House Speaker Nancy Pelosi just 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 Speaker Pelosi, and I know she cares deeply about patients. Despite her good intentions, this bill would do little to reduce patients’ pharmacy bills. But it would deprive Americans of lifesaving treatments.
Consider the bill’s main provisions, which would 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. And the government wouldn’t be required to funnel those savings back to beneficiaries.
Another measure would allow the government to cap the price of 250 brand-name medications. The caps would reduce government spending. But they wouldn’t necessarily reduce patient cost-sharing.
Such measures would crush America’s biopharmaceutical industry. The bill would reduce drug companies’ revenues by $1 trillion in 10 years.
That would hurt patients. Pharmaceutical companies devote 17% of revenues 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. Government pricing setting would slow drug development so much, average life expectancies could decline.
Workers would also suffer. America’s biopharmaceutical industry supports 4.7 million U.S. jobs and generates more than $1.3 trillion in economic output.
Speaker Pelosi can relieve Americans at the pharmacy counter without harming workers or patients. How? Target “pharmacy benefit managers.”
PBMs help insurance companies decide which drugs to cover. This role gives PBMs considerable power. In 2018 alone, pharmaceutical firms offered $166 billion in discounts.
Those savings rarely trickle down to patients at the pharmacy. 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.
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.
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 healthcare system up to $290 billion in avoidable medical expenses.
Speaker Pelosi’s bill 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.