Since passage of the Medicare Modernization Act in 2003, which prohibited Medicare from negotiating prescription drug prices, seniors and their advocates have demanded that lawmakers take further action to lower drug costs for beneficiaries. But pharmaceutical industry lobbying and divided government have nullified earnest legislative attempts. Now, with Democrats poised to lead the White House, House, and Senate for the first time since 2010, it’s time for change. Moving forward, there must be swift action to tame the punishing prices that force seniors to forgo necessary medications, to ration pills, or to choose between prescription drugs and other essentials — like rent and groceries.
As if to underscore the need for reform, Big Pharma raised the prices for hundreds of prescription drugs at the beginning of the year by an average 3.3 percent (with some as high as 15%) — more than double this year’s meager Social Security cost-of-living adjustment (COLA). With the median income of Medicare beneficiaries hovering around $26,000 per year, it’s little wonder that so many seniors struggle to afford life-saving medications. Except for the poorest beneficiaries, Medicare Part D has no cap on patients’ prescription cost sharing. This can add up to tens of thousands of dollars in out-of-pocket drug costs during retirement.
Let’s lay blame where it belongs for the failure to confront Big Pharma on blatant price gouging, and give credit where it’s due. The House majority made good on its 2018 campaign promises and passed H.R. 3, the Lower Drug Costs Now Act, which would allow Medicare to negotiate prices directly with pharmaceutical manufacturers. But Senate GOP Leader Mitch McConnell refused to bring it to the floor. Sens. Charles Grassley (R-Iowa) and Ron Wyden (D-Ore.) soon introduced a more modest drug pricing bill, which we endorsed, but the full Senate never took it up. President Trump promised to lower drug prices. But instead of encouraging Congress to pass legislation, he issued a series of executive orders that were either ineffective, ill-considered, or rejected by the courts.
This failure to lower drug costs is directly at odds with what Americans want. In a 2019 Kaiser Health survey, 86 percent of the public supported allowing the government to negotiate drug prices for Medicare. Support for this measure cuts across party lines, including 90 percent of Democrats and 80 percent of Republicans. The public knows a commonsense solution when they see it. They realize that the government negotiates the prices of almost everything it procures, and that there is no reason prescription drugs shouldn’t be included.
The Veterans Administration has been negotiating with drug-makers for years, saving more than 40 percent on prescription drug costs. The Congressional Budget Office and Joint Committee on Taxation estimated that the negotiation provision in the House-passed bill (H.R. 3) would save Medicare $456 billion over a ten-year period.
Medicare price negotiation is a powerful tool against soaring drug costs, but it is by far not the only one. President Biden, Democrats, and some Republicans in Congress favor other effective measures, including a cap on out-of-pocket costs for Medicare Part D, limiting prescription price increases to the rate of inflation, and allowing safe importation of drugs from Canada and eventually other countries. Any comprehensive solution also should require greater accountability for Pharmacy Benefit Managers (PBMs), the middlemen who often skim excess profit by overcharging for medications.
Make no mistake: drug-makers can afford to charge lower prices. Despite Big Pharma’s claims, their research and development efforts are highly subsidized by the federal government (including the development of COVID vaccines). Meanwhile, the pharmaceutical industry has reaped record profits at the expense of everyday Americans — especially seniors living on extremely modest fixed incomes.
The Pharmaceutical Research and Manufacturers of America (PhRMA) invests billions in lobbying and advertising every year to discourage government limits on drug pricing. They showered more than $500 million on candidates during the 2020 elections, including $4.5 million to a dark money group backing House Republicans. No doubt, too many lawmakers are influenced by those donations and remain reluctant to challenge the industry.
Sen. Debbie Stabenow (D-Mich.), who introduced her own drug pricing legislation in 2019, put it best when she said, “Prescription drug pricing is the ultimate example of a rigged system that needs to be unrigged to bring costs down.” For years, pharmaceutical companies have been putting profits first, and the public good second. The new president and the 117th Congress must seize this moment to reverse Big Pharma’s price gouging — and put the public good first.
Max Richtman is president and CEO of the National Committee to Preserve Social Security and Medicare, a membership organization that promotes the financial security, health and well being of current and future generations of maturing Americans. He also chairs the board of the National Committee’s Political Action Committee, a PAC that endorses candidates for federal office.