Home / Blog / Article




August 19 2019

Republicans Considering Drug Plans that Are Standbys of the Left

by Charlotte Hays

As the 2020 election looms, Republicans are turning their attention to the high costs of drugs.

Unfortunately, says the editorial board of the Wall Street Journal, they may be looking at the wrong solutions.

Two plans under consideration, according to the editorial, are “standbys for the left” that “are more about politics than results for patients.”

The two ideas are importing foreign drugs and pricing penalties.

The idea of importing drugs from Canada has enormous public appeal, reflected in polls. But there are problems:

One problem: Canada. The country is disinclined to siphon off its drug supply to American patients. By one analysis, if merely 20% of U.S. prescriptions were filled in Canada, the country’s drug supply would be exhausted in less than 200 days. Reuters last month obtained documents showing the Canadian government discussing how to stop U.S. importation that could create shortages.

Savings would be illusory in any case. HHS excludes from importation: controlled substances, biological products, infused drugs, intravenously injected drugs, drugs inhaled during surgery and certain others. As the American Action Forum puts it: “In other words, everything except the expensive treatments can be imported.” Generics are already cheaper in America.

There are also safety concerns as labeling in another country might make it harder to tack drugs and some people could end up with counterfeit drugs.

The drug pricing legislation comes from Republican Senator Chuck Grassley’s Finance Committee. It would cap out-of-pocket expenses under Medicare Part D, the drug prescription part of Medicare. The editorial says that the “point is to reorganize the benefit’s structure in more rational ways, and much of it is worthwhile.”

The editorial points out:

One problem involves Medicaid. Drug manufacturers by law owe Medicaid steep rebates—for most patented drugs, 23.1% of the average manufactured price or one prescribed by a formula, whichever is higher. Drug makers pay an additional rebate if the drug’s price increases faster than inflation. Total rebates are capped at 100% of the average manufactured price.

Drugs for diabetes, oncology and other maladies have hit this rebate maximum. Congress is now proposing to increase rebate limits to 125% of the average manufactured price. In other words, for Medicaid to cover a drug, some companies would have to pay the government. These losses would be recouped by higher prices in commercial markets. A bigger rebate won’t help Medicaid beneficiaries, whose out-of-pocket drug costs are capped at a few dollars for a prescription.

The Senate bill would also apply bad principles to Medicare. A provision championed by Democrat Ron Wyden of Oregon proposes adding a penalty in Medicare for drugs whose prices increase faster than inflation. That will cause companies to launch drugs at higher prices. Former FDA Commissioner Scott Gottlieb has pointed out that companies could react by treating inflation as the floor and ceiling of politically acceptable price increases. In other words, companies might increase prices every year up to the point of inflation, regardless of market realities.

These arguments haven’t stopped Congress for two reasons: One is that the penalties raise revenue that Congress can spend elsewhere. The second is that both parties want drug companies as a punching bag. Drug companies deserve criticism for abetting ObamaCare and some pricing excesses, but much of the recent assault is demagoguery.

The editors argue that Republicans would do better running on their record with regard to generic drug approvals. It should also be noted that drug price increases are now trending below what they were when President Trump was inaugurated.

Here’s what the editors propose for the GOP:

The party should promote more intense industry competition and other initiatives as a down payment on more progress. Instead Republicans risk abetting more government control over health care.

Another good focus for Republicans would be price transparency in heath care, particularly drugs.

Read the entire editorial.

 





Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
Follow us