Lower Drug Costs: What’s Been the Holdup in Congress?

By George W. Chapman

Drug pricesBefore we overhaul our expensive healthcare system, we have to start with drug prices. So, Congress needs to get this seemingly no-brainer bill done first.

It’s called the Elijah Cummings Lower Drug Costs Now Act of 2019.

It is well documented, almost ad nauseum, that we pay way more for drugs (and use way more drugs per capita) than most countries.

We spent $345 billion or over $1,000 per person on drugs last year. In countries with a single payer or universal healthcare model, the government uses its purchasing power to negotiate prices with drug manufacturers.

But not the U.S.

Our government — through the Centers for Medicare and Medicaid Services (CMS) — covers 60 million people on Medicare and 70 million people on Medicaid. That’s a staggering 130 million people or 40% of the U.S. population. Canada negotiates drug prices and pays far less than we do. The purchasing power of our northern neighbor is a less than staggering 30 million people. CMS literally sets the fees for hospitals and physicians. There really isn’t any negotiation per se, unless CMS “listens “to hospital and physician trade associations counts.

So why doesn’t CMS use its staggering 130 million people purchasing clout to negotiate drug fees? What’s the holdup? Simply: the drug lobby. It is the No. 1 lobby on the Hill, by far, spending $4 billion over the last 20 years and employing almost 1,300 drug lobbyists. That’s 2.4 lobbyists per congressperson. How are they not tripping over each other as they enter and exit congressional offices?

Why drug prices are so high and still going up? Blame the drug lobby. They are the largest of all lobbies in Washington D.C., spending $4 billion over the last 20 years and employing almost 1,300 drug lobbyists. That’s 2.4 lobbyists per congressperson.

The ubiquitous drug lobby has succeeded in making this no-brainer issue into a partisan issue by contributing heavily to campaigns.

Curiously, by comparison, there is little to no partisan bickering or compunction when it comes to setting prices for hospitals and physicians. By doing so, Congress has unwittingly limited its ability/cash to spend like the drunken sailor drug lobby.

The drug manufacturers attribute their high prices and exorbitant profits to research and development, the cost of going through FDA approval, getting the drug to market and potential lawsuits.

All debatable, but I’ll concede those points.

So, this begs the question: why are they negotiating prices with anyone? Apparently, the U.S. government and U.S. consumers — paying anywhere from four to 120 times the price paid by other countries — are bearing most if not all of the costs of drug development.

A lot of congressmen continue to parrot the drug lobby mantra that controlling drug prices will lead to less innovation and new drugs entering the market. No one is begrudging drug manufacturers a fair profit. Congressman Tom Reed (R-NY) incredibly said, “You are putting too much weight in the hands of the government dictating price.”

But isn’t that how negotiations work? Isn’t that the whole point?

Why can’t CMS be the 800-pound gorilla at the negotiation table when it comes to drugs? We’re talking 130 million lives.

Congressmen like Tom Reed seem to have no problem dictating hospital and physician prices. And to exacerbate this total inequity, commercial insurers were quick to jump on the CMS fee control bandwagon and mimic CMS payments to hospitals and physicians. We’re basically most of the way to a single payer system since CMS and commercial insurers are already paying hospitals and physicians about the same fee per procedure.

Instead of a bill with some teeth that would simply and broadly allow CMS to negotiate prices for drugs, bipartisan bickering has watered down the bill to the point where they are actually debating how many drug prices CMS will be allowed to negotiate. Right now, the bill would allow CMS to negotiate a whopping 25 prices. But Congress has magnanimously allowed CMS to negotiate (ready?) 35 whole drug prices … by 2033.

Thirteen years from now?

Despite the almost unanimous consensus that drugs cost too much, you can thank the drug lobby the next time you are at a fundraiser for a friend who can’t afford their cancer drugs.

CMS indifference to providers continues. No negotiating here. The 2020 fee schedule at least gives physicians a paltry 1-2% increase, but then alters the hoops they have to jump through to get paid. Physical therapy fees will be cut 8% and psychology fees 7% in 2021.

George W. Chapman is a healthcare business consultant who works exclusively with physicians, hospitals and healthcare organizations. He operates GW Chapman Consulting based in Syracuse. Email him at gwc@gwchapmanconsulting.com.