Budget bill insert costs drugmakers billions
Deep in a budget deal Congress passed earlier this year — just 118 words in Section 53116, a little before passages on prison reporting data and payment yields for seed cotton — was a hit to pharmaceutical companies that will cost them billions, and could signal more losses to come.
Despite an intense lobbying push, lawmakers changed a Medicare rule, putting manufacturers on the hook for more of seniors’ prescription costs. The companies will have to offer a much more generous discount to beneficiaries who fall into the socalled doughnut hole coverage gap, marking down retail costs by 70 percent instead of the current 50 percent.
It was a rare defeat for some of the biggest spenders in the political influence game and raised new questions about how they’ll fare in forthcoming battles. Lawmakers have introduced bills that would squeeze the industry, and President Donald Trump has said he will roll out proposals this month to curb drug prices.
“They’re in a defensive position,” said Kim Monk, an analyst at Capital Alpha Partners in Washington. Investors are wondering, she said, if Big Pharma has lost its famed clout. That may be a stretch, but the pressure seems to be on. “I don’t see how they come out of this completely unscathed.”
Trump has gone on the rhetorical attack before, accusing drugmakers of “getting away with murder” and railing against prices he has called unjust. Now, though, he has promised to offer explicit solutions.
That could raise the stakes, said David Mitchell, president of the advocacy group Patients for Affordable Drugs. He’s been critical of Trump for failing to take action despite a lot of talk.
“If the president and administration threw its support behind a package of changes to prevent abuse it still will be a fight, but it would have a reasonable chance,” Mitchell said.
Secretary of Health and Human Services Alex Azar, a former Eli Lilly & Co. executive, has said there’s interest in doing more than lowering the bill for patients simply by having public and private insurers pick up larger shares of the tab; the retail prices that manufacturers set should just come down. Trump once suggested that Medicare should be allowed to directly negotiate what it pays for beneficiaries’ drugs.
Drug prices are largely unregulated in the U.S., and any plan to change that would need buy-in from antiregulation forces on Capitol Hill.
Meeting with reporters last month, Azar said the steps under consideration include regulatory actions, which he didn’t spell out, as well as “thoughts and requests for input” that could help crystallize what legislative measures the administration would support. He downplayed a recent Council of Economic Advisers report that basically blamed everyone except Big Pharma for spiraling prices, saying it was largely written before his confirmation in January.
The middlemen in the drug supply chain known as pharmacy benefit managers, such as Express Scripts Holding Co. and CVS Health Corp., are also in the administration’s sights.
One focus is on the rebates these companies receive from drugmakers that critics complain aren’t passed on to consumers.
Azar has signaled support for changing how some of the most expensive drugs administered in hospitals and doctors’ offices are paid for. He told senators at recent hearings that the administration wants to end a tactic known as “gaming” that exploits the patent system to extend monopolies and keep cheaper competitors at bay. This idea has bipartisan support.
The Pharmaceutical Research and Manufacturers of America, the trade group representing more than 30 pharmaceutical companies including giants Pfizer Inc. and Merck & Co., has beefed up its budget. The trade group spent $26 million on lobbying in 2017, up from $20 million in 2016, according to the nonpartisan Center for Responsive Politics.
Holly Campbell, a spokesman, said too much weight has been given to the significance of the Medicare setback. “The focus shouldn’t be on who the Beltway chattering class believes is up or down on any given day,” she said. “We are as strong and united as ever.”
Most Americans want action on drug prices.
With lawmakers so focused on the midterm elections in November, there’s little expectation any sweeping efforts will be made until next year — when out-ofpocket obligations for drugs under Medicare Part D are set to rise. More than 40 million Americans are enrolled in the drug benefit program.