Lowering Drug Prices – Two Different Approaches

Last week Senator Wyden, the Democratic Chairman of the Senate Finance Committee, and Senator Crapo, the Republican Ranking Member of the same Committee each released their solutions to lowering drug prices.

Senator Wyden’s letter proposed the following five basic principles (the three page paper can be found here).

1. Medicare must have the authority to negotiate with pharmaceutical companies, especially when competition and market practices are not keeping prices in check.
2. American consumers must pay less at the pharmacy counter.
3. Prices of drugs that increase faster than inflation will not be subsidized by patients and taxpayers.
4. Drug pricing reforms that keep prices and patient costs in check should extend beyond Medicare to all Americans, including those covered by employer and commercial health plans.
5. Drug pricing reforms should reward scientific innovation, not patent games.

The letter’s singular author was Senator Wyden and was a stark departure from Senator Wyden’s and Senator Grassley’s bipartisan plan they proposed last year. Senator Grassley disagreed with the principles released last week and dismissed the approach as an effort to placate the progressive side of his party.

The short three-page document consisted of a series of broad statements that could morph into a menagerie of different regulations and controls. It uses the word fair without defining who would define “fair.” Who would decide when prices were not in check? How would a patient’s out-of-pocket costs be lowered? How would you extend these regulations and controls into employer and commercial health plans without changing the basic ways these markets function today? The letter generated many questions with answers that could have a huge negative impact on, not only the healthcare of older Americans, but the healthcare of all Americans.

Senator Crapo also put forth his solution to drug prices last week, the “Lower Costs, More Cures Act” (LCMCA) (you can find a section by section break down of the legislation here). This legislation was introduced last year with nine cosponsors. It is a detailed, free market solution that encourages innovation. The Lower Costs, More Cures Act, among other things, would:

• Modernize payments for drugs delivered in the doctor’s office under Medicare Part B.
• Incentivize lower-cost alternatives, or biosimilars.
• Establish an annual out-of-pocket cap of $3,100 for Medicare Part D enrollees and allow certain patients to pay in monthly installments.
• Decrease beneficiary cost sharing from 25 percent to 15 percent of costs before the out-of-pocket cap is reached.
• Allow prescription drug plan sponsors to offer, at minimum, up to four Part D plans per region, spurring competition and innovation.
• Make permanent the Center for Medicare and Medicaid Innovation model that enables Part D enrollees taking insulin to limit out-of-pocket costs to $35.
• Allow state Medicaid programs to enter into outcomes-based agreements to pay for life-saving gene therapy treatments.
• Provide the HHS Secretary with the authority to require drug manufacturers to provide pricing information on all direct-to-consumer advertising.
• Codify a Trump Administration regulatory action that classifies insulin and other treatments for chronic conditions as preventative care so that high deductible health plans can cover costs before the patient reaches the deductible.
• Create a trade negotiator solely dedicated to putting American patients first in government trade negotiations related to medicines in order to prevent foreign “free-loading” off America’s investment.

As you have probably figured out, I prefer the second solution. It has the detail required for real solutions. It details ways that this legislation will lower a patient’s out-of-pocket costs while encouraging the continuance of our country’s, best in world, innovation. It focuses on the patient. The Lower Costs, More Cures Act is not perfect, but it offers the basis for real-world solutions.

It is interesting to contrast these two plans offered by the Democratic and Republican leaders of the Senate Finance Committee. I’m convinced that as we move forward this year there will be many more drug pricing proposals. I will work to keep you informed and alert you to any needed action required to either promote those solutions that help the patient or defeat those proposals that hurt our access to healthcare or stifle innovation.

Best, Thair