Blog February 12, 2019

Drug Pricing: A Key Political Issue for 2019?

Politics of drug pricingDrug pricing is clearly going to be one of the major topics of discussion — and a key political issue — in 2019. Drug makers began the New Year with price increases in the United States on more than 250 prescription drugs. In response, House Democrats, led by the Chairman of the House Oversight Committee, Rep. Elijah Cummings, have launched a drug pricing investigation into 12 major companies. Their goal: to determine why drug companies have been increasing prices dramatically, how they are using the sales proceeds, and what can be done to help reduce prices.


Numerous Democrats — including several who are eyeing Presidential election runs in 2020 — have already introduced legislation aimed at lowering drug costs. Several of these proposals are focused on various sorts of price controls, including more or less draconian attempts to align U.S. drug prices with those in other wealthy nations — a strategy also proposed by President Trump and the Department of Health and Human Services.


Republican Senator Chuck Grassley, Chairman of the Senate Finance Committee, has signed onto several bipartisan bills, including one allowing drug importation from Canada and one to help generic drug manufacturers by ensuring their ability to access samples of branded drugs for testing purposes. In a more creative approach, Senator Elizabeth Warren and Congresswoman Jan Schakowsky are proposing that the federal government either itself manufacture or contract an outside company to produce prescription drugs when prices for certain generic medications — including insulin — become unaffordable. Drugs supplied in this way would be “fairly” priced to cover the cost of their production. A few major hospitals have had a similar idea, teaming with philanthropic groups to set up non-profit drug companies to manufacture and sell certain medications more affordably.


U.S. states are taking action on drug pricing as well. New California Governor Gavin Newsom’s first act in office was to sign an executive officer that directs the California Medicaid system to negotiate drug prices for all Medi-Cal recipients and state employees, thus setting up the nation’s largest single-purchaser system for prescription drugs. Under this directive, the state would create a list of drugs to be purchased in bulk or targeted for price negotiation. Over time, the intent is allow other California government agencies and even private companies to participate in price negotiations. Newsom’s intent is to also increase the number of patients covered by Medi-Cal, including extending such coverage to undocumented immigrants up to age 26 who otherwise meet eligibility requirements.


As the most populous state in the United States and the fifth largest economy in the world, California’s move to allow the state to negotiate drug prices on behalf of more than 13 million people — the number covered by Medi-Cal today — is an action to watch. If successful, it could be used as a pilot model for similar efforts to allow uniform drug price negotiations on a larger, national scale for patients covered by Medicare Part D. A recent analysis published in JAMA Internal Medicine found that the federal government could have saved $14.4 billion on the top 50 drugs covered by Medicare Part D, had Medicare obtained the same prices as the Department of Veteran’s Affairs, which already negotiates for drug price discounts.