New Plan to Cut Prescription Drug Costs Meets Stiff Opposition from Industry
Business + Economy

New Plan to Cut Prescription Drug Costs Meets Stiff Opposition from Industry


Calls for containing soaring prescription drug costs are all the rage on the campaign trail, and lawmakers from both parties have been conducting hard-hitting hearings on Capitol Hill to expose the worst pricing practices of major pharmaceutical companies.

But with a powerful, well-financed drug industry strongly opposed to major reforms, the prospects for any significant change in the way drug companies do business is relatively slight, at least for the foreseeable future.

That became abundantly apparent on Monday when the Campaign for Sustainable Rx Pricing — a national coalition seeking legislative and administrative changes to control rising drug prices — issued a set of policy proposals.

Related: Obama Administration Will Press Medicare Doctors to Use Cheaper Drugs

Members of the coalition include the AARP, the American Hospital Association, America’s Health Insurance Plans and Walmart. The Pharmaceutical Research and Manufacturers of America, the drug industry’s trade group, has spurned participation in the effort. Yet even without the drug industry’s participation, the proposals unveiled today are relatively tame and don’t include some of the most controversial measures that have been touted to bring down the cost of pricey new drugs for treating cancer, Hepatitis-C and other life-threatening diseases.

For sure, many of the proposals were sensible and addressed three key issues in drug pricing: transparency, competition and value.

In order to enhance transparency, for instance, the coalition has called for more details on how drugs are priced and marketed and how much federal and state governments pay for them, as well as the cost of research and development.

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The coalition says that competition could be improved by speeding up the process of bringing generic drugs to the market to compete with much costlier brand-name drugs. The group favors sharply reducing the 12-year exclusivity period for cutting-edge biological drugs and providing the FDA with more resources to speedily process thousands of generic-drug applications.

As for measures to address value, the coalition is advocating a major boost in funding for research on the pricing and benefits of drugs — a requirement that pharmaceutical companies compare the costs and outcomes of new drugs with existing drugs, and extend that data to the sale of drugs to federal health care programs. Industry critics say that drug companies typically focus on the medical benefits of the latest, most expensive drugs they manufacture without advising consumers about comparable benefits from older, less costly drugs.

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Yet the group skirted some of the most controversial proposals that would require more aggressive government intervention or price setting, in light of opposition from PhRMA and Republican business leaders.

Most notably, the coalition doesn’t call for a change in the law that would allow Medicare — the premier health care program for seniors — to negotiate prices with pharmaceutical companies. That idea has been endorsed by presidential candidates Hillary Clinton, Bernie Sanders and Donald Trump and is practically boilerplate in many proposals for drug industry reform. But it is vigorously opposed by PhRMA and its Republican allies on Capitol Hill.

A 2013 study by the Center for Economic and Policy Research concluded that the federal government could save roughly $540 billion over the coming decade by negotiating for lower drug prices similar to those paid in other industrialized countries. However, the landmark Medicare Part D prescription drug program enacted in 2003 during the administration of Republican President George W. Bush prohibited Medicare from negotiating drug prices, setting prices or establishing uniform lists of covered drugs.

The Obama administration let that prohibition stand during negotiations with the drug industry over the 2010 Affordable Care Act.

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The coalition also didn’t include a call for allowing far less expensive drugs to be imported from Canada and other countries — another approach strongly opposed by PhRMA and its allies.

John Rother, president and CEO of the National Coalition on Health Care, who is leading the drug-pricing reform coalition, describes his group’s initiative as “market-based” and one that would lead to “a functioning market that would better balance innovation with affordability,” according to The Washington Post.

However, Rother and other leaders of the coalition acknowledged the political limitations in attempting to forge a bipartisan, industry-wide approach that would assuage concerns of the drug companies and the business community about heavy-handed government intervention.

Related: Ignoring Warnings, Drug Companies Hike Prices By 10 Percent

Rother told the Post that some members of the coalition feared that lifting the prohibition on Medicare negotiations with the drug industry would be tantamount to “government price setting.”

He told The Fiscal Times on Monday that, “We committed to a market-based plan for both practical and coalition concerns.” He said that some of the campaign’s members support lifting the negotiating ban on Medicare while others don’t, “so we went forward with a consensus platform.”

“We aren’t talking about price controls; we are talking about something quite different, shining a light on processes and speeding things up,” Chip Kahn, president of the Federation of American Hospitals, told the Post.

PhRMA took strong exception to the coalition’s proposals, arguing that they weren’t market-based and would likely add costly new government regulations.

Lori Reilly, executive vice president for policy and research at PhRMA, told the Post that the coalition’s proposals were also an effort by the health care insurance industry to deflect attention from reports of soaring premium and out-of-pocket costs for consumers.