U.S. Sen. Chuck Grassley recently offered what has become a rarity in American politics — big, bipartisan legislation to address a problem everyone agrees is real.
The Prescription Drug Pricing Reduction Act — sponsored by Grassley and his Democratic counterpart on the Senate Finance Committee, U.S. Sen. Ron Wyden — would impose a limit on out-of-pocket costs for millions of Medicare and Medicaid patients. Government analysts predict that would save taxpayers $85 billion and save beneficiaries $27 billion over 10 years.
The bill also mandates more transparency over the way drug manufacturers, insurance companies and pharmacy benefit managers set prices. More information for consumers would unleash the powerful market forces that are sorely missing in the health care industry.
Americans consistently rank health care costs among their top concerns in public opinion polls, and prescriptions make up a significant share of that spending. The Grassley-Wyden bill is the product of months of bipartisan discussions in the Senate, and we believe it’s a reasonable first step toward addressing an urgent problem.
Unfortunately, it seems all too likely that Washington, D.C. will do to this proposal what it usually does to significant legislation — squander the opportunity to rivaling factions of special interests and ideological purists.
On one side, the bill faces opposition from lawmakers backed by the pharmaceutical industry and anti-regulation Republicans, who correctly identify the cost savings will largely come out of the drug companies’ profits.
On another side, some Democrats who demand broader changes to the health care industry could sink the bill because it doesn’t go far enough.
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The Trump administration has touted the fact that overall prescription drug prices have decreased over the past year. That’s true, but prescription prices are up more than 30 percent over the past decade, according to the federal government’s consumer price index.
Even that does not capture the whole picture. Prices for some products have increased by 100 percent or more in short timespans, leaving cost-burdened patients unable to obtain the medicine they need.
Stories of diabetic people dying because they can’t access insulin have emboldened price control advocates. After a 32-year-old Iowa man without insurance died last year, his mother told KWWL he had been rationing insulin and ran out.
The insulin market provides a useful insight into the problems with drug pricing. Just three companies account for an estimated 90 percent of the global insulin industry, and that lack of competition has enabled apparent price gouging.
Grassley’s committee opened in investigation this year into insulin costs. He and Wyden sent a letter to the three insulin companies, demanding to know why list prices increased so dramatically — 77 percent from 2013 to 2019 for Sanofi, 87 percent from 2013 to 2019 for Novo Nordisk, and 585 percent between 2001 and 2015 for Eli Lilly.
The very same products are purchased in other countries for a fraction of the price. Insulin is a stark example, but unjustifiable price disparities exist for many other medicines as well.
There is growing recognition of the ways other business practices skew prices as well.
Pharmacy benefit managers — third-party companies that work between insurance companies and pharmacies — are putting financial pressure on pharmacists, especially independent providers often found in small towns, according to Gazette journalist Michaela Ramm’s report last month.
Here again, patients suffer under a lack of competition. Three firms control an estimated 80 percent of the pharmacy benefit manager market.
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“We don’t have a choice not to work with them,” Matt Osterhaus, owner of Osterhaus Pharmacy in Maquoketa, told The Gazette. “It’s not an even playing field. Being an independent pharmacy in that environment, that’s a major challenge.”
Greater transparency requirements included in Grassley’s bill would help stakeholders understand prices and could spur additional reforms.
To be clear, no one is suggesting the Grassley-Wyden bill would solve the prescription pricing crisis. This proposal focuses on Medicare and Medicaid, and people with private insurance plans, or those without insurance at all, may see no immediate cost reductions.
Still, it’s likely to have spillover effects on the broader drug market by pressuring manufacturers to lower their list prices.
We know the status quo is unsustainable for millions of Americans with serious ailments. Congress should act to address prescription drug prices.
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