The adoption of the radical economic policy of the Democrats package — which is designed to fight climate change, cut health care costs and cut the deficit by raising corporate taxes — is a major win for President Biden’s agenda.
Plus, pushing Democrats to pass a $35 insulin cap for patients not covered by Medicare was both the practical and the political right move — even if it ultimately failed — because they forced Republicans to join them or vote against a policy. it would reduce costs for millions of Americans with diabetes.
The Democrats’ final legislation represents a historic investment in clean energy, which will help the United States reduce greenhouse gas emissions by 40 percent by 2030. It also expands expanded subsidies under the Affordable Care Act and achieves the party’s long-sought goal of allowing Medicare to “negotiate” prescription drug prices directly with drug companies.
Proponents say allowing Medicare to negotiate prices will lower the cost of prescription drugs for nearly all 64 million Americans who are currently on Medicare, and specifically for the 1.4 million beneficiaries who spend more than $2,000 a year on their drugs.
Unfortunately, this is a flawed assessment that fails to consider how this policy will actually reduce both the affordability and accessibility of prescription drugs over the long term.
The Democrats’ drug pricing policy won’t improve the problem it’s supposed to solve — making prescription drugs more affordable for Medicare beneficiaries — and it will end up limiting Medicare patients’ access to certain drugs. Plus, it will discourage pharmaceutical innovation and, worse, drive up costs for the 220 million Americans with private insurance.
Indeed, this policy will increase drug costs and health care premiums for the 220 million Americans with private health insurance. If drugmakers are forced to give Medicare steep discounts on certain drugs, these companies will make up for that lost revenue by raising prices in the commercial market, as argued by the editorial board of the “Wall Street Journal.” in his report. column earlier this week.
If hundreds of millions of Americans with private insurance are paying more for their drugs — as well as their hospital and medical services — the Democrats’ “Cut Inflation Act” will do no such thing and could end to make the problem worse.
While Democrats attempted to include a across-the-board discount if drug prices rise at a faster rate than inflation, the Senate congressman struck down that provision and Senator Majority Leader Chuck Schumer (DN.Y.) went ahead with the bill anyway.
Besides driving up costs for the majority of Americans, the policy won’t provide relief to most Medicare beneficiaries. The Bill’s $2,000 Cap for Medicare Part D Patients Will Help Only a Small Fraction of Beneficiaries and Doesn’t Even Go Into Effect Until 2026. Even then, the policy will start by tackling only ten of the most expensive drugs on the market.
The policy focus on big drug makers, who make brand name drugs, will also inject uncertainty into the market and breed perpetual monopolies. This will make it more difficult for lower-cost generic drugs – which account for almost 90 percent of all prescriptions filled in the United States – to enter and compete in the market, driving up prescription drug prices for all Americans over time.
In addition, this policy will end up limiting Medicare patients’ access to life-saving treatments. It gives drug manufacturers impossible to meet requirements — namely, if a manufacturer does not agree to sell at the government-mandated price, they will be forced to either pay a 95% tax sales or withdraw their medicines from the market.
In the long term, this reform will also stifle medical and pharmaceutical innovation, restricting all Americans’ access to lifesaving drugs, especially the elderly.
Continuing research after a drug is approved or rejected allows researchers to understand whether a drug works in a different stage of a disease or for a different condition. This is particularly important when it comes to treating cancer – as almost 60% of oncology drugs approved ten years ago will receive additional approvals for different types of cancer in the years to come.
The Senate bill removes the incentives needed to encourage continued investment in new cures by fixing the price of drugs before that progress can be made. This will hurt the elderly the most, as it will deter drugmakers from constantly investing in finding Medicare-covered drugs.
To more effectively minimize costs and maximize access, Democrats should focus on promoting drug pricing reforms that eliminate inefficiencies and promote market competitiveness.
That would involve cracking down on Pharmacy Benefit Managers (PBMs), which are third-party administrators of prescription drug programs, who reap the benefits of rebates instead of American patients. Often, PBMs receive more money from insurers than was paid for the drug.
By cutting out these middlemen — PBMs — Americans could buy prescriptions directly from the provider, eliminating unnecessary markups or price hikes. This approach has been successfully undertaken in the private sector, such as billionaire Mark Cuban’s company — Cost-plus drugs — offers over 100 generic drugs at affordable prices by removing pharmacy benefit managers from the equation.
While there are many helpful reforms in the Democrats’ economic package, their drug pricing policy, unfortunately, misses the mark. All Americans will bear the brunt of rising prices and diminishing access, ironically the elderly will be hardest hit.
Douglas E. Schoen is a political consultant who served as an advisor to former President Clinton and Michael Bloomberg’s 2020 presidential campaign. He is the author of “The End of Democracy? Rising Russia and China and retreating America.