll go year by year since many of the changes won’t go into effect for a few years. I’ll try to keep it short and to the point.

2023

• The price of some drugs may not increase as fast since the manufacturer must pay a rebate if they raise prices above inflation. I wonder how much a benefit this will be if inflation stays high.
• Out-of-pocket costs for insulin is capped at $35 a month.
• Reduces the cost for adult vaccines.

2024

• If you reached the catastrophic phase of your Medicare Part D coverage, which means you spent $7,050 on drugs, that’s all you’ll have to pay. Eliminates the 5% coinsurance that you used to pay.
• Expands the eligibility for the Part D low-income subsidy.
• Starting in 2024 and continuing through 2030 Part D premium growth is capped at a maximum of 6% per year.

2025

• Part D 0ut-of-pocket costs are capped at $2,000 per year.
• The payment of drug costs can be smoothed out over the entire year.

2026

• Government price controls will be implemented on 10 selected drugs. This may affect what you pay depending on the drugs you take.

2027

• Government price controls will be implemented for 15 more drugs, for a total of 25.
• The Trump Administration’s drug rebate rule, which had been delayed until 2027, will be further delayed until 2032.

2028

• Government price controls will be implemented for 15 more drugs, for a total of 40.

2029

• Government price controls will be implemented for 20 more drugs, for a total of 60.

The amount of savings generated by government price controls for any one individual will depend on a lot of variables. The Kaiser Family Foundation, a non-partisan information source on healthcare, said the following about possible savings.

“The number of Medicare beneficiaries who will see lower out-of-pocket drug costs in any given year under this provision will depend on how many beneficiaries use drugs whose prices increase more slowly than would otherwise occur and the magnitude of price reductions relative to baseline prices.”

These are the pocketbook impacts of this new law for seniors. What hasn’t been discussed much since this bill was signed into law is the other impacts of this new legislation, like the constraint to the development of new drugs. This will be especially felt by the small bio firms which produce many of the new scientific break throughs. This law doesn’t do anything to add more transparency and efficiency to the drug supply line. There were many improvements that could have been done that would have saved money and improved access that were not considered.

As with all big changes to our healthcare system, the real impact will depend on how the law is implemented and how the providers, drug manufacturers and insurance companies react to the changes. There is much more to understand about this bill, and we must still stay involved as it is implemented. The devil is in the details and the details will reveal the real impact these big changes will have on each of us. We’ll stay involved through the process and we hope that you will stay involved also.

Best, Thair

While the blog title is a good one for a great spaghetti western it’s not so good when it applies to pending legislation that will have a long-range effect on our lives. I’m talking about the Inflation Reduction Act that survived Saturday night and early Sunday’s gauntlet of voting on amendments to the bill, affectionally known as the vote-a-rama, and was passed by a partisan 50 to 51 vote with the Vice President breaking the tie. It will now go to the House where they will most assuredly pass it, probably on Friday. So, how did we get to this point on this ominous piece of legislation?

Since the massive Build Back Better bill failed to gain traction, the Democrats have worked feverishly to try to find a narrow bill that they could pass before the midterm elections. This meant they needed to broker a deal with two moderate Democrats, Senators Joe Manchin III (W.Va.) and Kyrsten Sinema (Ariz.), who were the ones that held up the passage of the larger bill. When Senator Manchin abruptly changed his stand opposing legislation that would impact inflation and raise taxes, and Senator Sinema got her changes to the bill, the door was open for a pared-down bill that they named the Inflation Reduction Act, an obvious nod to Senator Manchin. The only way to pass this bill was through a process called reconciliation. I discussed this process and my disdain for using legislative maneuvers like it to pass such important legislation in a recent blog. Suffice it to say that this bill, if it passes, and it probably will, will be a purely partisan law. In essence, a bill that affects 100% of us will only have the support of 50% of those who represent us. It took the vote of the Vice President to break the tie. This bill certainly contains some good, some bad and some ugly parts.

The good –I think that capping the out-of-pocket costs for prescription drugs at $2,000 a year is definitely good for seniors. I’ve been advocating for this change for more than a decade. It gives older Americans some sense of security knowing they won’t be bankrupted by drug costs, and it gives younger people a definite ceiling on out-of-pocket costs as they plan their retirement.

The bad – This bill allows the government to fix the price of some of the highest priced drugs. I’ve talked ad nauseum about the problems of allowing the government to insert itself into our healthcare when it’s not needed. Drug prices have not risen faster than inflation for years and they have risen slower than the other parts of healthcare. There are parts of our prescription drug system that need to be changed. Having the government set the prices for important drugs is not the answer. Many have talked about the negative effect this change will have on innovation and the discovery of new life improving and lifesaving drugs. It is difficult for many of us to understand how this will dampen the willingness of investors to risk their money on new research. Maybe this example will help.

