January 5, 2016
Dear Representative Schakowsky,
On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I write to enthusiastically endorse your bill, H.R. 4207, the Medicare Fair Drug Pricing Act. Your legislation would allow the Secretary of Health and Human Services (HHS) to negotiate prices with pharmaceutical companies when drugs lack sufficient competition. It also allows the Secretary to set a drug’s price when HHS and drug manufacturers fail to agree on one.
This legislation arrives at a time when drug prices are increasingly burdening seniors with high out-of-pocket costs and are a drain on the Medicare program. Not surprisingly, addressing the problem of high drug costs is a clear priority for the public. According to a Kaiser Family Foundation tracking poll, 77 percent of Americans favor making sure that high-cost drugs for chronic conditions are affordable to those who need them. Sixty-three percent of Americans favor government action to lower the cost of prescription drugs.
Without action, drug prices will continue to put pressure on the Medicare program. Total per beneficiary costs for the Medicare prescription drug program grew by almost 11 percent in 2014, driven largely by specialty drugs. According to the Centers for Medicare and Medicaid Services, total Medicare subsidies, known as reinsurance, paid to Part D plans with enrollees that have especially high drug costs have grown by more than three times the rate of premium growth. Sovaldi—just the type of drug with little competition the Medicare Fair Drug Pricing Act seeks to address—cost the Medicare program more than $3 billion in 2014.
High drug prices are having a direct impact on beneficiaries’ Part D costs. The 10 most popular stand-alone Part D plans, representing more than 80 percent of prescription drug plan enrollment, will see average premium increases of 8 percent in 2016.
High drug costs impact the Medicare Part B program as well, as many high cost drugs, such as cancer drugs, are administered in physician offices. A Government Accountability Office study found that nearly two-thirds of new Part B drugs had expenditures per beneficiary in excess of $9,000 in 2013.
Due to Medicare Part B coinsurance, beneficiaries who use expensive drugs shoulder the cost of 20 percent of the costs of their drugs. And there is no out-of-pocket cap for Part B expenses. In 2013, beneficiaries’ share of the cost of these drugs ranged from $1,900 to $107,000 per drug. While many beneficiaries have supplemental insurance to help pay for their out-of-pocket costs, the impact on beneficiaries who need these drugs and who are without supplemental coverage is potentially devastating.
Over the long term, these trends will continue to drive up costs for the program if nothing is done. Total Medicare Part B drug expenditures grew at an average annual rate of 4.4 percent from 2007 through 2013, at a much higher rate than inflation over that time. Things will only get worse as hundreds of expensive new drugs currently in development make their way to market.
The National Committee therefore strongly supports H.R. 4207 because it provides HHS with tools to obtain rational prices for new drugs that have limited, or no, competition. If enacted, H.R. 4207 will lessen the financial burden for seniors and help sustain the financial viability of the Medicare program. We applaud your leadership on this important issue.