California Proposition 61 (up for vote on the November 8, 2016 ballot) has brought the question “why should some Americans be charged lower drug prices while others are charged much more?“ to Americans across the country. Do I think that our federal government should use its power to get lower drug prices for ALL Americans? You bet! This is simply a question of fairness and cost-effective health spending.
Our federal government already has in place mechanisms (i.e., price controls and negotiation rights) that deliver lower drug prices to SELECT groups of Americans. The SELECT groups include the Department of Veterans Affairs (VA), the Department of Defense (DoD), the Public Health Service, and state Medicaid programs. The SELECT groups are taxpayer-funded government programs where the government cannot (i.e., the beneficiaries are too poor) or will not (i.e., present or former military) let “sky is the limit” drug prices fall. All other Americans (the NON-SELECT) must rely on the less efficient, individual private health insurance companies to negotiate for smaller drug price relief. The NON-SELECT group includes all Americans who receive drug coverage through Medicare stand-alone Part D, Medicare Advantage Prescription Drug (MA-PD), employer-sponsored and non-group health plans. The uninsured (also in the NON-SELECT group) have no payer negotiating on their behalf and usually pay the highest drug prices.
Why Federal Government Doesn’t Bring Lower Drug Prices For ALL Americans
Why doesn’t our government use its laws and regulations to deliver lower drug prices for ALL Americans? The answer, as always, comes down to money, who is throwing it around, and who is being influenced by it. If lower drug prices for ALL Americans became a reality, then who would pay for the profits, bonuses, and higher salaries in private health insurance and drug companies? Obviously, our government has picked the NON-SELECT Americans to fill that role.
The NON-SELECT Americans are covered by private for-profit health insurance plans that are given the exclusive right by our government to negotiate inefficiently as separate entities. This power to negotiate generates an income stream that is very lucrative (this means more costly to consumers) to the health insurance companies that run the plans. When drug manufacturers increase their prices, the private health insurance companies do not absorb the cost, they simply pass it along to consumers as increased premiums and beneficiary cost-share (deductibles, copays, and co-insurance). These private insurance companies also restrict access to expensive drugs in their quest for greater profitability.
The drug manufacturers are also benefiting on the backs of the NON-SELECT Americans. In our healthcare system, the drug companies can (and do) set drug prices at “whatever the market will bear”. Numerous governmental and private buyers (called the payers in the U.S. healthcare system) separately negotiating with drug manufacturers giving the latter the upper hand. Higher prices are the result. Our government encourages and nurtures this setup with favorable healthcare policy. In countries where universal health coverage is in place, a large publicly-funded buyer commands great negotiating power over the drug manufacturers and can demand the lowest prices from them. You may have noticed that my blog post title only calls for lower and not lowest drug prices. Getting the lowest drug prices through such a single, publicly-funded buyer setup in the United States is currently politically not possible. Too many powerful and moneyed special-interests (and voter inaction) keep this dream just that for now.
In addition, to “whatever the market will bear” prices, drugs that save lives and have no competition can command “sky is the limit” prices. If payers are unwilling or unable to pay, then patients will have to do without. For example, more Americans die of hepatitis C than from all other infectious diseases even though a drug cure exists. Unfortunately, a three-month course of Hepatitis C treatment costs between $80,000 and $120,000 and many Americans cannot afford it. In other countries where generic versions are available for the drugs, the price is from $200 to $900.
While both private health insurance companies and drug manufacturers profit from our present healthcare system, it is our government that has ultimate control over who and who doesn’t get lower drug prices.
Without a clear mandate from voters (“bring down drug prices for ALL or we will vote you out”), our government officials and the bureaucracy at the Department of Health and Human Services (HHS) will always follow the money and hope the fervor over high drug prices dies down!
Greedy Drug Manufacturers to Blame for High Prescription Drug Prices?
We have been conditioned to blame the greedy drug companies for high prescription drug prices. As show above, they are simply behaving like any other for-profit American business; namely, looking out for the financial interests of stockholders and employees. They are under no obligation to deliver a cost-effective product to the American consumer.
Is Mylan N.V. (maker of EpiPen) to blame because it raised the price for EpiPen, a drug delivery system that has no competition? Many will say this is a smart business move. Mylan N.V is no more to blame for high drug prices than are orthopedists or cardiologists to blame because the design of our healthcare reimbursement system makes them some of the highest paid professionals in the world.
Situations like the recent jump in the EpiPen price became front page news after outraged mothers of allergic children (who need the drug when potentially life threatening allergies strike) demanded action. With high-deductible health insurance plans, these moms were aghast at the cash that had to be handed over for so little. The finger of blame is immediately pointed at the greedy drug company and action is demanded. Our elected officials make threatening noises and Mylan N.V. makes some placating vague promises to give the consumer cost-share relief. In the end, mom goes back to her life, the congressmen think the anger is replaced with other issues, and the price increase stays intact. The higher drug price will show up in next year’s health insurance premiums. This process is like a bad movie on automatic rewind.
The Cry for Fairness is Getting Louder with Proposition 61
Proposition 61 is California’s attempt at wrestling the lower drug prices obtained by the SELECT (specifically, veterans) from federal government control by riding the Department of Veteran Affair’s coattails to lower drug prices. Leave it to California (a large payer) to be at the vanguard for cost-effective, equitable treatment in healthcare.
Drug manufacturers are trying to nip this movement in the bud through expensive media campaigns to encourage California voters to reject the proposition. Their biggest fear is that our government will start delivering lower drug for ALL Americans after the idea spreads across the country. This would severely dent the profitable ride they have enjoyed for decades.
Drug manufacturers are already shouting rhetoric of financial ruin /jobs lost/drug development demise if government opens up their price controls and negotiation efforts to ALL Americans.
The Bottom Line
The ability to deliver lower drug prices for ALL Americans rests firmly with our federal government. Our federal government chooses not to enlarge the reach of existing drug price regulation for the benefit of ALL Americans because our governmental healthcare policy is aligned with the financial interests of the private healthcare businesses. Proposition 61 (whether it passes or not) has introduced the idea that government laws and regulations that reduce prescription drug prices for SELECT groups (like the veterans) should also be applied to ALL Americans.
Unfortunately, Americans are only outraged about high and rapidly escalating drug prices when it affects them directly. Medicare beneficiaries grumble amongst themselves or silently accept the high costs of drugs needed to keep them alive or deliver a minimum quality of life. Younger Americans look at health care like they do retirement savings—why worry about something that will happen decades down the road. They do not know our government has it in its power to deliver lower drug prices for ALL Americans today if only they complained en masse.
We must not let this opportunity for lower drug prices for ALL Americans slip through our fingers. Until individual Americans raise their voices loudly, incessantly, and as one, nothing will change. Contact your elected officials directly or join BB’s Healthcare Brigade to strategize a plan of action. Let’s get together and fight for Affordable Health Care and Beyond for ALL Americans before the next EpiPen scandal numbs us further into apathy.
California Proposition 61—A Message for All Americans–In this Proposition (that didn’t pass), Californians bring out the concept that lower drug prices should be shared by ALL Americans
How Our Government Delivers Lower Drug Prices to Select Americans–why does our government want some Americans to pay more for prescription drugs?