The movie industry and prescription drug business have a lot in common. For starters, the drug industry calls a very successful drug a blockbuster, the term was taken from the same moniker enjoyed by a very financially successful movie. Thousands of movies are made each year with very few of them breaking even or making a profit. Small independent movie makers have an idea and develop a script and work to find money to make the movie. Likewise, there are many small biotech firms that have a scientific idea about a new drug and work to find the money to continue their research. Both of these businesses rely on investors who are willing to wait years, some over a decade, for a return on their investment, with the understanding that about 9 out of 10 will be failures. They are still willing to invest because of the chance for the financial windfall of a blockbuster, whether it be a movie or a drug. If the government gets the power to limit the price of the expensive blockbuster drugs, it will be like the government limiting the number of movie tickets that can be sold for a successful movie. In both of these scenarios the number of new movies and the number of new drugs will both be limited because the reduced reward will not be worth the risk. Investors will take their money elsewhere. This same scenario plays out for big movie producers and big drug manufacturers – they won’t be willing to purchase these smaller companies if the big payoff is not available.

There is one other consequence of this price fixing legislation. In the late 1980s and 1990s many prominent scientists left companies in other countries, especially Europe, and came to America where the environment for pharmaceutical innovation was much better. If that environment worsens, that migration is sure to reverse itself and we will lose those great scientists. Having new discoveries in our country proved to be very valuable during the pandemic. I would hate to lose that advantage to other countries.

The ugly – I’ve already talked about the ugliness of the process used to pass this bill here and in an earlier blog. The reason this bill was forced through had everything to do with politics and the upcoming midterm elections and very little to do with the long-term health and the wellbeing of older Americans. I wish it didn’t have to be this way.

I’m sure there will be more to say as this law is passed by the House at the end of the week and as it is implemented. We will continue the fight to lessen the impact of this bill and we will continue the fight for better healthcare for you and me.

Best, Thair

The odyssey of how the President tries to rescue some portion of the Build Back Better act continues. Now that he can’t get the votes for the scaled down version that was proposed a few weeks ago he is extracting one part of that scaled down version that he hopes can get the votes to pass. Unfortunately, that part is the drug price control proposal. This approach has been discussed a lot. . . how it would impact innovation, how it would reduce competition and impact access. You’ve heard me echo many of those feelings. As it is with any issue that has the ability to affect millions of lives, there’s been deafening rhetoric from both sides. It shouldn’t take long, if you go back and read some of my earlier blogs, to ascertain where I stand on government price controls on prescription drugs and why. I would like to step back a little from all the specific pros and cons of this proposed legislation and talk about the evolution of how our government works and how this evolution impacts each of us.

I think that the process of how we pass important legislation has evolved (or in my opinion devolved) to a point where those officials who we elect to represent us have less and less control over the final regulations that will ultimately have a huge affect on our lives. I offer some examples.

I was very involved in the issues and the impact of the Affordable Care Act (often called Obamacare). This law was passed in the short two-year window when the Democrats controlled both the House and the Senate. The House passed their version of the bill and sent it to the Senate for action. There were Senators, both Democrats and Republicans, who had concerns with some parts of the bill – the power of the Independent Payment Advisory Board (IPAB) and the lack of any tort reform, for instance. The Senate did make changes to the bill and some Senators still had misgivings because the changes they wanted, like the two highlighted above, were not included. These Senators were assured that those changes could be added when the House and Senate went to conference to resolve differences. But, in the interim, Sen. Ted Kennedy, a Democrat, died and was replaced by a Republican. Concerns arose that a new bill could not be passed out of the Senate. The House speaker and the President convinced the House members to vote to pass the Senate’s version of the bill without a conference. This action assured that it would be a very partisan law and that for over a decade the Republicans would work to try to repeal the law rather than working to improve it.

The Republicans were no better. An amendment to alter the powers of IPAB, a sore spot for many on both sides of the aisle, was voted out of subcommittee with votes from both parties with the assurance that this clean bill would pass both the House and the Senate. The Republicans, rather than accepting the clean bill, added amendments that lost the votes of the Democrats. They passed up the chance to improve the bill for purely partisan political reasons.

President Trump used the power of executive orders and regulations to pass significant changes to our healthcare system. One of these was rebates at the pharmacy counter. Some people thought that was a good idea, others thought it wasn’t. Either way it didn’t matter because as soon as President Biden took over, he rescinded the order.

The process of reconciliation was instituted to make it easier for Congress to pass legislation that dealt with finances and budgets. It isn’t subject to the filibuster and only needs a simple majority in the Senate rather than 60 votes. It is used often when one party controls Congress and the White House but doesn’t have a 60-vote majority in the Senate. The Build Back Better bill was submitted under the rules of reconciliation as are all of the latest trimmed down proposals.

In the last few weeks, as it was evident that Senator Manchin couldn’t agree with the climate change and tax portions of the bill, the Senate decided on a smaller version containing the drug price controls. This proposed legislation would also be submitted under the rules of reconciliation. President Biden then indicated that he, like those before him have done, would use executive orders and other regulations to accomplish those parts of the initial legislation that had been removed.

I hope you see the common theme in these illustrations. The normal process for our government to pass and enact laws that impact our lives has been altered. The party in power now has the tools and the precedent to circumvent the checks and balances prescribed in the constitution and single handedly implement healthcare changes with none of the compromise that has historically been the hall mark of passing legislation.

