(WASHINGTON) — A popular plan to let the government directly negotiate lower prescription drug prices with pharmaceutical companies — extracting significant savings for taxpayers and patients — will likely not be part of the Democrats’ sweeping social spending package, the White House said Thursday.
The development dashed hopes for what many consumer advocates had considered the best chance in decades for immediate relief to families burdened by soaring costs of medication. It also marks a major victory for drug makers who have spent millions of dollars lobbying against direct government intervention in pricing.
“Unless the government steps in and fights the fight for us, we have to fight it. And we don’t have a choice,” said Laura Marston, 39, of Washington, D.C., who needs daily doses of insulin to survive. The drug’s list price has risen 1000% over the last 25 years.
“Every day I feel like I live in a country that prides itself on freedom, but I don’t get to be free because at 14 I was diagnosed as a type 1 diabetic,” she said.
Americans pay more for prescription drugs than citizens of any other country in the world, on average $1,200 per person, per year, according to the Organization for Economic Cooperation and Development.
While individual American insurance companies negotiate discounts with drug makers, federal law prohibits the government from doing the same thing.
Most Democrats and patient groups have pushed for changes to the law that would allow the government to negotiate prices through Medicare under a cap pegged to what other wealthy nations pay. Former President Donald Trump also campaigned on the idea in 2016.
“The idea is not just to have Medicare negotiate prices for its own program but to extend those negotiated prices to private insurance plans as well,” said Larry Levitt, executive vice president for health policy at the nonpartisan Kaiser Family Foundation. “This would put drugs on equal footing with other types of health care. Medicare negotiates or sets the price for hospital care, for doctor visits.”
The federal government could save $450 billion over 10 years, according to one Congressional Budget Office analysis — savings that could help offset the costs of other initiatives or reduce the deficit. Consumers would also reap savings at the pharmacy counter.
“Everyone would feel it through a couple of different channels. In some cases, it would mean less out of pocket at the pharmacy, and in some other cases it would mean less that we pay for prescription drug coverage,” said Andrew Mulcahy, a health policy researcher at RAND Corporation, who has studied the issue.
Drug companies have warned that the trade-offs from lost revenue would be significant, upending a key part of the U.S. economy, leading to job losses and less money for research and development of new drugs.
“Of course we make profit, but it’s not like we keep it, right? We return it to shareholders who give us money to take huge risk on R&D,” said Lilly CEO Dave Ricks, whom public filings show received a $23 million compensation package last year.
Ricks estimates that despite earning billions in profits, the company would have to cut experimental drug projects in half if the government capped prices — curbing the kind of innovation seen from manufacturers during the COVID-19 pandemic.
“Five of the six medicines approved globally to treat COVID are from American companies — two from mine, and three of vaccines that are used globally are from American companies,” Ricks said.
An independent government analysis forecasts there would be two fewer new drugs brought to market over the next 10 years, with 23 fewer over the decade after that.
Sue Millikan of Ohio, a retiree and grandmother covered by Medicare, says high prices concern her but so does the prospect of missing out on medical breakthroughs.
“We are able to do things here in this country because of our freedoms and invent things and produce things, and I don’t want to see restrictions to that,” Millikan said. “I can see where it’s happening in other countries where it limits how many drugs they get, when they get them, how fast you can get stuff, and I don’t want to see that happen here.”
While many Americans share those concerns, polls show that large majorities of Americans — Democrats, Republicans and Independents — have consistently supported government negotiation of drug prices.
“It’s really speculative to try to figure out what might happen, you know, 10, 20, 30 years from now,” said Levitt. “We don’t even know what scientific breakthroughs there will be, let alone what drugs might or might not come to market.”
“The United States is alone among developed countries in not having a role for the government in negotiating or setting the price of drugs, and that’s why we pay much higher prices than the rest of the world,” he said.
For diabetics like Marston, government negotiation of drug prices could mean between $28 and $176 less for a monthly supply of insulin, according to an analysis by the Center for American Progress.
“It would be a great first step to demonstrate that and I think more people across both parties would benefit from that and appreciate that,” she said.
But the White House on Thursday said the idea doesn’t have enough votes in Congress.
“At the end of the day, there are not yet enough votes to get something across the line,” a senior Biden administration official, who asked not to be identified, told reporters.
Sen. Ron Wyden, D-Oreg., who chairs the Senate Finance Committee and is a leading advocate for Medicare drug negotiations, says he is still fighting for a slimmed-down version of the plan.
Sen. Bernie Sanders, I-Vt., is also adamant that the proposal be restored before a final vote on the social spending plan.
“The American people are very, very clear that they are sick and tired of paying the highest prices in the world for prescription drugs,” he said. “It is really outrageous that year after year, members of Congress talk about the high cost of prescription drugs and yet, year after year, we are not able to do anything about it.”
For now, the drug companies appear to be winning the debate. The industry is pushing alternatives for relief, like caps on out-of-pocket expenses for critical medicines and expansion of Medicare coverage of some drugs.
“Our understanding is this is a framework. We continue to stand ready to work with policymakers this year to enact meaningful reforms that will lower out-of-pocket drug costs for patients,” said Brian Newell, spokesman for PhRMA, the drug industry trade group.
In the meantime, millions of Americans hope Congress won’t squander this moment, and years of debate over drug prices will finally lead to some action.
“I don’t think anybody’s happy with how drug prices have gone up,” Millikan said.
ABC News’ Sarah Kolinovsky and Allison Pecorin contributed reporting.
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