pharmaceutical companies

Congressional Drug Pricing Strategy Begins to Emerge

Polls indicate high prescription drug prices are a top congressional priority for a majority of Americans. The Senate Finance Committee held a high-profile hearing to pummel pharmaceutical executives for price gouging. Now the House Energy and Commerce Committee is expected to advance two bills aimed at anticompetitive actions that block or delay the introduction of lower-cost generic drugs, which will be a prelude to a later, more controversial effort to allow Medicare to negotiate for lower drug prices.

Polls indicate high prescription drug prices are a top congressional priority for a majority of Americans. The Senate Finance Committee held a high-profile hearing to pummel pharmaceutical executives for price gouging. Now the House Energy and Commerce Committee is expected to advance two bills aimed at anticompetitive actions that block or delay the introduction of lower-cost generic drugs, which will be a prelude to a later, more controversial effort to allow Medicare to negotiate for lower drug prices.

The Senate Finance Committee pummeled seven pharmaceutical executives a week ago about price gouging. Next week, the House Energy and Commerce Committee begins considering two bills to lower drug prices that may attract bipartisan and bicameral support.

The House bills are the CREATES Act and “pay for delay” legislation. Both aim to limit anticompetitive actions by pharmaceutical companies to block or delay introduction of lower-cost generic versions of their brand name drugs.

A version of the CREATES (Creating and Restoring Equal Access to Equivalent Samples) Act passed out of the Senate Judiciary Committee last summer on a solid bipartisan vote. The Congressional Budget Office estimated the legislation, if passed into law, could save consumers and private insurers billions of dollars, while also contributing to reduce the federal budget deficit.

“The bipartisan CREATES Act is a free-market solution that respects intellectual property rights and encourages greater competition that will inevitably lower the price of prescription medications for the American patient,” Iowa GOP Senator Charles Grassley said. 

The “pay for delay” legislation also has a Senate counterpart introduced last December by Grassley and Minnesota Democratic Senator Amy Klobuchar, who is a 2020 presidential candidate. The measure seeks to limit pharmaceutical companies from striking deals to prevent or delay biosimilar and interchangeable biologics to generic versions.

Speaker Nancy Pelosi, who has made the issue of high-cost drugs a legislative priority, believes it is smart strategy to get a couple of wins before tackling the more controversial issue of allowing Medicare to negotiate prices with pharmaceutical companies. Her strategy of starting small is a reflection of the political clout drug companies have on Capitol Hill.

Oregon Senator Ron Wyden, the Ranking Democrat on Senate Finance, took the lead last week in lambasting pharmaceutical company executives as “morally repugnant” for their inability to explain why prescription drugs are more expensive in the United States than overseas. “You’re willing to sit by and hose the American consumer while giving price breaks to consumers overseas,” Wyden said. 

Independent healthcare analyst Joshua Cohen, writing for Forbes, said drug companies aren’t entirely to blame. He explained that health plans, pharmacy benefit managers and employer health insurance sponsors negotiate sizable rebates on listed drug prices. Insureds don’t always see the benefits of those rebates, Cohen added, because their coinsurance is based on the list price, not the lower rebate price. The result, he said, is a “public outcry aimed at the drug companies for high prices.”

“To be constructive, [Congress] should not only probe the pricing of prescription drugs by pharmaceutical manufacturers, it should also investigate the billing and pricing practices of hospitals, physicians, and insurers. Ultimately the problems related to the relentless rise of overall healthcare costs are not going to be solved by putting blinders on and solely targeting the pharmaceutical industry,” Cohen concluded.

While high drug prices may be the result of a complex set of circumstances, Bloomberg says the underlying truth is that Americans pay more per capita for prescription drugs than anyone else in the world.

While high drug prices may be the result of a complex set of circumstances, Bloomberg says the underlying truth is that Americans pay more per capita for prescription drugs than anyone else in the world.

Bloomberg story last month summarized the issue simply. “Americans spend more on prescription drugs – average costs are about $1,200 per person per year – than anyone else in the world. It’s true that they take a lot of pills. But what really sets the United States apart from most other countries is high prices. Cancer drugs in the United States routinely cost $10,000 a month. Even prices for old drugs have spiked, as companies have bought up medicines that face no competition and boosted charges.” 

Sensing congressional action is at hand, pharmaceutical companies are taking actions or expressing a willingness to do so. Eli Lilly announced it will sell a cheaper generic version of its rapid-action Humalog insulin.

"We don't want anyone to ration or skip doses of insulin due to affordability. And no one should pay the full Humalog retail price," Eli Lilly Chairman and CEO Dave Ricks said. He described the generic drug as "a bridge that addresses gaps in the current system until we have a more sustainable model."