The price controls proposed in this slimmed down bill will have to be reviewed by the Senate parliamentarian to see if it fits the rules of reconciliation. This decision is subject to debate and even legal intervention. Presidential executive orders and directed changes in regulations is not the way basic parts of our healthcare should be changed. Is this how we want changes to our healthcare implemented, using a process that has no mention in the U.S. Constitution and can be canceled with a stroke of the pen when the other party inhabits the White House? Do we want to implement laws that affect almost all of us in a very basic way with a short cut process that is intended primarily for financial and budgetary actions? When legislation is a one-party creation, we miss the compromise and balance of a bipartisan approach. We also almost always lose the willingness of the excluded party to participate in later amendments to improve the law after it is enacted. We deserve the full checks and balances afforded in the Constitution to come into play, especially when the legislation may eliminate the discovery of medicine that may save my life or the lives of my family.

Both sides of this drug pricing legislation emphasize the impact this legislation will have on our lives. Don’t we deserve the full constitutional prescribed process and debate for something so important? Tell those who represent you in Congress that you think this important piece of legislation deserves the debate and process guaranteed in the Constitution.

Best, Thair

I’m back after our 4^th of July break. I hope everyone had a safe and enjoyable holiday. My plan was to have a light, feel good blog on enjoying a summer without the stringent COVID restrictions, but it wasn’t to be. The threat of the government setting the prices on prescription drugs has reared its ugly head again.

As the Senate’s Democrats frantically search for some way to rescue some of the Build Back Better bill that failed on the launching pad, they have released language concerning the control of drug prices that reportedly all Senate Democrats support.

I’ve pontificated ad nauseam about the problems with proposals for the government to control drug prices. I’ve talked about the impact their solutions would have on innovation and how the insertion of government controls would limit access. There are two other aspects of their proposed solution that I haven’t discussed too much that I think need to be highlighted.

First, this proposal is another attempt at finding a politically convenient solution to a complicated problem. H. L. Mencken said, “For every complex problem there is an answer that is clear, simple, and wrong,” and it absolutely applies in this case. The problem is not just proposing a “simple” answer to a complex problem but with politicians turning away from even understanding the complexities of the problem and only searching for a solution that polls well with constituents. That’s why they favor inserting the popular term “negotiations” into the solution’s description when the true process will give the government the ability to arbitrarily impose a non-negotiable take-it-or-leave-it drug price.

The current prescription drug pricing and supply chain is convoluted and costly. It is fraught with perverted incentives and controls that do nothing to lower the out-of-pocket costs for the patient and can even raise the list price of the drug. Seeking to dictate the cost of drugs after they have gone through this inefficient and flawed process is like continuing to manufacture a car with very uncomfortable front seats and then giving everyone who buys the car padded seat cushions for the back seats . . . it doesn’t fix the basic manufacturing problem and the proposed fix shows a lack of understanding of the current problem.

The drug manufacturers continually offer to sit down and talk about drug prices. To my knowledge it hasn’t happened. We need to somehow decide to get to the root of the problem and fix the process rather than continue to propose band aid solutions that further complicate the situation.

The second part of this issue that I feel needs to be discussed is the motivation behind proposing this price fixing proposal. The indications are that the bill will not only contain the drug price control scheme but will also contain programs and costs dealing with climate change, energy production and taxes, and the Democrats are counting on the “projected” savings from drug price-setting to pay for these other programs. To quote the non-partisan Kaiser Family Foundation,

“At the very least, advancing the drug bill would make some other Democratic goals easier to achieve, since it would save the federal government a lot of money, which could then be applied to other programs.”

That’s what bothers me – a lot! Why do our elected politicians think it’s ok to use the hard-earned money we sent to the government to pay for other programs. We were told our money was put into a trust fund that was to be used to pay for our healthcare when we got old. They didn’t say that they were going to use the money to finance other programs, like climate change, energy production, lower taxes or any other current or future whim Washington may come up with. It seems to me this type of action removes any trust we had in the fund and the government that over sees it.

There were some good changes that were implemented in Obamacare. One of the problems I had back when it was being debated was using cuts and savings in Medicare to pay for some of those changes. It wasn’t right then and it’s not right now. If there are savings that can be realized, without reducing healthcare choices and access, then those savings ought to be used to lower the patient’s out-of-pocket costs or shore up Medicare’s financials. We hear continually about when Medicare will run out of money, yet we are willing to use projected Medicare savings for other programs. Even if the proposed changes to Medicare would generate savings without reducing access, benefits, and innovation to find new cures (and you know that I don’t think that’s possible), the savings should be used to the benefit of the Medicare beneficiaries, not other programs. Medicare shouldn’t be used as Washington’s uncontrolled ATM.

Washington needs to understand what’s causing the problem and get all the stakeholders together and decide how to fix the problem rather than continuing to come up with politically expedient band aid solutions. They also need to quit using Medicare to finance this month’s popular issue. We need to tell our leaders in Washington we deserve accessible, quality, innovative healthcare.

Best, Thair