Keeping the Facts of Drug Pricing Proposals Straight

As debate over the federal Build Back Better budget reconciliation package continues this autumn, your legislators in Washington, DC need to hear from YOU. DFA has put together a letter, phone script, and tweet that you can use to contact your legislators and voice your support for the healthcare provisions in the package – reach out today!

The increasing price of prescription drugs has long been a problem for our patients. Even prior to the COVID-19 pandemic, one in four Americans reported that they struggled to afford the medicines they needed. The media has frequently covered such struggles – from EpiPens to insulin to aducanumab, the high cost of prescription drugs and what these prices mean for patients have repeatedly garnered national media attention. 

Elected officials have also been driven to act. In 2019, Congress introduced and passed HR3, the Elijah Cummings Lower Drugs Costs Now Act. That same year, the Prescription Drug Pricing Reduction Act was introduced in the U.S. Senate. Since the initial introduction of both bills, a federal election ushered in a new President and Democratic majorities in the House and Senate. Provisions from HR3 were folded into the Build Back Better budget reconciliation package.

As federal bills are negotiated and numerous bills have been introduced and considered at the state level, the pharmaceutical industry has maintained steady opposition to government action. Over and over, when confronted with the realities of patient struggles and the possibility of legislation passed to make prescription drugs more affordable, the pharmaceutical industry responds with predictable talking points and rebuttals. However, these talking points can – and should – be fact checked.

HR 3, the Elijah Cummings Lower Drug Costs Now Act

Provisions of HR 3 have been included in the Build Back Better budget reconciliation package. Negotiations on the legislation continue. Throughout negotiations, however, certain aspects of the original HR 3 have stayed the same.

HR 3 allows Medicare to negotiate better prices for your medications. 

  • The bill requires the Department of Health and Human Services (HHS) to identify a number of brand-name medications that lack market competition and generate the greatest cost to Medicare, including insulin products. HHS would then be allowed to negotiate the prices for these drugs (as little as 25 to as many as all 250).
  • Any drug selected for negotiation will be included in the program until a competitor medication enters the market.    
  • Negotiated drug prices would be required to not exceed 120% of the medication’s average price in 6 other high-income nations: Canada, the UK, France, Germany, Japan, and Australia.
  • Negotiated drug prices will also account for R&D and production costs, alternative treatments, and sales data.  
  • Drug manufacturers will be required to offer the negotiated price to the commercial market, however individual private payers do not have to accept this price.
  • Drug manufacturers that do not negotiate in good faith or comply with the law would face escalating financial penalties, starting with a 65% tax on gross sales.

Under HR 3, drug manufacturers would be required to give rebates for any of the 8,000 medicines covered in Medicare Part B and D whose cost has risen greater than the rate of inflation. HR 3 caps out-of-pocket expenses to $2,000 annually for Medicare Part D beneficiaries. Finally, under HR 3, drug manufacturers are required to report drug price increases before they take effect.

No component of HR 3 reduces federal investment in new drug R&D – instead, the bill mandates further investment with the dollars saved with an estimated direct spending of $10 billion from 2020-2029. And according to CBO analysis, HR3 will reduce federal direct spending for Medicare by $345 billion over the 2023-2029 period.

The Pharmaceutical Industry’s Talking Points

The pharmaceutical industry lobbies heavily against legislation to curtail drug prices at both the state and federal levels. They spend millions of dollars on advertisements and even participate in “astroturfing” by bankrolling “patient groups” that tout industry talking points. At both the state and federal levels, talking points in opposition to legislation are similar. Below, we outline key facts that highlight why the pharmaceutical industry’s frequent arguments in opposition to drug pricing legislation do not stand up to scrutiny.

Innovation

  • Less than 1 in 3 newly approved drugs have significant therapeutic value.
  • Drug companies spend more on shareholder profits than research and development (R&D): From 2016 to 2020, the top 14 drug companies spent $577 billion on stock buybacks and dividends—$56 billion more than they spent on R&D. 
  • Drug companies try to suppress competition: Many drug companies spend a significant portion of their R&D on finding ways to suppress generic and biosimilar competition instead of on innovative research. 
  • The U.S. government funds significant innovative research via the National Institutes of Health (NIH): Of the 356 new drugs approved from 2010-2019, they all received NIH funding totaling over 200 billion USD. 

Pharmacy Benefit Managers (PBMs)

  • Drug Companies Receive ~67% of all Revenue Generated by Prescription Drugs; PBMs receive less than 5%.
  • Manufacturers retain nearly ten times the amount of revenue that PBMs make from prescription drug sales, according to a 2019 PEW report.

Jobs

  • Analysis by the U.S. House Committee on Oversight and Reform found that for 14 of the largest drug companies in the United States, these companies spent over $3.2 billion in aggregate executive compensation for their highest paid executives in the past five years. From 2016 to 2020, these drug companies increased executive compensation spending by 14%. 
  • This same analysis found that some drug companies paid multimillion-dollar compensation packages to top executives while raising prices on drugs relied on by millions of Americans. In fact, the Committee’s investigation found that price increases on certain brand-name drugs led directly to higher bonuses for executives. 
  • A 2019 analysis by West Health found that the pharmaceutical industry could lose $1 trillion in sales and still be the most profitable industry in the United States.

High Prices Reduce Access to Medications

Again, as debate over the federal Build Back Better budget reconciliation package continues this autumn, your legislators in Washington, DC need to hear from YOU. DFA has put together a letter, phone script, and tweet that you can use to contact your legislators and voice your support for the healthcare provisions in the package – reach out today!

Prescription Drugs
Menu