The slow walk down the path toward the government’s total control of Medicare’s prescription drug program has begun and it flies in the face of one of the most successful public-private partnerships in history.
A little background, the Medicare Prescription Drug Benefit, Part D, was signed into law in 2003. Those who wanted a government-controlled program asserted that there wouldn’t be enough competition and choice of plans and the government’s cost would skyrocket if the public-private partnership was enacted. After much debate, the partnership plan was passed in a narrow vote early in the morning and it has proven the naysayers wrong. It has continued to cost 40% less than was projected and the number of plans offered in each state range from 19 to 28. Since its inception, those using Part D continue to give it an overall satisfaction rate around 90%. I don’t know of any other government program that has such sterling credentials, yet Washington is determined to, step by step, insert itself into this successful program.
Last year the Inflation Reduction Act, which passed in August 2022, included a provision that allowed the government to set the prices of certain drugs, starting with 10 in 2026, adding 15 in 2027, another 15 in 2028 and then 20 in 2029 continuing with 20 more each following year. The law also contained a provision that limited the amount a drug’s price could be increased each year. I maintain that this government intervention in a hugely successful program had more to do with politics than it did to lowering the cost of prescription drugs to Medicare beneficiaries and I think it’s part of the administration’s plan to control Medicare Part D.
Last October I wrote a blog titled “Beware the Camel’s Nose,” about how politicians can introduce small, seemingly insignificant legislation, rules or executive orders that will start small but can open the door to much larger impactful changes. I talked specifically about the Inflation Reduction Act (IRA), which is now law, that contained price controls. As outlined above these price controls affected a relatively small number of drugs and they were limited to drugs that had been available for the accepted exclusivity period. These exclusivity periods were necessary to encourage innovation and have been working effectively since 2006. To some it seemed a small insignificant step, but to me it was the camel’s nose pushing under the edge of the tent. Here’s a few quotes from the blog from last October:
“Soon, this approach” (legislation that inserts the government into a part of our healthcare) “won’t shock us, and we won’t think it’s so bad when they propose that they limit access to a small portion of accelerated-approved drugs, maybe like in the IRA, where it is 10 drugs for the first year and then adding 15 more and then . . .”
The . . . at the end of the quote is what scared me last October – it was the fear of what would be next and now, unfortunately, I have good reasons to say, “I told you so!”
The President just released his proposed budget for next year and it is clearly the next steps in controlling our prescription drug program. The budget would:
- Increase the number of drugs eligible for price controls from 10 to as many as 40, effectively doubling the number of eligible drugs.
- Decrease the time that drugs are eligible for price controls from 9 years for small molecule drugs and 13 years for biologics to 5 years!
- Insert these government price controls into the commercial marketplace.
- Increase the HHS budget by 11.5%.
There it is! The government has now stuck, not only its nose into our healthcare, but wants to stick its head and neck and one shoulder in and it has a huge budget increase to accomplish it. While the President’s budget has little chance of passing, it clearly shows his intent and fits into his expected rhetoric for his quest for reelection. Their hope is that we won’t be so surprised and upset when we see these proposed changes again, in other legislation, rules and executive orders.
These new proposed changes would further chill innovation, threaten Medicare, and discourage investments in future research and development. It clearly shows that the administration’s direction continues to move away from the discovery of new treatments and cures. What scares me is that these policies could mean that the next life altering, or lifesaving discovery will be postponed or remain undiscovered and be unavailable for me, my children, or my grandchildren.
It gives me no satisfaction to say I told you so. While politicians can often be predictable, they can also decide to do the right thing. The amount of money a patient pays for a drug at the pharmacy counter is impacted by a convoluted supply chain that has many twisted incentives that inhibit the reduction in the final price the patient pays. There are ways to maintain the competition and the investment in innovation without government intervention and price controls. We need to step back and decide on a long-term way that we can ensure both accessibility and innovation.
Click here to tell your members of Congress to reject the dangerous direction outlined in the President’s budget. Tell them you want to find ways to increase accessibility and finding new cures. It would be sad if we found ways to fix inflation, emerge from the pandemic and return to prosperity only to find we don’t have the future innovative drugs that would keep us healthy enough to enjoy those newfound bounties.