Drug pricing had been on the policy backburner for some time, with leaders, legislators and the industry focusing the lion’s share of their attention on the country’s pandemic response. That changed this week, when President Biden called on Congress to include drug-pricing regulation in the $3.5 trillion reconciliation bill Democrats hope to pass.
“I think it is safe to say that all of us, whatever our background or our age and where we live, could agree that prescription drug prices are outrageously expensive in America,” Biden said in an address on Thursday.
Biden’s proposal includes allowing Medicare to negotiate drug prices, capping out-of-pocket Medicare prescription expenses and tying drug price increases to the rate of inflation. While Democrats have long considered such reforms, this marked the first time the president highlighted them as a top priority — and in doing so, considerably upped the pressure for tangible action.
The drug-pricing debate has burbled beneath the surface for years, with former president Trump calling for lower prices on multiple occasions. The issue further diminished in priority when COVID-19 overran the country. But Congressional resistance, driven largely by Republicans, may be weakening as concerns about deficit spending continue to surface.
Jon Bigelow, executive director of the Coalition for Healthcare Communication, noted the likelihood of passage of a budget bill that funds the federal government. With any such effort comes pressure to offset additional spending.
“In the past, this issue has not gone further largely because some Republicans in Congress and some of the more centrist Democrats have been unenthusiastic about it,” Bigelow explained. “But even the Republicans and centrist Democrats would probably see taking a cut out of drug prices as being preferable as to some of the tax increases being proposed. That is an important new factor in this debate, and that’s on top of people acknowledging that healthcare is getting too expensive in our country.”
Biopharma companies, not surprisingly, have staunchly opposed the proposal, arguing that pricing limits would compromise the industry’s ability to innovate.
“We stand ready to work with lawmakers and do our part so that patients can see lower costs at the pharmacy and continued access to the cures and treatments they need,” PhRMA president and CEO Stephen Ubl said in a statement. “Unfortunately, the policies the president outlined today would undermine access to life-saving medicines and fail to address an insurance system that shifts the cost of treatments onto vulnerable patients.”
Bigelow noted the obvious: that the industry’s opposition is related to its fear of decreased profits.
“Increased corporate tax rates, limits on the ability to avoid income taxes by offshoring intellectual property, and restrictions on the ability to set initial prices for drugs or limit price increases — all those things will reduce profits for the pharma companies,” Bigelow said. “That’s their big concern.”
Whether such reforms would reduce industry innovation and profitability remains an open question. In a recent Bentley University report, researchers argued that biopharma companies could develop and bring new drugs to market without opposing pricing reform.
“Price reductions from the proposed legislation, if properly managed, could have minimal impact on pharmaceutical innovation and the emergence of new products for prevention, treatment, and regeneration,” the authors wrote. “We would emphasize that this conclusion is based squarely on current best practices in the biopharmaceutical industry, the observed relationship between revenue and R&D spending over the past two decades, and the contributions currently being made to pharmaceutical innovation by companies of different sizes.”