Fact Checker: Would negotiating drug prices lead to fewer choices?

Lowering the cost of prescription drugs for Americans is a priority for some in Washington, D.C., including the way Medicare negotiates prices.

The Pharmaceutical Research and Manufacturers of America, or PhRMA, a trade group representing U.S. drug companies, is pushing back on those proposals in a television advertisement broadcast nationally and in the Cedar Rapids market this month.

The ad features a woman named Sue who says she relies on Medicare for her diabetes medication. In the 30-second clip, she states “some in Congress” want to make it harder for Medicare patients to obtain the medicines they need.

“They want to repeal a protection in Medicare that protects access to my medicines,” Sue says in the ad, which was first posted online Aug. 5. “They call it negotiation, but it really means the government decides what medicines I can get. That would make it harder for people on Medicare to get the medicines we need.”

Analysis

At the heart of the discussion is the non-interference clause, a provision that prevents the federal government from having a direct role in negotiating prices for drugs covered by Medicare Part D.

Currently, those prices are negotiated between manufacturers, private health plans and pharmacies, but not by Medicare.

In 2019, the U.S. House passed the Elijah E. Cummings Lower Drug Costs Now Act, which would enable the Health and Human Services secretary to negotiate prices for a select number of drugs that do not have a generic alternative. The legislation also would give the secretary the ability to impose an additional tax on companies that do not reach an agreement.

The PhRMA ad was based on proposals within the legislation, but PhRMA noted in an email to Fact Checker that the ad also pertains to other proposals from Capitol Hill and the White House.

Pharmaceutical lobbyists likely see these initiatives going further this year after President Joe Biden issued an Executive Order on Aug. 12 saying his administration supports “aggressive legislative reforms that would lower prescription drug prices, including by allowing Medicare to negotiate drug prices.”

The Medicare negotiation bill, H.R. 3, was reintroduced in the House earlier this year. The Senate has taken no action.

An analysis conducted by the Congressional Budget Office in February found the bill’s provisions could reduce pharmaceutical costs between 57 and 75 percent compared to current prices.

A 2019 analysis by the U.S. Centers for Medicare and Medicaid Services found the negotiation provisions within the bill would reduce spending by Medicare Part D enrollees by $117 billion between 2020 and 2029. That includes an estimated $102.6 billion cut in cost sharing for beneficiaries who use drugs covered under Part D that are subject to negotiation.

Debra DeShong, the PhRMA executive vice president of public affairs, said in an email to the Fact Checker team that government negotiation “inevitably limits patient choice, especially if that policy is intended as a cost-saving measure.”

PhRMA pointed to a 2020 analysis by the Hayden Consulting Group — a group that is aligned with pharma interests — that stated the bill would create a preference for drugs with reduced prices, which could in turn reduce incentives for research and pharmaceutical innovation.

DeShong further defended the ad by stating that if government-negotiated drugs cost less, health plans would steer patients to “government-selected drugs” to keep costs low and ultimately lead to fewer options for patients.

“The long-term implications for the marketplace are that the government is picking winners and establishing a de facto group of preferred medicines that limits access and choice,” she said.

PhRMA also pointed to a line within the 2021 Congressional Budget Office analysis that theorized manufacturing companies, if they failed to reach an agreement with the federal government, could choose to take the drug off the U.S. market rather than pay the excise tax proposed under this legislation. That essentially would take away the option to use that drug from Medicare patients, PhRMA officials said.

A spokesman for the House Finance Committee told the Washington Post earlier this month that the legislation is not intended to prevent access to medications for Medicare Part D patients.

In addition, most drugs would not be subject to a negotiation process under the provisions of H.R. 3, a Kaiser Family Foundation official told the Post.

In addition, there’s no requirement for the federal government to make decisions around which drugs would not be covered under Medicare Part D — that still would be up to individual health plans.

Conclusion

The PhRMA ad is misleading when it states that proposals like H.R. 3 are designed to restrict access to certain drugs and make it harder for Medicare patients to get their prescriptions.

However, it is fair to say there will be an impact if drug costs are cut as a result of government negotiation. At this point in time, that impact is unknown.

This ad touts the worst-case scenario, so for that, it earns a D.

Criteria

The Fact Checker team checks statements made by an Iowa political candidate/officeholder or a national candidate/officeholder about Iowa, or in ads that appear in our market.

Claims must be independently verifiable.

We give statements grades from A to F based on accuracy and context.

If you spot a claim you think needs checking, email us at factchecker@thegazette.com.

This Fact Checker was researched and written by Michaela Ramm of The Gazette.