For decades, Big Pharma has been one of the most powerful special interest groups in Washington. It has resisted transparency, engaged in monopolistic tactics and put profits over people, resulting in a prescription drug pricing crisis that has left in its wake families and patients who have been hurt and negatively impacted.
Drugs prices are increasing at 10 times the rate of inflation, causing Congress to finally take action. Lowering prescription drug prices has been a focal point of the 116th Congress’ agenda. Big Pharma is finally on the hot seat -- and Democrats and Republicans alike have pledged to hold them accountable.
Despite making a commitment to lowering prescription drug prices, a recent proposal from the Trump administration raises concerns. In February, the Department of Health and Human Services introduced the rebate rule. The rule would eliminate the ability of pharmacy benefit managers (PBMs) to negotiate rebates with pharmaceutical companies for Medicare recipients. It will cost patients and taxpayers billions of dollars -- all handing Big Pharma a big pay day. Simply put, the rebate yule is nothing more than a special interest handout that rewards Big Pharma for its price gouging tactics.
PBMs are an important part of the supply chain. PBMs work on behalf of health insurance companies to negotiate discounted prices on Medicare Part D drugs. This is important especially for seniors and those with disabilities who depend on these life-saving drugs.
Many of them are on fixed incomes and already struggle with paying for their medications. PBMs have tremendous bargaining power -- and the discounts they negotiate are passed down to patients through lower premiums and out-of-pocket costs. In addition, PBMs are the only check on drug manufacturers in the supply chain. Without them, manufacturers would have nearly unilateral control over price setting.
The administration claims the rebate rule will result in more savings for consumers at the pharmacy, but in fact, the opposite is true. The Centers for Medicare and Medicaid Services (CMS) prepared an analysis to calculate the impact of the rule’s costs. According to their own actuaries, Medicare Part D premiums will increase by 25 percent overall and 19 percent in 2020 alone. Not only will seniors and those with disabilities pay more out of pocket, American taxpayers would be negatively affected too. The CMS analysis also indicates that federal spending will increase $196 billion from 2020 to 2029, making it one of the most expensive regulations in U.S. history.
One only has to examine Big Pharma’s gain to realize that the rebate rule is just another way they can boost their bottom line. The same CMS analysis shows that pharmaceutical companies will keep some of the dollars they currently pay in rebates and use the rule to line their own pockets with an increased $137 billion in overall drug spending. Big Pharma has some of the highest profit margins in any industry – the last thing they need is a bailout on the backs of some of our country’s most vulnerable citizens.
Pharmaceutical companies love to play the blame game. They’ve been pointing fingers at everyone but themselves for the rising cost of drugs. They say the money spent on research and development is why they have to increase the price of their products, but nine out of 10 of the biggest drug companies spend more money on marketing than developing new drugs.
They’ve taken to blaming PBMs as unnecessary middlemen, but the truth is, without PBMs, Big Pharma would be able to jack up their prices even more. Bottom line: Big Pharma sets the price of their drugs. There are no other contributing factors.
Big Pharma has been able to manipulate policy to work in their favor for a long time, but their influence is slowly fading. Lawmakers on both sides of the aisle are done with their gamesmanship. Positive steps have been made toward lowering prescription drug costs, but the rebate rule gives Big Pharma a win and patients a loss.
If we want real solutions, Congress needs to pass bipartisan, market-based solutions that empower consumers with information and choice. Congress should see the Rebate Rule for what it is: another special interest ploy crafted by Big Pharma.
Lawmakers need to reject Big Pharma’s power grab. Millions of suffering patients are counting on them to do the right thing.