WASHINGTON — Here’s a dirty little secret as prescription drug costs emerge as a major political issue: Nobody really knows what will work.
Presidential candidates are rolling out proposals and lawmakers are holding hearings to show they’re on it. But many of the top proposals from Hillary Clinton, Bernie Sanders, and the Republican candidates have been floated for a long time — and experts say none is guaranteed to bring down drug prices in a way that would significantly alleviate the burden on consumers. The more ambitious policies are also the least politically feasible.
“None of the proposals on the table move the needle that much,” said Caroline Pearson, senior vice president at Avalere Health, an independent consulting firm. “I’ve yet to see anything that you wave the magic wand and it solves the problem in a major way.”
Nearly a dozen policy experts and lobbyists interviewed by STAT echoed those remarks: Despite all the bluster, nobody is actually sure what to do.
“There’s grave concern about this, but it’s not clear at all what a public policy process would look like,” said Chip Kahn, president and CEO of the Federation of American Hospitals. “I don’t think anyone has a good handle on a good policy.”
Part of the problem is that the drug industry is incredibly complex. Medicine is not monolithic.
Pharmaceutical companies that produce specialty drugs, designed to treat diseases affecting a small population, say they often charge high prices because they have a smaller consumer base and because they need to recoup the costs of research and development. On the other end, companies that produce more popular chronic care drugs argue that they are preventing thousands of people from getting sick and ending up in hospitals, where the cost of care can be enormous.
That complexity makes it hard to craft a sweeping overhaul, yet experts say many of the more modest proposals also have obvious flaws.
“There’s grave concern about this, but it’s not clear at all what a public policy process would look like.”
Chip Kahn, president and CEO of the Federation of American Hospitals
Should the federal government cap how much health insurance plans can require consumers to pay for drugs, as Clinton recently proposed? Then insurers will just find a way to shift costs around by raising premiums or charging more for other services.
“That really doesn’t still get to the underlying costs, and I think at some point, that’s a much more difficult area to delve into,” said Kathleen Sebelius, the former health and human services secretary under President Barack Obama.
Clinton and Sanders both support allowing the government to negotiate directly with drug makers on the prices of medicines covered by Medicare, as has Obama. But a Congressional Budget Office analysis found giving the government negotiating powers — without allowing it to take other measures, such as restrict which drugs it would cover — would have a negligible impact on government spending. Sanders’ office, however, likes to cite an analysis by the left-leaning Center for Economic and Policy Research that projected up to $541 billion in savings over 10 years.
Should the government allow cheaper drugs to be imported from Canada or other countries? “The drug industry would not be happy about increasing supply to Canada to meet increased demand from [the United States],” said Ira Loss, senior health care analyst for Washington Analysis, an independent research firm.
And because American pharmaceutical companies supply a lot of drugs to the rest of the world, they can adjust accordingly by simply shipping fewer medicines out of the country in the first place.
What about increasing Medicare drug rebates for low-income populations, another idea embraced by both Clinton and Sanders?
The savings to the federal government would be real — $100 billion over 10 years, per the CBO — but pharmaceutical companies might try to make up what they would lose from Medicare by reducing discounts and rebates for private health plans.
“We just haven’t had a great test case for it,” Pearson said.
One other popular policy proposal supported by the two leading Democratic candidates would force drug makers to publicly disclose the amount they spent on researching and developing new treatments. But without hard price controls, it’s difficult to predict whether transparency would measurably impact prices.
On the Republican side, where the candidates stick to well-worn proposals like loosening the Food and Drug Administration’s regulations to speed drug approval, there are plenty of other pitfalls.
Loosening regulations wouldn’t necessarily do enough to encourage the kind of competition that would drive down prices, particularly as medicine becomes more tailored to individuals’ conditions. There are also concerns that alleviating regulatory burdens could create safety concerns.
“It’s not clear to me that ‘Reform the FDA’ is going to be enough as part of their platform,” Yevgeniy Feyman, deputy director at the Center for Medical Progress at the conservative Manhattan Institute, told STAT last month of the GOP proposals thus far.
The government does have some leverage to bring down prices. The budget deal passed by Congress last month increased the rebates that generic drug makers must pay to state Medicaid programs; it had previously been proposed by Sanders in his own bill and is projected to save the federal government $1 billion over 10 years. But that is a drop in the prescription drug-spending bucket.
The takeaway is that doing more than incremental improvements could prove difficult, as even advocates for reining in prices will admit.
“There’s no magic bullet,” said John Rother, who leads the Campaign for Sustainable Rx Pricing, a broad-based lobbying group. “You’ve got to do a combination of things.”
Experts say a more holistic approach would require the cooperation of the insurance and pharmaceutical industries, as well as the cooperation of Republicans and Democrats.
“Unless there are creative new ideas that cross the two industries, I don’t think we’re going to see a solution,” said Dan Mendelson, a former Clinton administration health official who now heads the Avalere consulting firm. “I would believe that something real will happen when the [pharmaceutical] and insurance industries come together and agree on a set of solutions.”
Clinton proposed requiring companies that receive federal support to invest a set amount of money in research and development, as opposed to marketing, or face penalties. The drug lobby denounced that policy as “arbitrary spending caps on the most research-intensive industry in America.” The insurance lobby also criticized her out-of-pocket cap proposal. (Clinton’s camp did not respond to requests for comment.)
Sanders, on the other hand, has in the past endorsed totally discarding the current economic model for drugs — based on patents that give companies a monopoly for a set period of time — and changing instead to what’s known as a prize model. The federal government would reward drug companies with cash prizes for developing new medicines, based on what they spent to create the medicine and its projected value, but low-cost generics would be available right away to the public.
Sanders’ office pointed STAT to endorsements for some prize models from groups including the World Health Organization and Doctors Without Borders as evidence that the concept is gaining momentum. But for now, it seems politically far-fetched — in no small part because the drug industry would oppose throwing out the current system and replacing it with a prize system. Direct price controls, despite some support from the public, are likely out for the same reason in the current political climate.
Some consumer advocates said that, as they listen to the latest proposals, they can’t help but feel a sense of déjà vu. The candidates are out again.
“I’ve been around since 1986. Every time there’s an election, we see them,” said Lynda Dee, co-chair of the Fair Pricing Coalition, a consumer advocacy group, “and when there’s not, you have to chase them with a lasso.”