“Later this year, the federal government is supposed to start a serious attempt to rein in drug prices: For the first time, Medicare will negotiate with pharmaceutical companies over the prices it’s willing to pay for a short list of drugs. It’s a long-awaited change that is supposed to save the government and patients billions of dollars over time.
But the drug industry is now launching a legal fight aimed at stopping Medicare’s negotiations over prescription drug prices before they begin. The stakes are higher than just a drug price reform: The case could set an important precedent for the government’s authority to try to constrain health care prices.”
“The Merck lawsuit focuses on the Constitution’s takings (or compensation) clause in the Fifth Amendment, which protects private owners from having property taken without “just compensation” by the government. It also raises First Amendment claims centered on the law’s requirements that drugmakers not disclose information they receive from the government as part of the negotiations. The Chamber of Commerce’s case rests on a constitutional right to due process, arguing that, because the Medicare negotiations are exempt from review by the courts under the IRA, drugmakers are being denied due process.
Taken together, the lawsuits give any judges predisposed to side with private industry over the federal government a few options for a legal foundation upon which to base a decision in pharma’s favor.
A number of legal experts say they are skeptical of these arguments. Merck’s takings clause case turns on defining a patent — an issuance from the government — as private property subject to the just compensation clause, said Robin Feldman, a law professor at UCSF, a difficult assertion. She also said the premise present in both cases — that the federal government as a health care purchaser through Medicare can’t say no to the companies it purchases drugs from and can’t dictate prices as the consumer — is “problematic.”
“It can’t be that the government as a buyer has to pay whatever a seller wants to charge,” she said. “That the government could be forced to spend itself into bankruptcy.”
Regarding the chamber’s due process claim, several legal experts have pointed out that Medicare’s various contracts with health care providers are already often generally exempted from judicial review. It is understood that this is necessary to allow the program to function; the government, as the administrator of the program, needs that authority without each of its decisions being subject to litigation.”
“Mark Cuban’s online pharmacy was founded to sell prescription drugs at the lowest and most transparent prices possible. As Cuban recently told PBS News Weekend, when it comes to medication, “the reality is the only number that matters is cost. What can we as the retailer or the distributor, buy it for and how low can we sell it? So we decided to take the exact opposite approach that politicians have been taking.”
That approach involves selling generic drugs for a 15 percent markup, plus $3 for pharmacy labor and $5 shipping. The result is that Cuban’s company is able to sell generic drugs at significantly lower rates than typical retail prices. For example, a 30-day supply of Amlodipine, a common high blood pressure medication, costs only $3.60 at Cost Plus Drugs, while the typical retail price is $50.10.
Some drugs have even higher savings.”
“Cuban’s company is restricted to unpatented generic drugs. While Cuban can sell these drugs at a massive discount, it is worth noting that research into new drugs, as well as the costs of clinical trials, is funded by the high profit margins derived from patents. While Cost Plus Drugs is a welcome innovation for drugs that are no longer patented, Cuban’s business model likely can’t fund drug innovation.”
“Cuban himself notes that Cost Plus Drugs isn’t the first company to try this approach, but it is the first to succeed”
“Last week, a new study from the Annals of Internal Medicine estimated that if Medicare Part D plans had purchased generic drugs from Cuban’s company, Medicare could have saved $3.6 billion in 2020.”
“Cuban has been vocal on Twitter about the study, asking President Joe Biden and other political leaders to “have your people call my people and let’s get this done.” However, as exciting as reducing Medicare’s budget sounds, progress on the issue seems unlikely. Legislative solutions to the high price of prescription drugs have often been slow-moving and stalled by partisan bickering.”
High-Deductible Health Plans Reduce Health Care Cost And Utilization, Including Use Of Needed Preventive Services Rajender Agarwal et al. 10 2017. HealthAffairs. https://www.healthaffairs.org/doi/10.1377/hlthaff.2017.0610 Does High Cost-Sharing Slow the Long-term Growth Rate of Health Spending? Evidence from the States Molly Frean and Mark
“Medicare’s inability to determine the price it pays for aducanumab is a uniquely American problem compared to health systems in the rest of the developed world. Countries like Australia and the United Kingdom have independent boards that evaluate a new drug’s effectiveness and set a price based on that estimated value. The US pharma industry says the US system is important for encouraging innovation, and companies have made amazing breakthroughs, such as the hepatitis-C drugs that effectively cure that disease.
But, as the standards for approving have sometimes seemed to slip in recent years, the chances of the FDA approving very expensive drugs with only marginal benefits have risen.
“We don’t require prices to reflect the value of treatment, period,” Dusetzina said. “Companies can price their drugs as high as they want. Companies can also get drugs approved with little evidence.”
So Biogen is planning to charge $56,000 annually for aducanumab. ICER, which evaluates the estimated value of new drugs, estimates, based on the clinical evidence, that it’s worth more like $8,000; perhaps as little as $2,500 or as much as $23,100. Regardless, the price announced after Biogen secured FDA approval “far exceeds even this optimistic scenario,” ICER concluded.”
“Researchers at Harvard University and the University of California Berkeley examined what happened when Medicare beneficiaries faced an increase in their out-of-pocket costs for prescription drugs. They found that a 34 percent increase (a $10.40 increase per drug) led to a significant decrease in patients filling their prescriptions — and, eventually, a 33 percent increase in mortality.
The rise in deaths resulted from people indiscriminately cutting back on medications when they had to pay more for them, including drugs for heart disease, hypertension, asthma, and diabetes.
