Ron Klink: Nancy Pelosi’s drug plan misses the mark
House Speaker Nancy Pelosi has proposed one of the most ambitious health care reforms since the Affordable Care Act. She hopes her plan, the Lower Drug Costs Now Act, will reduce the “out of control” prices that are “crushing Americans at the pharmacy counter.”
I served four terms in Congress with Pelosi, and I know she cares deeply about patients. But despite her good intentions, this bill would do very little to reduce patients’ actual pharmacy bills. And it would deprive Americans of lifesaving treatments.
Consider the bill’s main provisions, which would primarily reduce government — not patient — spending. One measure would impose steep fines on drug companies that raise prices faster than inflation. The revenue collected would go straight to the Treasury Department, not patients’ wallets. And the government wouldn’t be required to funnel those savings back to Medicare beneficiaries.
Another measure would allow the government to cap the price of 250 brand-name medications that have few, if any, competitors. These drugs tend to be highly advanced — and quite expensive. The caps would certainly reduce government spending. But they wouldn’t necessarily reduce patient cost-sharing, which varies based on patients’ insurance plans.
Such measures would crush America’s biopharmaceutical industry. The bill would reduce drug companies’ revenues by $1 trillion in just 10 years.
That, in turn, would hurt patients. Pharmaceutical companies devote 17% of revenues, on average, to research and development. So a $1 trillion drop in revenues means research spending would fall by roughly $170 billion.
Without this funding, scientists would develop far fewer medicines. Cutting drug prices by 40 to 50% would result in up to 60% fewer research and development projects, according to a National Bureau of Economic Research paper. Another study found that government pricing setting would slow drug development so much, average life expectancies could decline.
Fortunately, Pelosi can relieve Americans at the pharmacy counter without harming workers or patients. How? Target “pharmacy benefit managers,” or PBMs.
Unlike pharmaceutical companies, these middlemen in the drug supply chain don’t create new medicines. And unlike pharmacies or hospitals, PBMs don’t provide care to patients.
PBMs help insurance companies decide which drugs to cover. PBMs also determine how much patients should pay out-of-pocket. This gatekeeper role gives PBMs considerable power — and enables them to extract big discounts from drug companies. In 2018 alone, pharmaceutical firms offered $166 billion in discounts.
PBMs keep billions of those discounts for themselves as profits. And they pass the rest on to insurers.
Those savings rarely trickle down to patients at the pharmacy counter. If Pelosi required PBMs and insurers to pass along those discounts to patients at the point of sale, patients could save $93 billion over the next 10 years.
Pelosi could also work with Congress to remove unnecessary barriers to access posed by prescription drug plans. These roadblocks make it harder for patients to quickly get the medicine they need, which ultimately hinders their ability to beat back illness.
That includes things like “step therapy.” This common approval process requires physicians to prescribe the cheapest drugs first, even if they are less effective than a more expensive drug. Thanks to this policy, patients are often forced to wait months before insurance will cover the treatment they really need.
Roadblocks like this increase the likelihood that patients will deviate from their treatment regimen. Prescription “non-adherence” is responsible for approximately 125,000 preventable deaths per year, and costs our health care system up to $290 billion in avoidable medical expenses.
Making insurance cover drugs up front — the way it covers other necessary medical care — would save patients from costly illnesses and treatments.
Helping Americans afford their drugs is a noble goal. But Speaker Pelosi’s bill, in its current form, would hurt patients and scientists. Let’s hope she and the rest of my former Democratic colleagues rethink their approach.
Ron Klink is a former Democratic congressman from Pennsylvania and is currently senior policy adviser at Nelson Mullins Riley & Scarborough LLP.