Drugmakers Reveal Their Prices. Prepare to Be Confused and Outraged.

Plus, fighting the next recession

Prepare to Be Confused and Outraged as Drugmakers Reveal Prices Online

Drug companies are revealing their list prices online for the first time, Bloomberg’s Riley Griffin and Anna Edney report, noting that the voluntary move is “a bid to stave off pressure from the Trump administration to make even more public disclosures” — and that, far from bringing clarity to the murky world of drug prices, the disclosures could lead to more confusion.

The background: After the Trump administration proposed nearly a year ago that drugmakers be required to put their list prices in television ads, the pharmaceutical industry argued that those list prices could mislead consumers, who aren’t usually required to pay those prices, and could cause people to skip filling their prescriptions. The industry also objected on First Amendment free speech grounds.

The Pharmaceutical Research and Manufacturers of America, the industry’s main trade group, instead adopted new advertising guidelines urging members to direct patients to company websites to find more information about drug pricing, including both the list price and average or estimated out-of-pocket costs. Those voluntary guidelines took effect on April 15.

What drugmakers have done: Some, like Pfizer and Amgen, have created “digital hubs” where patients can find pricing information, Bloomberg reports, while other companies have added pricing information to their sites for specific drugs.

The potential problem: “For consumers,” Bloomberg’s Griffin and Edney say, “the patchwork quilt of resources might not be so easy to navigate and could lead to more confusion in the already byzantine world of drug pricing, according to health-care cost experts.”

Why it matters: A Lilly spokesperson told Bloomberg that providing more personalized details about expected out-of-pocket costs is more meaningful for patients than posting list prices, and that’s likely true — but the detailed pricing data also highlights just how convoluted the drug pricing system is. “Prescription drug prices can be confusing,” the Eli Lilly drug pricing site says. “Two people may pay different prices for the same drug, depending on their insurance situation.”

For example, Lilly says that nine out of 10 prescriptions for its breast cancer treatment Verzenio cost less than $50 a month, while the remaining prescription costs an average $1,772 a month. Most Medicaid patients can expect to pay between $4 and $9 a month, while costs for patients on Medicare Part D can vary throughout the year, going from less than $30 a month to an average of $685 a month. Patients without insurance, meanwhile, can expect to pay the full list price of $11,732 a month.

Does the US Have Enough ‘Fiscal Space’ to Fight the Next Recession?

One common concern about the Republican tax overhaul is that it has weakened the country’s ability to combat the next recession. Some experts worry that the tax-cut driven increase in the budget deficit — which could hit $1 trillion as soon as this year — will make it harder for politicians to respond to an economic downturn with new fiscal stimulus. This reduction of “fiscal space” could serve as a political and perhaps economic constraint on policymakers confronting a recession as they seek to boost unemployment benefits, fund infrastructure projects or provide temporary tax relief to workers.

In short, bigger deficits now could mean less federal spending later when the economy really needs it.

Economist Josh Bivens of the liberal Economic Policy Institute argues in a new paper that while the U.S. is indeed ill-prepared to face the next recession, fiscal space is not the issue. While the debt-to-GDP ratio has risen sharply in the last 10 years, more than doubling to about 77%, Bivens says that number is not inherently problematic, however much fiscal hawks see it as a looming constraint.

As an alternative, Bivens recommends looking at other fiscal variables, including the cost of federal debt service as a share of GDP. Low interest rates, which in part reflect a lack of concern in the markets over growing U.S. deficits, mean that the cost of servicing the debt is modest by historical standards (see the chart below). By that measure, the U.S. has plenty of fiscal space to “do the right thing in the next recession,” Biven writes.

The bottom line: Economists will disagree about how much fiscal space the U.S. has at any given moment, but the idea is inherently a matter of perception — and politics. The federal response to the next recession will depend to some extent on the perceived level of debt at the time, and the political interests of policymakers as they open the fiscal toolbox.

Three Numbers That Sum Up the GOP Tax Cuts in 2018

With tax season ending this week for most Americans, Howard Gleckman of the Tax Policy Center has boiled down the effects of the new tax law for the average citizen into just a few numbers. While no two taxpayers had exactly the same experience, Gleckman says these three numbers, drawn from TPC’s analysis of The Tax Cut and Jobs Act, do a good job of summing up what the GOP tax cuts meant for most people:

  • 65% of households got a tax cut,
  • 6% of households got a tax increase,
  • the tax cut for the average middle-income household was $800.

One other generalization may come in handy, too: “in general,” Gleckman wrote, “the more money you made, the bigger your tax cut on average--both in dollars and as a share of your after-tax income.”

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A Follow Up on Tax Day Numbers

On Monday, we shared some numbers from an Economics 21 piece by Brian Riedl of the Manhattan Institute breaking down federal spending in 2019 on a per household basis. Reader Bruce Munshower of Glastonbury, Connecticut, emailed us to ask for some clarification on the $26,677 in taxes per household Riedl said the government would collect in 2019. That figure multiplied by the number of tax filers we mentioned equals far more than the $1.7 trillion in individual income taxes the government received in fiscal 2018. Why the discrepancy?

The short answer is that Riedl’s $26,677 figure includes all taxes, not just individual income taxes. We reached out to Riedl and are sharing his more detailed response here for Bruce and any other readers who found the numbers perplexing:

“To answer the reader: The op-ed calculates total federal taxes paid per-household - not income taxes paid per tax return. Census Bureau data suggests there are 128.86 million households in 2019. The data includes all federal taxes - income, payroll, excise, estate, even corporate taxes passed on to families. After all, basic tax incidence analysis shows that all federal taxes (even corporate) are eventually passed on to families.”

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