“We find that small increases in cost cause patients to cut back on drugs with large benefits, ultimately causing their death,” the authors — Amitabh Chandra, Evan Flack, and Ziad Obermeyer — wrote. “Cutbacks are widespread, but most striking are those seen in patients with the greatest treatable health risks, in whom they are likely to be particularly destructive.””
“This finding challenges an important assumption embedded in American health care policy. In the 1970s and ’80s, the RAND Health Insurance Experiment concluded that small copays encouraged patients to use fewer health care services without leading to worse health outcomes. That helped establish a new economic argument for insurers to ask their customers to put more “skin in the game”: it would encourage more efficient use of health care services with no downside.
But that premise presumed people would be rational. For example, if they are being asked to pay more money for prescription drugs, they would cut back on less-valuable medications first. The Harvard/Cal study didn’t detect any such rationality. When costs went up, people just stopped filling their prescriptions for statins — high-value drugs that are effective in preventing heart attacks.
The researchers explained it like this: The way patients behaved when faced with higher out-of-pocket costs would suggest that they placed very little value on their lives. They literally stopped taking high-value drugs because of the price.”
“If patients can’t make good value judgments, the economic argument for cost-sharing starts to crumble, and it starts to seem like eliminating cost-sharing — increasing the likelihood patients will continue to take the medications they need to stay alive — would be a cheap way to “buy” people more health. As the researchers wrote, “improving the design of prescription drug insurance offers policy makers the opportunity to purchase large gains in health at extremely low cost per life-year.””
“Eliminating out-of-pocket costs would come with a price: Insurers would likely charge higher premiums to offset the loss of the copays and coinsurance that currently reduce their direct costs. But if the goal is better health outcomes, that is arguably a price worth paying.”
What’s Wrong with Employer Sponsored Health Insurance Ed Dolan. 11 6 2018. Niskanen Center. The Real Reason the U.S. Has Employer-Sponsored Health Insurance Aaron E. Carroll. 9 5 2017. New York Times. Column: The health insurance tax exemption makes care more affordable,
“The House bill — H.R.3 — has a few mechanisms for reducing prescription drug prices, but most notably, it would allow the US health department to directly negotiate the prices it will pay for up to 250 drugs every year. The Congressional Budget Office (CBO) has estimated the bill would save Medicare up to $450 billion over 10 years because of those new negotiating powers. CBO has also projected about eight fewer drugs (out of an expected 300 over 10 years) would come to the market in the next decade because of the decrease in revenues for drug makers.
Despite Trump’s promises on the 2016 campaign trail that he would support proposals allowing Medicare drug negotiations, the White House threatened to veto the House plan. They called it a plan to institute government “price controls,” and said it would limit access to medicine, a favored talking point of the pharmaceutical lobby.
Even without this veto threat, H.R.3 is expected to be dead-on-arrival in the Senate. Senate Majority Leader Mitch McConnell has shown no interest in taking up the bill.”
“Instead, Trump has aligned himself more with Republican Sen. Chuck Grassley, who has advanced a narrower set of reforms from his perch as the Senate Finance Committee chair. (Grassley has also accused McConnell of sabotaging his bill, which moved out of Grassley’s committee with bipartisan support.)
His committee sent a bill to the full Senate in the fall, though it has languished there in the months since. It’s unclear if Trump’s quasi-endorsement — he did not call out Grassley’s bill directly Tuesday night, instead praising the senator generally for his individual work on the issue — will provide any new momentum for the plan. Grassley’s bill, as the Brookings Institution documented, achieves pricing reform through a mix of technical changes to the rebates that drug makers pay under Medicare and Medicaid as well as provisions to cap out-of-pocket drug costs for seniors.
Right now, neither of the bills seems on a fast track to anywhere. Part of this is because Trump’s interest in drug pricing has been scattershot at best, and many Republicans are reluctant to place too many new regulations on an innovation industry.”
“for medical services, other wealthy countries are often paying half the price — or less — as private insurers in the United States.
The Netherlands, consistently ranked as one of the best health care systems in the world by advanced metrics, spends a quarter of what American insurers do on hip and knee replacements. A CT scan costs $1,100 in the United States and $140 in Holland. There are only a handful of isolated instances — childbirth in the United Kingdom, an angiogram or cataract surgery in New Zealand — where the cost of a particular service even approaches the US price.”
“The US is still the wealthiest country in the world. It’s home to the world’s leading biopharmaceutical industry. It tends to have the most cutting-edge treatments. All this contributes to higher prices here than elsewhere. But one big and unavoidable culprit is the lack of price regulation.
Private insurers, which cover more than half of Americans, negotiate with private providers and drug companies to set their prices. They do have some leverage (by denying a provider or drugmaker access to their patients) but it is more limited than in other countries. There is certainly significant price variation within the United States (with CT scans, for example, can cost anywhere from $250 to $1,500 depending on the location), but on average, prices for US private insurance are significantly higher than those seen under other kinds of health systems.
In some of the countries studied by the Health Care Cost Institute, like the UK, the government actually employs doctors and owns hospitals. Others, like Australia, have a universal public insurance program.
Even the Netherlands, which has a fully privatized insurance scheme, has placed more government controls on prices than the United States. Insurers there use global budgets, also common in single-payer systems, to pay providers, capping the amount they’re willing to pay per year to cover all of the services their customers need. It’s a hard limit on health care spending for the coming year, and then providers and payers negotiate prices for individual services based on that budget cap. It’s very different from private insurance in the United States, which is generally open-ended depending on how much medical care is used in a given year — and the price for those services.
Because of America’s high prices, there is a $3.5 trillion industry invested in the status quo.”