This AARP Public Policy Institute Spotlight finds that total Medicare Part D spending on 50 top brand-name drugs was $38 billion higher between 2015 and 2019 than it would have been if drug manufacturers had not increased their prices faster than the corresponding rate of inflation.
by Leigh Purvis, June 7, 2021
This AARP Public Policy Institute Spotlight finds that total Medicare Part D spending on 50 top brand-name drugs was $38 billion higher between 2015 and 2019 than it would have been if drug manufacturers had not increased their prices faster than the corresponding rate of inflation.
Our analysis also found that the vast majority of the top 50 sole-source brand-name drugs experienced annual price increases over the study period. On average, nearly 90 percent of the top 50 drugs had annual price increases that exceeded the corresponding rate of general inflation from the end of 2015 through 2019.
It is unclear whether the inflation-based rebates under consideration in Congress would lead to widespread changes in drug company pricing behavior. However, given the current prevalence and magnitude of annual brand name drug price changes, it is clear that even a small movement in the right direction will result in substantial savings over the status quo.
House Democrats say they’ll make an effort to include H.R. 3 — the measure allowing the federal government to directly negotiate lower drug prices — in whatever infrastructure and jobs bill congressional leaders are trying to hammer out over the summer.
House Energy and Commerce Chairman Frank Pallone Jr. (D-N.J.) told reporters yesterday that he’s aiming to get the measure attached to the package — a package that almost certainly represents Democrats’ best shot this year at turning their top priorities into law.
“This is a necessity,” Pallone said on a call hosted by the group Protect Our Care. “We definitely want to do it this year.”
H.R. 3’s only realistic hope lies in getting attached to the jobs and infrastructure package.
And it would only, possibly work if Democrats decide to bypass Republicans entirely by using the budget reconciliation process.
This week, President Biden is continuing negotiations with Republicans over the pending deal to improve the nation’s roads, bridges, pipes, ports and Internet connections — and it remains unclear how it all will unfold.
White House spokeswoman Jen Psaki laid out a number of possible paths toward passing infrastructure legislation on a bipartisan basis, although she has also said the clock is ticking on Democrats working with Republicans. The White House is leaving open the possibility of muscling the legislation through without the GOP.
If the effort at bipartisanship falters, all eyes will be on Sen. Joe Manchin III (D-W.Va). “Should Democrats and Republican fail to broker a deal, the White House will need every Democratic senator to rally behind the infrastructure bill on a party-line vote, making Manchin a pivotal figure capable of making or breaking a centerpiece of the Biden agenda,” our colleagues Mike DeBonis and Sean Sullivan write.
Manchin has sponsored legislation allowing the federal government to directly negotiate lower drug prices, so the thought is that he’d be fine with adding elements of H.R. 3 to a budget reconciliation bill, although he hasn’t explicitly said that. H.R. 3 also carries the benefit of being a net positive on federal spending, since the Congressional Budget Office has scored the direct negotiation piece as saving $456 billion over a decade.
Still, the future of H.R. 3 is far from certain.
President Biden and House Speaker Nancy Pelosi (D-Calif.) also say they want it passed, and two House committees held hearings on it in May.
But enough House moderates have expressed hesitation that it could easily be derailed. In a recent letter led by Rep. Scott Peters (D-Calif.), 10 Democratic members of Congress told Pelosi they want “bipartisan, bicameral support, with buy-in from a majority of Americans and stakeholders in the public and private sectors.”
Peters and seven of the signers voted for H.R. 3 when the House passed it in late 2019. But Peters told Politico he only voted for the bill to “start a conversation” about lowering prescription drug prices, with the understanding that it wouldn’t ultimately be passed by the Senate.
Democrats currently hold the House majority by just eight seats, but Pallone brushed off the letter when asked about it yesterday, saying he has “no doubt” the chamber could once again pass H.R. 3.
“If you look at that letter, it didn’t really say they wouldn’t support it,” Pallone said. “There may be parts of it they might like to see changed, but the basic idea of having the government negotiate prices is the key.”
Meanwhile, Trump’s foray into lowering drug prices is fading into the background.
The former president spent his four years in office promising the American people he’d significantly lower the cost of prescription drugs. His administration did advance several policies to do so, including issuing several regulations late last year.
But those regulations have largely been blocked or delayed, and the Biden administration has shown little interest in advancing them.
In January, a federal court blocked Trump’s “most-favored-nations model,” which would have tested tying the prices of certain Medicare drugs to lower prices in other countries. The Biden administration would have to start over with the traditional rulemaking process, which the court said the Trump administration inappropriately skipped.
The Biden administration has also delayed a Trump-era rule banning drug rebates for manufacturers in the Medicare program. Now the rule isn’t slated to take effect until Jan. 1, 2023.
And in late May, the Biden administration indicated it has no timeline on whether it will allow states to import drugs from Canada. The Trump administration approved a rule allowing states to seek permission for drug importation, which the pharmaceutical industry is suing to block.
Biogen on Tuesday faced tough questions from Wall Street analysts over the $56,000 annual cost of its newly approved Alzheimer’s drug, Aduhelm – a price tag executives are calling “fair” and “responsible.”
Shares of Biogen surged 38% on Monday after the FDA announced it approved the company’s drug, scientifically known as aducanumab. It is the first medication cleared by U.S. regulators to slow cognitive decline in people living with Alzheimer’s and the first new medicine for the disease in nearly two decades.
The biotech company said it is charging $56,000 for an annual course of the new treatment, higher than the $10,000 to $25,000 price some Wall Street analysts were expecting. That’s the wholesale price, and the out-of-pocket cost patients will actually pay will depend on their health coverage.
Some analysts and advocacy groups immediately questioned how the company could justify the price — about five times higher than expected — especially as medical experts continue to debate whether there’s enough evidence that the drug actually works and the industry faces criticism over drug prices.
The FDA departed from the advice of its independent panel of outside experts, who unexpectedly declined to endorse the drug last fall, citing unconvincing data.
“Our one concern here comes around the Aducanumab annual cost, and whether at $56K/year (we were at $10k) the sticker shock could further invigorate scrutiny on drug pricing,” Stifel analyst Jeff Preis told investors in a note Monday.
On a call with investors Tuesday morning, Evercore ISI analyst Umer Raffat congratulated the Massachusetts-based company on the drug’s U.S. approval before asking executives to explain its price.
“I do think there’s a disconnect between some of the words that you’ve shared in your press releases, like responsibility, access, health equity, versus the price point, especially given the primary care population,” he told executives.
J.P. Morgan analyst Cory Kasimov later asked executives how much federal health insurance program Medicare will be expected to pay for the drug and how concerned executives are about the “backlash” the industry will face over its pricing.
Biogen executives said the total price figure for the new treatment is “substantiated” by the value it is expected to bring to patients, caregivers and society. They insisted the price is “responsible,” noting the disease costs the U.S. billions each year.
More than 6 million Americans are living with the disease, according to estimates by the Alzheimer’s Association. The company said it currently has the capacity to provide 1 million patients with the drug annually, with more than 900 sites in the U.S. ready to implement the new medicine.
“We want to make sure Aduhelm is affordable for patients and sustainable for health-care systems,” one executive said.
The company has committed to not raising the price of the new drug over the next four years. That being said, executives said they are “open-minded” and suggested they could rethink the price as the company assesses demand over the next few years.
Biogen CEO Michel Vounatsos joined CNBC on Monday and said the drug’s price will allow the company to further invest in its pipeline of medicines for other diseases. He added the company is working closely with Medicare as well as private insurers.
